Dan Carrigg is legislative director for the League and can be reached at dcarrigg@cacities.org.

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Money cures many things, including issues in the state Capitol. With voter approval of Proposition 30, which increased sales tax and income taxes, and Prop. 39, which ended a $1 billion corporate tax break, the cycle of multi-billion dollar state budget deficits finally ended — at least for the short term. The economy also improved. Unemployment decreased, the stock market rebounded and home equities increased. Democratic legislators obtained supermajority powers and broader prospects — they could move legislation at will, place measures on the ballot and even override the governor. Yet these developments were tempered by more sobering realities. The adopted budget was balanced but had minimal reserves, and billions of dollars in unfunded pension and health care liabilities remained outstanding. Governor Jerry Brown resisted new spending and continued to prevail on most budget and policy matters.

In 2013 the League focused on sponsoring and supporting legislation to help develop new community and economic development tools and funding options for city services. These efforts included proposals developed by the League’s 2012 Task Force on the Next Generation of Economic Development Tools and legislation that focused on redevelopment dissolution, affordable housing, infrastructure development and reduced voter thresholds. While legislators were ready to move forward in these areas, the governor was not. Several helpful redevelopment agency dissolution bills made it through the process and were signed into law, but proposals for new tools and resources stalled or were held back from the governor’s desk. On other fronts, it was another busy year for defending local control on measures that would undercut local authority and revenues.

New Capitol Dynamics: Redistricting, Top-Two Primary and Longer Terms

Other things changed in the Capitol besides an improved budget. The November 2012 elections produced the first class of legislators subject to independent redistricting, a top-two primary system and term limits extended to 12 years in one legislative house or a combination of both. Democrats also captured more than two-thirds of the seats in both houses.

While it is too early to fully assess the results of these reforms, the following initial observations can be made. The theory behind redistricting was that having an independent commission — instead of politicians — draw district boundaries would ensure balance and produce representatives more focused on solving problems than waging partisan battles. The new legislators, however, have not yet fully made their mark. They voted with their predecessors to re-elect the Senate and Assembly leadership previously in place and, with few exceptions, followed it. Their actions in 2014 will be more revealing when they decide on replacements for the current term-limited Assembly speaker and Senate president pro tem, who will exit the Legislature.

The top-two primary signaled change on Election Day when several incumbent Assembly Democrats backed by the speaker were defeated by challengers from within their own party. The election of Assembly Members Richard Bloom (D-Santa Monica) and Marc Levine (D-San Rafael), both former council members, demonstrated that the top-two primary was a viable vehicle for unseating incumbents, which rarely happened in prior years. This is an improvement from a local accountability standpoint. Instead of being shielded by their party to protect their seats, legislators will need to be more attentive to district issues. This also increases the value of local endorsements.

In addition, a visible change occurred with the prospect of longer legislative terms. Unlike their predecessors, the new class of legislators appeared less in a rush to introduce legislation and run for the next office. Many seem genuinely interested in taking the time to develop policy expertise and build relations with each other, including across party lines. If this trend continues, a more policy-focused and deliberative mindset among legislators should improve receptiveness for issues raised by cities and other groups with a stake in policy matters.

Actions of the Supermajority

As the session began, political observers speculated about what the Democrats would do with their new supermajority. Prop. 25 of 2010 had already addressed budget delays by reducing the vote threshold to a majority and cutting legislative pay for missed deadlines, so two-thirds control meant less than in past years. Still, a supermajority cemented the Democrats’ control over the Capitol, relegating Republicans to the role of political bystanders. Urgency measures could be adopted and procedural rules waived. Gutting and amending bills in the final hours of a session could reign unchecked. But for Democrats the real question was whether they would assert their authority as a counterweight to the governor’s power. They could place constitutional amendments on the state ballot without the governor’s signature and override vetoes.

However, Democrats have done little yet to exercise their newly acquired powers. They have introduced several constitutional amendments, including proposals to lower local vote thresholds and change the initiative process, but little action has resulted. This could simply be a matter of timing. The real deadlines to qualify measures for the November ballot come in mid-2014. As for an override, it appears there would have to be a significant level of tension and much to consider before any serious attempt to override would be initiated.

