The governor is expected to sign the budget bills today, Tuesday, July 28, and has already issued the proclamation to suspend Prop 1A, as required by the Constitution. Read the proclamation here.
The vote to suspend Prop 1A was one of the most difficult budget votes for both houses. The text of the bill to suspend Prop 1A, ABx4 14, can be found here. The Assembly vote break-down can be viewed here and the Senate vote break-down can be viewed here.
ABx4 15 contains the language to repay the property tax borrow and also contains the language that sets up the loan securitization mechanism. The full language can be found here. The vote break-down for the Assembly can be viewed here and the vote break-down for the Senate can be viewed here.
As mentioned before, the Legislature has set up a process for special districts, cities and counties to offset their reduction in property tax revenues through a loan securitization mechanism. Under this mechanism, a joint powers authority (JPA) will issue notes backed by the state’s repayment obligation and use the proceeds to replace the diverted property taxes of those local agencies that participate in the JPA. Those local agencies that can sustain the 8 percent shift this year have the option of not participating in the JPA and then be repaid by the state directly at an interest rate that will be set by the Department of Finance, subject to a cap of 6 percent.
CSDA will be working with the League of California Cities, CSAC and the California Statewide Communities Development Authority (CSCDA), which is the JPA that will be administering the securitization mechanism. Details on the various deadlines, how to apply and how to become a member of the JPA and will be released to our members in early August.
ABx4 15 also includes a hardship provision for those local agencies that are in or near bankruptcy or unable to provide a basic level of core public services because of the property tax shift. Details on how to apply for a hardship provision will be available for CSDA members soon although, hypothetically, the hardship provision will not be necessary if the sale of state notes through CSCDA is successful.
CSDA will provide more information as details emerge. In the upcoming days and weeks, check the Protect Special Districts’ Services section of the CSDA Web site for Frequently Asked Questions and other details of the Prop 1A suspension.