Cities statewide lose vehicle license fee money, thought to be a
sacred cow of revenue
Come February 1, cities throughout California will be losing a
major weapon in their arsenal to generate revenue: the vehicle
license fee.
As part of the Governor’s new plan to get California out of its
$34 billion deficit, the state will pull millions of dollars from
local government to help bail out Sacramento.
Gilroy is expected to lose $2.4 million annually as a result of
the plan.
Cities statewide lose vehicle license fee money, thought to be a sacred cow of revenue
Come February 1, cities throughout California will be losing a major weapon in their arsenal to generate revenue: the vehicle license fee.
As part of the Governor’s new plan to get California out of its $34 billion deficit, the state will pull millions of dollars from local government to help bail out Sacramento.
Gilroy is expected to lose $2.4 million annually as a result of the plan.
“This was a state constitution protected tax of local government,” said frustrated Gilroy City Administrator Jay Baksa. “Now it’s all going to the state-really makes you feel warm and fuzzy all over, doesn’t it?”
And that’s not good news for Gilroy-a city looking to build a new fire and police station.
“This is really going to impact everything,” said Baksa. “I don’t really want to get into the specifics right now before analyzing it and seeing the end result. But it will affect everything.”
Currently, the money that the city needs to be subsidized through taxation is $28 million, meaning that a $2.4 million hit is close to 10 percent of the city’s budget.
“But it’s even worse than that,” said Baksa. “Because $21 million of our $28 million budget goes into public safety. So if the city says, OK, no cops are out and no fire stations are out then, there will be a $2.4 million impact to the remaining $7 million left and that poses a one-third reduction in everything else.”
Those other areas include city’s parks and recreation services, library and social services.
Yet despite the dramatic blow, Baksa said that Gilroy is in a better position than many cities because of sound planning.
“Fortunately, we saved money in the good times to prepare for the bad,” said Baksa.
Currently, the city has $24 million in reserves. Prior to the announcement that the vehicle license fees will be going back to the state, it was estimated that Gilroy would have to take $3 million annually from reserves until the economy makes an about-face.
“Now with that extra $2.4 million going to Sacramento, that money will evaporate,” said Baksa. “But this all makes me mad. What this state is doing is criminal. Could you imagine what would happen if our city was in a similar position. I’d lose my job in a minute.
This is the worst state in the union in terms of fiscal management. Just a few years ago this state had a record surplus. How could they not think to save when they had it?”
Eventually, the city hopes to bounce back from the financial crisis when the 1 million square feet shopping center located just north of Highway 152 near the U.S. 101 junction opens up later this year.
Eventually, it is projected that the city will receive roughly the same amount lost from the vehicle license fees via sales tax revenues.
And that money can’t come soon enough. This spring both the city’s new fire and police stations will go out to bid. While the money is in place to build them, Baksa said staffing them could be another story.
In addition to the hit that many cities suffered as a result of losing its vehicle license fees, Redevelopment Agencies also took a major hit in the Governor’s proposed plan.
“That was the next big loser,” said Baksa. “But we’re unaffected by that one.”
