Special districts brace for state borrowing

It’s been more than a month since the California Legislature approved a bill to suspend Proposition 1A, a 2004 voter-approved measure that protects property tax money dedicated to counties.
The suspension of 1A allows the state government 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 state will take 8 percent of property tax revenue from special districts in Santa Cruz County, and those districts are preparing for the crunch.
In all, Santa Cruz County will fork over $12.2 million from its budget, with its special districts taking a $3 million blow. However, there may be light at the end of the tunnel, as the amount borrowed by the state must be paid back — with interest — within three years, if all goes according to plan.
Mary Jo Walker, county auditor-controller, is calculating what the 8 percent property tax loss will be for each special district.
“The timing has been very tight, and it’s taking a while to compute what the estimate will be,” Walker said. “Property tax is very complex.”
All the numbers she has now are estimates, and the final guidelines and figures will be determined in October, Walker said.
Michael Eggleston, district manager of the Lompico County Water District, said the district will lose about 20 percent of its reserve funds this fiscal year.
“We have a bare-bones budget as it is, and we do rely on the funds from Prop. 1A,” Eggleston said. “That’s our reserve money that we use for capital improvements and emergency review.”
Employees of the Lompico Water District have been on furloughs one day per pay period since March — amounting to 208 hours per year.
“We’re hoping the governor sticks with the repayment plan,” Eggleston said. “It’ll be interesting to see how it works out.”
Scotts Valley Fire Department Chief Mike McMurry said the district has suspended all previously agreed-upon pay increases and is using its emergency reserves to pay for basic operations for the coming year.
The fire district is bracing for an estimated $432,740 loss in revenue.
“We have reserves set aside for emergencies,” McMurry said. “But we were not prepared that the state would take the money.”
Scotts Valley Water District general manager Charlie McNeish said his district will also use reserve money and not make any cuts. McNeish said the district will have to raise its rates if the state does not pay the money back or if the borrowing becomes permanent.
“We’re taking the state on face value that we’ll be paid back. Our reserves will only cover us for one year,” McNeish said.
The Felton Fire District will lose an estimated $50,000 in revenue, but Chief Ron Rickabough said the district anticipated the state’s move and budgeted accordingly.
“It’s certainly going to affect us, but it’s not going to impact our operation at this point in time,” he said. “Thankfully, we planned ahead.”
The Boulder Creek Parks and Recreation District will lose an estimated $15,000 of its $172,000 budget and will be forced to cut services.
“We’re a small district with a small budget, so even a little bit affects us a lot,” said Christina Horvat, district manager. “I’ve found myself saying no more to staff, and we’re continually looking for alternative funding options.”
Scotts Valley Mayor Randy Johnson said he is disappointed that the state will take the cash.
“As a city, we make our budget. Then, out of left field, out of nowhere, the state government borrows a huge chunk. They are shaky and unpredictable, so it makes me uncomfortable,” Johnson said. “The past shows that they don’t always follow through. They are not reliable — no bank would loan the state money with their past record.”