Most of the county’s local agencies, including its special districts — fire, water, parks and recreation — have applied for bond money that will pay back property tax money borrowed by California to balance the state budget.
In July, the California Legislature approved a bill to suspend Proposition 1A, a 2004 voter-approved measure that protected county-dedicated property tax money dedicated from seizure by the state.
The suspension of 1A allowed the state to borrow $1.9 billion in property tax revenue from special districts, cities and counties in an attempt to close its $26.3 billion budget gap.
The fallout hit Santa Cruz County as the state took 8 percent of property tax revenue from special districts and cities in Santa Cruz County, leaving them short of anticipated revenue as they work on budgets for the next few years. The only requirement is that the state must pay the money back — with interest — within three years.
In all, Santa Cruz County forked over about $11 million from its budget, with its special districts taking a $2 million blow, said county auditor-controller Mary Jo Walker.
Most local agencies in the county were already operating on bare-bones budgets before the property taxes were taken.
As a result, many opted to apply for the bond to recoup the money long before the state is required to repay the money.
California Communities, a board sponsored by the League of California Cites and the California State Association of Counties, supports the bond that will give local agencies the money back in two increments.
All of the money borrowed will be paid back through the bond with no costs to participating agencies — the state will pay for all interest and bond issuance.
The money is slated to be wired Jan. 15 and May 3.
Scotts Valley Fire Protection District Chief Mike McMurry said the district suspended all previously scheduled pay increases and has used emergency reserves to pay for basic operations following the state’s borrowing.
The district has already applied for the bond money, McMurry said.
“We really rely on property tax money, so we were very affected by this,” he said.
The fire district lost $359,270 in property tax revenue from its $5.5 million budget.
“We’d rather get the full amount up front, as opposed to having the state hold onto it for three years,” McMurry said.
Ben Lomond Fire Protection District Chief Jon Charcho said his district lost $65,000 from its $685,000 budget after the suspension of Proposition 1A. The district applied for the bond at the beginning of the month.
“It’s pretty much a win-win situation for us,” Charcho said. “And pretty much everybody’s doing it, so there’s no reason not to.”
Jim Mueller, San Lorenzo Valley Water District manager, said his district opted out of applying for the bond and will wait the three years to get the 2 percent interest rate.
The water district lost only $40,000 in property tax revenue from its $6.5 million budget.
Water districts are less pressured than other special districts by the Proposition 1A suspension, because they are enterprise districts that rely more heavily on fees from customers than on property tax revenue.
The Boulder Creek Parks and Recreation District lost $12,711 of its $159,000 budget and opted to cut services upon the suspension of Proposition 1A.
District manager Christina Horvat said she applied for the bond about a month ago.
“We didn’t want to take the risk of waiting,” Horvat said. “We have a lot of projects going on and need all of what little budget we have.”
The four cities of Santa Cruz County — Capitola, Santa Cruz, Scotts Valley and Watsonville — lost a total of $2.6 million in property tax revenue and have all joined the bond pool.
The city of Scotts Valley lost about $174,000 of its more than $8 million budget, in addition to cutting its budget by $400,000 in September.
City Manager Steve Ando prepared the staff report on the bond for the City Council meeting last month. The document was approved at the most recent meeting Oct. 21.
“We’d rather have the money up front,” Ando said. “Who’s to say what the state’s financial condition will be in two years?”
