March 31, 2004 - From the March, 2004 issue

L.A. Council Pres. Padilla On Need For Cities To Protect Themselves From The State

In January, Governor Schwarzenegger proposed a $1.4 billion transfer of funds from local government to state government to help balance the state budget. He was not the first governor to to propose such a transfer. Ever since Prop. 13 passed in 1978, local governments have been at the mercy of such actions by the state. Metro Investment Report is pleased to present this interview with Los Angeles City Council President, and League of California Cities Vice President, Alex Padilla. In this interview, he addresses both the budgetary challenges cities in California face in the absence of constitutionally protected revenues and how the League of Cities' November ballot measure plans to correct this subject of dispute.


Alex Padilla

In a time of severe budget constraints, share with our readers what the pressing fiscal issues are before the L.A. City Council and you as its President.

The budget process is always very competitive. When times are good you have various members or officials advocating different uses of moneys. But, those battles are even more challenging in tougher economic times. Last year was no piece of cake, but we were able to overcome that. This year is more difficult-this really is gut check time. We have to focus in on our most important priorities. There is a consensus on the Council that our responsibility begins with public safety. So, the question is, what kind of investments can we afford this year to further our gains in making Los Angeles a safer city? Then will come the infrastructure, transportation, and housing conversations. Then will come other programs in which the city invests.

I'm encouraged that there's an awareness in Council that the dynamics impacting the budget aren't exclusive to Los Angeles. We are very much tied to the state and federal governments and their cyclical budgets and actions. So, as we look to shape the '04-'05 budget, we're not limiting ourselves to looking at whether our receipts are up or down and how to balance our budget, but we're also participating in advocating for reform in Sacramento and Washington.

The Council under your leadership balked at accepting the mayor and police chief's request for a four-year commitment to LAPD officer growth because you were concerned about the budget implications. We're speaking now in March. What are the prospects for revisiting that issue and the Council coming to an agreement with the mayor and the police chief?

The conversation never really went away. I applaud my colleagues for the action that we took together last June in adopting a budget that was significantly amended by the Council. First and foremost, let me make it clear we are all pro-public safety. We all want Los Angeles to be the safest city it can possibly be, and we all believe that part of the formula to achieve that is increasing the number of police officers in the force. But we also believe that our duty as policymakers here is to responsibly balance the need for public safety against infrastructure and everything else. As much as we wanted to expand the police department, we felt it needed to be balanced with the fiscal limitations within which we were working.

That vote to override the mayor last year was a very telling moment in time, and the Council showed its strength and its resolve. Hindsight being 20/20, I think it was very prudent. Since then, we've seen not only the economy not recover to the extent that was hoped for, but we're also seeing the worst case scenario develop in Sacramento. With the removal of the VLF funding stream, and even with the promise of a backfill in the governor's January budget proposal, they're taking equal amounts of money away from other sources. Sacramento continues to attack the VLF, continues to attack property taxes, and continues to attack redevelopment funds. I don't even think the sales tax is safe. The city of Los Angeles is not only active in working the halls of the Capitol in Sacramento, but we're participating fully with the League of California Cities on a ballot measure slated for November that would protect these local government revenues.

Speak more to the League of Cities' November ballot initiative, as well as to other reform proposals such as the Home Rule Initiative inspired by Speaker Emeritus Robert Hertzberg. How do we best fix the state-local fiscal arrangement to better protect and guarantee local governments the revenue they need to meet their constituents' service demands?

It's important to recognize that there is more than one measure being discussed or in the process of seeking placement on the November ballot. The Hertzberg initiative is more ambitious in trying to solve a very complex and imperfect relationship between the state and local governments and our funding streams.

The League of Cities' ballot measure hopes to maintain the Vehicle License Fee as a revenue source for local government, maintain the property tax share for local governments as a revenue source, and maintain a portion of the sales tax for local governments as a revenue source and as a baseline that Sacramento cannot go below into the future. And, should any budget actions emerge in Sacramento that would change this configuration of revenue sources, it would have to go to the voters for approval first.

So, this measure is not raising taxes and it's not compromising anything. It does nothing more than defend local governments from further raids on our coffers. Importantly, the initiative puts the ultimate choice in the hands of the voters. If they choose to see moneys shifted away from their local governments-which inevitably means police services and fire services, because public safety makes up anywhere from 2/3 to 3/4 of a city's budget-towards Sacramento, then they will say so. But, short of voter approval, Sacramento cannot impact us that way.

We need revenue sources that we can depend on. It's important for our fiscal planning and it's important for our bond ratings as well.

As an active leader on the California League of Cities' board, would you comment on often made criticism that the League's initiative is too modest a reform agenda-a lowest common denominator product of the League's majority compromising with a minority faction that has bet the store since Prop 13 on sales tax revenue to underwrite city services? Is constitutionally protecting both city sales tax revenues and our present dysfuctional state/local fiscal arrangement really reform?

I can tell you, first of all, that that's not the case. This is an initiative that has been years and years in the works. I've been on the board for about four years now, and the conversations about this type of initiative even precedes my time at the League of Cities. I'm not only a member of the board, I'm also the second vice president. So, as an executive officer, I can also tell you that support for this ballot measure is widespread. It comes from cities that enjoy more sales tax than others, from cities that enjoy more property tax than others. It comes from cities that are small, cities that are large, cities in the north, the south, urban areas, rural areas-it has a very wide consensus.