The presence of a supermajority has not yet fundamentally altered the relationship between Democrats and the governor. During the first two years of his term, the governor led the state out of a $26 billion fiscal hole by first persuading the Legislature to accept significant cuts to social programs, eliminate redevelopment agencies and enact prison realignment, and then persuading voters to approve billions of dollars in additional temporary taxes with Prop. 30. The governor’s dominance continued in 2013. Employing wily experience from years in politics, he continued to set the agenda — shifting nearly $2 billion per year in additional funds for impoverished schools, borrowing cap-and-trade funds, eliminating enterprise zones and securing an appropriation to house thousands of state prisoners rather than agree to federal court-ordered reduction programs.

Ironically, one of the most significant accomplishments of supermajority action so far was the approval of SCA 3 (Leno), which places a constitutional amendment on the June 2014 ballot to exempt the state from reimbursing local governments approximately $15 million for mandates required by the California Public Records Act (CPRA). Passage of this measure was inspired after newspapers criticized the governor and legislators over a related budget proposal seeking to avoid payment. The measure amends Prop. 59 of 2004, which incorporates the right of public access to information contained in the CPRA and other open meetings laws into the state Constitution. Yet when Prop. 59 was being drafted, the Legislature exempted its own operations from these provisions. Should SCA 3 pass, the lack of state reimbursement obligations and the need for the Legislature to adhere to similar standards may open the door for expanded mandates on local governments.

Democratic Constituency Groups Get Aggressive

With the state budget issues temporarily resolved, many Democratic constituency groups — hoping that the governor had not forgotten their assistance with the passage of Prop. 30 — envisioned restored programs and the adoption of progressive legislation. While the governor resisted major new spending proposals affecting the budget, he was open to many policy proposals that made it to his desk, including increasing the minimum wage, expanding rights for same-sex couples, providing driver’s licenses to undocumented immigrants, reducing school testing requirements, expanding the application of prevailing wages, and imposing restrictions on guns and bullets. Other proposals introduced in the first year of a two-year session will continue to be debated in 2014. These include liberalizing marijuana policies, providing additional rights to the homeless and limiting the expansion of non-union grocery stores.

Mixed Results on Several Redevelopment Agency Dissolution Cleanup Bills

Numerous legislators carried bills supported or sponsored by the League to address aspects of redevelopment dissolution. Assembly Member Mike Gatto (D-Los Angeles) authored AB 440 to restore “Polanco Act” brownfields remediation authority to cities and counties. Senator Jerry Hill (D-San Mateo) helped respond to a problem with advertising displays in former redevelopment areas by authoring League-sponsored SB 684. While Gov. Brown signed both bills, other helpful proposals failed to garner his approval. Another bill, AB 981 authored by Assembly Member Richard Bloom (D-Santa Monica), would free up proceeds from post-2011 redevelopment agency bonds to be expended for projects but was held in the Appropriations Committee.

Gov. Brown vetoed two other measures with messages that conveyed his desire to maintain state supervision over details of redevelopment dissolution disputes. AB 564 by Assembly Member Kevin Mullin (D-South San Francisco), sponsored by the League to provide certainty for cities receiving a Department of Finance (DOF) finding of completion by establishing a “one bite of the apple” policy for DOF reviews, made it through both houses without a single “no” vote. However, the governor vetoed the measure with a message stating the bill “would make policy changes that are contrary to the letter and intent of current law” and would “severely limit the state’s ability to ensure that successor agencies fulfill their obligation to wind down redevelopment affairs in an expeditious manner.” The governor also vetoed AB 662, a cleanup measure authored by Assembly Member Toni Atkins (D-San Diego). In his AB 662 veto message, the governor objected to language providing local agencies with flexibility to enter into new or amended contracts covering existing enforceable obligations.

