For bankrupt California cities, budget deal is last straw

Cities in distress are pushing back against the deal, which would take more than $4 billion from local governments to help close the state budget deficit.

By , Staff writer

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    Gov. Arnold Schwarzenegger responds to a question concerning the budget agreement worked out with legislative leaders, while talking to reporters outside his Capitol office in Sacramento, Calif., Wednesday.
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Vallejo, a city on San Pablo Bay just north of San Francisco, has reduced its police force from 155 to 115, closed three fire stations, and halted capital projects that include road and sidewalk maintenance.

Now, it must give up more. The California budget deal being considered in Sacramento Thursday will take some $6.5 million of the Vallejo’s $65 million annual budget – part of more than $4 billion the state government would take from municipal and county governments in a bid to close the budget deficit.

“If the state takes more of our money, we will be forced to make decisions on street lights or more public safety or other untenable forces,” says Craig Whittom, assistant city manager of Vallejo, which filed for bankruptcy last year.

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Cities across California already facing deep recessionary cutbacks and layoffs are pushing back against the budget deal, which was announced late Monday by Gov. Arnold Schwarzenegger and lawmakers.

The League of California Cities, an association of city officials, has enlisted 180 cities to file suit for what it says are “unconstitutional seizures” of local taxpayers’ funds.

Citing a recent decision by the Sacramento Superior Court which found that the state illegally took $739 million of public transit funds last year, Eva Spiegel, spokeswoman for the League, says, “This is going to harm people very seriously.”

“These budget cuts are going to be devastating to all cities and counties but to towns like Vallejo, the situation will be unrecoverable,” says Stephanie Gomes, a Vallejo city councilwoman.

Public safety is hurting with the current cutback, says Lt. Adel Tenorio, professional standards division for the Vallejo police. Police have had to eliminate three substations and community-based policing initiatives. They have stopped using police in schools, and cut the narcotics team in half.

"Staffing is lower so response times are not as fast," says Lieutenant Tenorio.

Mayor Osby Davis has been pitching an exemption for “distressed cities,” but it's unclear whether there would be such an exemption and how it would be defined. Vallejo filed for Chapter 9 bankruptcy which does not have the option of restructuring its debt.

Even temporary diversion of funds hurts the city, observers say, because deferred maintenance of capital projects such as roads and sidewalks means fixes are far more expensive later.

Vallejo has applied for federal stimulus funds, but those are only one-time payouts, says Vice Mayor Hermie Sunga. The city won’t know about such funding for at least two weeks. And stimulus funds are not designed to support ongoing operations, while the money the state is taking supports those operations, adds Mr. Whittom.

The state’s borrowing billions in property taxes from cities and counties is technically legal, admits League of California Cities’ Ms. Spiegel, but says cities simply can’t take the hit at this time.

“The state is telling us we can handle the hit because we can get loans based on their repayment plan, but we have no confidence that we can get loans based on the state’s guarantees,” she says. “The state’s bond rating is the worst in history and they are already paying workers and vendors with IOUs. Who would loan money to cities and towns in this situation?”

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