The only fault that people may be able to point to is that this isn't the overall solution to the sate/local government fiscal relationship. But before we can get to the solution, we need to stop the hemorrhaging. We need to safeguard local government revenues from Sacramento before we can get to that solution. And I think that's what this initiative can accomplish.

Alex, let's again focus on the City of L.A.s budgetary challenge. Mayor Hahn has endorsed priority-based budgeting as his means for reviewing and setting this year's budget. Elaborate on the ramifications of his approach? What, if anything, is new about it?

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I'm not an expert in the priority-based budgeting exercise that the mayor is leading various members of the city family through. But, like I said, this year more than any year that I've seen, it's going to be serious gut check time about what are the most important priorities for the city. What functions, what programs, what services that we provide shall we seek to protect in the budget. Because, programs will be cut. Unfortunately, that's the reality of our situation. We're going to have to make significant cuts. But we hope to do so in a way that not only reflects political priorities, but pragmatic priorities as well.

Even though we're going to be making budget cuts, the city of L.A will still be spending nearly $5 billion this next year. So, the money that we're spending should be in the wisest investment. When we invest in housing, which is an investment for the future. When we invest in public safety that is an investment in an economic turnaround, in a business friendlier environment. So, I would argue that we've always done priority based budgeting. It may go through somewhat of a different process in terms of putting the actual budget together. But once the mayor presents the budget and the Council reviews it, we ask those very same questions. What's in here? What's maybe not as necessary? Where would we rather see more moneys being allocated? There are times when the Council will make significant changes to the mayor's budget, there are times when the changes are very minor.

Being a city of over 400 square miles, there surely is a role for a fifteen-member council to assure that city resources are distributed in a fair and equitable manner. Is priority-based budgeting likely to enhance or undermine the Council's full review of the Mayor's budget?

There is a balance to be achieved. The official city budget process begins with the mayor proposing a budget; the Council then reviews, amends and approves the budget; and, finally, the budget will return to the mayor for approval. If the mayor vetoes any of the Council's actions, then those specific items come back to the Council for a possible override.

This year, more than we've seen in the past, there's participation and input from neighborhood councils. And I hope to see that participation reflected in the budget. I wouldn't interpret that as overriding the role of the Council, but I would interpret that as increased input and participation by communities. But, again, with that additional input, we should see a budget that is more reflective of the city's interests overall, not just particular communities or particular council districts.

Alex, you noted that the city's annual budget is about $5 billion-not an insignificant amount. But more sizable amounts will be expended by public entities like LAUSD and the MTA-special purpose jurisdictions which do not need to collaborate with the City. With the City facing the prospect of severe budget cuts in departments like planning, does the City presently have the will and staff capacity to positively leverage city funds, for example, with the $10 billion which will be invested over the next decade by the school district in new or modernized school facilities in L.A.'s inner city and inner suburban neighborhoods?

We have no choice but to seek opportunities for partnership and synergy when it comes to our resources. The tough challenges for the city, for the schools district and for the county pertains to our general fund budgets that we determine year in and year out. The good news for the people of Los Angeles and the surrounding communities, and certainly for the local economy, is that we do have a number of bonds that have been approved in recent years, and more on upcoming ballots.

As a result of those bonds, we are seeing a lot of construction of schools. We also are seeing a lot of construction of police stations, of fire stations, of parks and libraries. And, those projects are helping to create jobs and keep the economy going.

I've seen much more dialogue across jurisdictions-city officials talking to the county, county officials talking to the school district and the school district with the city-about how we're maximizing our investments. If there are opportunities to place a school near city libraries or city parks, or next to a county facility near a redevelopment zone, then we can get a bigger bang for the buck on the public's investment.

For the public to have faith in a city's budgetary process, there must be faith in the city's political system. As you're aware, there have been some allegations that Mayor Hahn's office engages in pay-to-play. In response, the Mayor has proposed ethics reforms for the Council to consider. Give our readers a context for evaluating such proposals.

I wasn't the first person to become supportive of a ban on commissioners' fund raising. It took me a while to get there because if there are ever wrongdoings in government, I believe those should see the light of day and guilty individuals should be prosecuted to the full extent of the law. But short of proof, short of evidence, to base policy on perceptions becomes very subjective, and you risk going down a slippery slope. So, we should be cautious of changing policies and procedures based on a perception of pay-to-play.

But, there's also a delicate balance between addressing issues of wrongdoings that actually have happened versus a general public perception of trust and confidence and integrity in the system. Unfortunately, we reached a point recently in Los Angeles where the credibility and integrity of the city, its officials and its decision-making was called into question.

Part of what changed my mind was recognizing that we have a district attorney whose reelection platform is significantly based on his public integrity unit. He has been very active and aggressive in his first term on trying to root out corruption in the region. At the state level, you have the FPPC taking a second look at previous rulings, and that has called our lieutenant governor's name into the newspaper because of how it has affected his campaign activities. The FPPC has ruled that even our own governor has to pay back $4.5 million from his own pocket based on his campaign fund raising and spending. At the federal level we have court decisions on McCain-Feingold and new rules coming out for federal campaigning and elections almost on a weekly basis. In addition, there is an increasing dialogue about the President and this country's intelligence prior to engaging in military action in Iraq. We have the Vice President of the United States entertaining Supreme Court justices on fully paid vacations while those same justices have to consider items in which the Vice President is involved.

So, I think the situation with the mayor has added to an overall air of questions about ethics, questions about integrity and questions about credibility. And, it does behoove the city of Los Angeles to take some appropriate actions to clear the air, at least for us here at the local level.

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