Efforts Stall Around New Tools

Legislators also focused on developing new post-redevelopment tools. Assembly Member Luis Alejo (D-Watsonville) worked closely with the League on AB 1080, a measure that would restore redevelopment authority for disadvantaged communities. Senator Lois Wolk (D-Davis) continued her effort to make infrastructure financing district (IFD) law into a useful tool through her bill SB 33. Senate Pro Tem Darrell Steinberg (D-Sacramento) authored SB 1, a financing tool for transit-oriented development. Other options for using IFDs came from Assembly Member Roger Dickinson (D-Sacramento) in AB 243 and Assembly Speaker John A. Pérez (D-Los Angeles) in AB 229. All of these measures were held in the Legislature after the governor’s administration sent signals that it was not ready to consider them.

Two other worthwhile proposals, AB 294 and AB 305, were held in committee. Assembly Member Chris Holden (D-Pasadena) authored AB 294, which would allow the State Infrastructure Bank to invest tax increment from the school share of property taxes in projects that match state and regional goals. Assembly Member V. Manuel Pérez (D-Coachella) authored AB 305, which would assist economic development in disadvantaged areas with a California New Markets Tax Credit.

Other legislators focused on filling the void in affordable housing funding. Senator Mark DeSaulnier (D-Concord), who chairs the Senate Transportation and Housing Committee, crafted SB 391. This bill would provide an annual allocation of approximately $500 million for affordable housing funds derived from a tax on real estate transfer documents. The measure is pending in the Assembly after passing in the Senate. Assembly Member Toni Atkins authored AB 1229 to restore local inclusionary zoning authority for rental property. The governor vetoed that measure and indicated that he wanted to await the Supreme Court’s decision on a related pending case. On a positive note, the governor approved AB 639 by Assembly Speaker John A. Pérez, which will place before the voters a measure to provide flexibility for $600 million in unused veterans housing bond authority.

Playing Defense to Preserve Existing Economic Development Tools

While the League worked with many legislators to craft new economic development tools, it had to play defense as well.

Enterprise zones have long been the target of legislative criticism, whether it was the impact on the state budget, the types of businesses assisted or the activities of tax consultants who work with these businesses. The League has historically supported these zones because they are successful in bringing jobs to disadvantaged areas with high unemployment. Under this state program, local agencies had to compete for a zone designation and were also subject to 15-year terms and other accountability requirements. Despite the efforts of a coalition of affected businesses and cities, the governor succeeded in convincing legislators to accept his proposals, which eliminated enterprise zones as of Jan. 1, 2014, and included a phase-out of up to five years for hiring tax credits for employees hired before that date. Regarding replacement programs, the Legislature agreed to eliminate state sales tax on manufacturing equipment, provide authority to the governor’s Office of Economic Development (GO-Biz) to offer several hundred million dollars in tax incentives to businesses, and establish a narrow hiring tax credit program targeted toward higher-wage jobs.

In other areas the League worked to protect local authority by opposing measures that would undermine local land-use authority and flexibility on economic development. The League opposed and helped defeat AB 667 (Hernandez). This measure would have singled out specific retailers (more than 90,000 square feet with 10,000 square feet for selling groceries) for an exhaustive economic impact report that would have made it very difficult to approve stores meeting these characteristics and would also have increased litigation. The League opposed this measure due to its interference with local land-use decisions. The measure was later held in the Senate Governance and Finance Committee.

A similar but broader measure, SB 673 (DeSaulnier), would have created unnecessary delays and litigation by imposing a new analysis upon any commercial development if the project benefited substantially from any financial assistance such as a state or federal grant, low-interest loan, land donation or acquisition, remediation or environmental cleanup activity. This measure failed passage on the Senate floor. The League also opposed and requested a veto on AB 562 (Williams), which requires specific documentation of information on local economic development efforts. While the bill was signed, the League helped obtain amendments in the Senate to reduce the bill’s potential burdens.

Advocating for City Interests

The League advocated for local control and city interests on numerous fronts in 2013.

Preserving Ballot Advocacy Authority. In partnership with the California State Association of Counties (CSAC) and other local government organizations, the League participated in a successful campaign to obtain major amendments to SB 594 (Hill), a gut-and-amend measure that would have restricted organizations like the League from advocating and spending non-public funds on ballot measures. The bill passed after amendments were made that local agencies found acceptable.

