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League Sponsors Legislation to Restore Funding to Annexing Cities Harmed by SB 89

Bill Also Benefits Cities Planning Future Annexations of Inhabited Territory

January 28, 2019
Assembly Member Eloise Reyes (D-Grand Terrace) introduced AB 213, a League-sponsored measure to restore funding to approximately 140 cities that had annexed inhabited territory in reliance on previous financial incentives, and then suffered fiscal harm when those funds were swept away through the budget process with SB 89 in 2011.
 
The measure also provides similar incentives to support future annexations of inhabited territory. Assembly Members Kansen Chu (D-San José), Jay Obernolte (R-Big Bear Lake), Freddie Rodriguez (D-Pomona) and Marie Waldron (R-Escondido) are principal co-authors of the bill.
 
Background

The funding swept from cities in SB 89 was from a special allocation of city shares of vehicle license fee (VLF) revenue derived from allocations made by AB 1602 (Laird) of 2006. AB 1602 allowed all cities and counties in existence in 2004 to swap dollar-for-dollar the amounts owed by the state to them as VLF backfill, following the state’s decision to reduce the amount of VLF paid by consumers. However, the 2004 swap did not address the future annexations and incorporations.
 
The Legislature restored funding to California’s four most recently incorporated cities through the passage of SB 130 in 2017. SB 130 contains a statutory formula (based on the 2004 VLF-property tax swap) that provides these cities with shares of property tax to offset the amount of VLF revenue they would have received. The amount will be adjusted in future years, according to the same rules applied to other cities, making giving these cities equal treatment with all other cities under the swap. Although SB 130 did not resolve issues associated with future annexations, it provides the legislative template to also address this issue. AB 213 uses the same formula from SB 130 to restore and stabilize funding with benefits to local services and compact growth.
 
A similar effort introduced last year, AB 2268 (Reyes), was held in the Assembly, in part because only a handful of cities sent in support letters. This year the author is working with the League to get more cities in support of AB 213 to improve chances for the bill to move in 2019.

For more in-depth background information on this issue, please refer to the Western City magazine article entitled “How SB 89 Harmed City Annexations — and Why Fixing It Makes Sense.”
 
Next Steps

The League urges cities to review AB 213 and support this measure because of its benefits not only to the 140 cities, but because it restores fiscal incentives for future annexations.
 
The measure will likely be heard by the Assembly Local Government Committee in March. The League prepared a sample letter that cities can use to register support. The sample letter, along with the League’s support letter, can be found at www.cacities.org/billsearch by plugging AB 213 into the search function.


 
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