Protecting Municipal Affairs. For more than 100 years the California Constitution has authorized voters to adopt local charters that govern their local “municipal affairs.” The courts have interpreted this authority to provide charter cities a degree of insulation from state micromanagement. Not surprisingly, such independence does not sit well with legislators or groups who would prefer to dictate policies from the state Capitol. The League opposed two measures in 2013 that would limit local flexibility for charter cities: SB 311 (Padilla), which requires labor-related charter amendments to be placed only on local ballots during a statewide general election; and SB 7 (Steinberg and Cannella), which would withhold all state funding from charter cities if they fail to impose state prevailing wages on local public works projects. Regrettably both of these measures passed into law, but the courts may ultimately determine their legality.

Cap-and-Trade and Prop. 39 Funds. Over the past several years, the League has been positioning for cities to receive funding generated from sales of carbon reduction credits at state cap-and-trade auctions. The League supported AB 416 (Gordon) and AB 574 (Lowenthal) as vehicles for these allocations. To the surprise of environmental groups, however, the governor borrowed approximately $500 million of these funds to help close the budget gap. The two bills stalled as a result but will likely be revisited this year because the “borrowed” funds will need to be repaid. A similar thing happened to the approximately $500 million per year made available for energy efficiency investments by the passage of Prop. 39 of 2012. The League supported SB 64 (Corbett), which would have allowed cities and other local agencies to compete for Prop. 39 funds. In the budget, however, the governor proposed to dedicate all the money to energy efficiency improvements to schools, with a primary advantage being that the funds could be scored as an offset to Prop. 98 school funding formulas. The Prop. 39 energy efficiency funds, however, will continue to flow for five years, so the potential remains for broader access to these funds in future budgets.

California Environmental Quality Act (CEQA) Reform. While many expected CEQA reform to be a major issue in 2013, things changed when Senator Michael Rubio (D-Bakersfield), who was leading the effort, resigned to take a job in the private sector. The focus then shifted to SB 731 (Steinberg) as the vehicle. A League CEQA task force carefully reviewed the measure and made recommendations. The League successfully lobbied for the requested changes but the bill was held in committee at the end of session. Instead, the author moved SB 743, which streamlines CEQA for the Sacramento Kings arena and includes several statewide provisions that could be helpful in streamlining some development. The League also addressed CEQA issues associated with AB 52 (Gatto) affecting Native American sacred sites.

Housing Elements. Throughout most of the year, the League and other local government groups opposed early versions of AB 325 (Alejo), which extended the statute of limitations to challenge lawfully adopted housing elements from the current one year and 150 days to more than four years. The League opposed this measure due to the lengthy exposure of cities to litigation. Later in the legislative session, prior to the bill being heard on the Senate floor, a compromise was reached with the author and sponsors and amendments were included that addressed local government concerns. The League took a neutral position on the final version of this measure.

Marijuana Regulation. Many communities and public safety groups remain concerned over the chaotic marijuana regulatory environment, which includes a state voter-approved medical marijuana initiative that has been abused, federal prohibitions, court decisions and mixed local reactions. If an improved regulatory structure is to be developed, it needs to contain flexibility to address community impacts and public safety concerns. While the League assisted with the defeat of several bills, this issue will return in 2014, and cities need to be at the table in future discussions.

Local Contracting and Employee Relations. In recent years, a variety of bills has been introduced seeking to limit local authority to contract for various services. The League opposed several bills in 2013 that would have undermined local authority. AB 1333 (Hernandez), which would have imposed unreasonable conditions on local contracting for waste management, was among the bills that were defeated. Another bill, SB 556 (Corbett), which required contractors to post large lettering on their vehicles and uniforms stating that they were not government employees, was stalled.

Future Transportation Revenues. The League has been working for more than a year with a group of transportation stakeholders to build the case for additional revenues devoted to transportation. These efforts include cap and trade (as mentioned earlier) and proposals from other groups. These efforts will continue in 2014 and likely beyond. In addition, the League is participating in a working group created by the governor’s January budget proposal. The group is reviewing the existing transportation funding system for potential opportunities to increase efficiencies.

Progress on League Strategic Priorities

The League leadership meets each year in November to develop the organization’s strategic priorities for the coming year. These priorities were identified for 2013:

• Build Lasting Partnerships. Develop and strengthen long-term relationships and partnerships with new and returning state policy-makers and other stakeholders with common interests to better serve and enhance the quality of life for all Californians.
• Expand Community and Economic Development Tools and Funding Options for City Services. Develop and advocate for new tools and funding options for community and economic development to support job creation, investment in public infrastructure, expansion of affordable housing, and increased funding for essential local services.
• Continue Pension and Other Post-Employment Benefits (OPEB) Reform. Continue and expand upon recent efforts at pension and OPEB reform to ensure the long-term affordability and responsiveness of public services for city residents.
• Implement an Effective League Branding Strategy. Develop and implement a marketing and branding strategy that effectively communicates the League’s identity along with the unique benefits that city officials, our partners and the public can expect from the League, its products and services.

Here is a brief summary of League activities in these strategic areas.

Building Partnerships. After a major recession and several difficult years of state-local relations, it was time to reinvest and rebuild. State and local budget conditions were improving. A new class of legislators, many from local government, began work at the Capitol with the ability to serve longer terms. League staff and city officials spent significant time connecting with these new legislators and working with them on legislation. Regional divisions hosted meetings and receptions. The League’s lobbyists and leadership also met individually with legislators in Sacramento. Relations with the League’s traditional partners in local government, business and other organizations were strengthened and paid off in collaborative legislative efforts.

Expanding Community and Economic Development Tools. Activity on this critical priority is addressed extensively earlier in this article. Many legislators have been working with the League to advance this priority. The stage is now set for broader action on economic development, infrastructure and affordable housing. The effort ahead involves working with legislators and the governor’s administration on the next steps.

Continuing Pension and OPEB Reform. Administrative implementation and minor legislative cleanup followed the legislative pension reform accomplishments of 2012. The League began working more closely with CalPERS by forming an advisory group of city officials to attend CalPERS meetings, comment on regulatory proposals and meet periodically with CalPERS leadership. An internal group of city managers continues discussing options on OPEB issues.

League Branding. Research was conducted in this area with the assistance of a League board-appointed task force and a consultant, who concluded that the League retains a strong brand with local officials, policy-makers and the media. Suggestions primarily focused on ways to fine-tune the ways the organization communicates its brand, with its primary audience remaining city officials.

The Governor’s Actions

Earlier in 2013, while explaining his thinking on the benefits of providing schools with additional flexibility, Gov. Brown spoke to the League board about the principle of “subsidiarity,” which translates into the more familiar “local control.” City officials were glad to hear the governor address this concept because it matches their beliefs and practical experience at the local level. Yet while the governor used these words, his philosophy was less apparent in light of his final decisions on bills affecting local government. One significant, positive development was the governor’s signing into law 85 percent of League-supported bills. He deserves the thanks of city officials for this. On the League’s veto requests, however, regarding bills that city officials opposed because they believed the measures undermined local control, his actions are more puzzling. The governor vetoed only 25 percent of League-opposed bills. Perhaps at some future point the governor may further clarify his philosophy on preserving local authority.

The Outlook for 2014

Looking ahead, 2014 should be a year of new opportunities. Barring an unforeseen reversal, the state budget should remain balanced, and the economy continues to slowly improve. State legislators have already put forward many ideas for tools to invest in infrastructure, transportation and affordable housing that can be pursued in the second year of the two-year legislative session. Discussions about a revised water bond and a new school bond are anticipated, along with potential revisions to local vote thresholds. As always, some new issues will also emerge.

Whatever the new year brings, the League will continue exploring opportunities for improved partnerships with legislators, administration officials, other organizations and stakeholders. At the same time, the League will advocate for tools and resources that allow cities to improve their communities, expand economic development and address emerging issues in ways that preserve local control and flexibility.

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This article appears in the January 2014 issue of Western City
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