HomeMy WebLinkAbout10-City Administrator's Office
CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
Date: August 10, 1998
ORIGINAL
Subject: Resolution opposing Proposition 9 -
The Utility Rate Reduction
and Reform Act
From: Fred Wilson, City Administrator
Dept: Administrator's Office
Synopsis of Previous Council Action:
July 27,1998 Legislative Review Committee recommended referral to full Council the second meeting in
August.
Recommended Motion:
Adopt Resolution.
4~
Contact person: Fred Wilson
Phone 5122
Supporting data attached: Yes
Ward: 1
FUNDING REQUIREMENTS: Amount: Nt A
Source:(Acct. No.)
(Acct. Description)
Finance:
Council Notes:
Agenda Item No. ./0
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CITY OF S~ BERNARDINO - REQUEST FOR COUNCIL ACTION
STAFF REPORT
SUBJECT: Proposition 9, The Utility Rate Reduction and Reform Act, qualified for the
November 198 ballot by initiative petition. (See Attachment 1)
BACKGROUND: In 1996, Governor Wilson signed AB 1890, which set into motion a
system to restructure California's electric services industry. In 1997, the Governor also
signed SB 477, which made several important changes to AB 1890, especially in the area
of consumer protection. In the newly restructured electricity services system, users may
continue to purchase their electricity from existing investor-owned utilities (i.e. PG&E or
Southern California Edison) or may purchase their electricity from an Energy Services
Provider. The existing investor-owned utilities continue to provide and maintain the
distribution and transmission system.
The Utility Rate Reduction and Reform Act would make a number of changes to AB
1890.
Key elements of Assembly Bill 1890:
AB 1890 permits the investor-owned utilities to recover their "stranded" capital
costs through March 31, 2002. In general, these are costs approved previously by
the Public Utilities Commission (Puq and previously included in the rate base.
That is, they are costs that electricity customers were already paying in their bills
prior to January 1, 1998, based on criteria established by the Puc. The CTC
authorized by AB 1890 is nonbypassable, with a few specific exceptions. That is,
all customers must pay the charge. Municipal utilities were authorized in AB 1890
to collect their version of the CTC if they meet specified criteria.
Assembly Bill 1890 froze all electricity rates at their June 1996 levels until January
1,1998. At that time, residential and small commercial customers received a ten
percent rate reduction. It is expected that residential and small commercial
customers will receive an additional ten percent rate reduction in 2002. The first
ten percent reduction has been achieved by financing a portion of the residential
and small commercial customer's share of the CTC paid to the investor-owned
utilities through $6 billion in so-called rate reduction bonds issued by the State
Infrastructure and Economic Development Bank to be repaid over ten years. Thus,
the residential and small commercial customers' share of the CTC will be spread
over a longer period of time (ten years) than the CTC paid by other users.
Key Elements of Proposition 9:
Transition Cost Recovery - The initiative would eliminate costs for nuclear
generating plants (other than reasonable costs for decommissioning) from the
CTC. For non-nuclear generation sources, the investor-owned utilities could not
receive CTC unless it demonstrated to the PUC that these costs could not be
recovered in the competitive market (with a fair rate of return).
Staff Report
Resolution opposing Proposition 9
Page 2
Rate Reduction . The measure would require at least a 20 percent rate reduction
for residential and small commercial customers effective January 1, 1999, with no
time limit on the reduction.
Bonds. The measure would not permit investor-owned utilities to pass on the costs
to repay reduction bonds through charges to customers.
Publicly expressed Support/Opposition
Proposition 9 proponents include: Harvey Rosenfield (author of Prop. 103), the Utility
Reform Network (TURN), Consumers Union and the Public Media Center.
Proposition 9 opponents include the League of California Cities, and a number of
organizations representing business, labor, education, taxpayers, environmental,
agriculture, public safety, ethnic interests, and local government. (See Attachment 2)
FINANCIAL IMPACT: It is difficult to clearly identify and quantify specific local
government impacts. The Legislative Analyst's discussion identifies various fiscal impacts
from changes in the CTC and bond repayment. The direct negative impacts to the City
include loss of franchise fee and utility users tax revenue, as a result of lower electricity
prices. A benefit to the City would be an estimated $22,000 annual savings (out of a $2.66
million budget) annually for those City accounts which would qualify for the 20%
reduction.
Indirect impacts would result from the uncertainty the initiative would have on the new
electricity services market, the potential disruption the new system would experience, as
well as the indirect impact on bond markets and municipal bonds. This latter impact
could be significant.
RECOMMENDATION: Staff recommends approval of the Resolution opposing
Proposition 9 due to the negative fiscal impacts it would have on cities, the uncertainty
that would result in the municipal bond market as a result of questions about repayment
of the $6 billion in rate reduction bonds, and the unsettling effect Proposition 9 would
have on the newly restructured electricity services market.
.
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RESOLunON NO._
1
2
RESOLunON OF lHE CITY OF SAN BERNARDINO. CALIFORNIA,
3 OPPOSING lHE 1998 ELECfRIC UIUITY PROPOSmON (pROPOSmON 9).
4
WHEREAS. the 1998 Electric Utility Proposition would undermine California's new
5 competitive electricity market, diminishing customer choice and competitive electricity
6 rates: and
7
8
WHEREAS. the State Legislative Analyst and Department of Finance have determined
that the net impact of this proposition on local governments would be revenue reductions
potentially in the tens of millions of dollars annually through 2001-02; and
9 WHEREAS. the precedence set by disallowing payment on rate reduction bonds could
10 impair the ability of state and local governments to secure low-cost financing for local
infrastructure bonds and other types of bonds; and
11
WHEREAS. passage of this measure could exacerbate the financial problems experienced
12 through unfunded state mandates; and
13
14
15
16
17
18
19
20
21
22
WHEREAS. the proposition jeopardizes the state's economic recovery by creating
uncertainty for California-based companies, as well as those considering relocating to our
state.
TIiEREFORE. BE IT RESOLVED BYlHE MAYOR AND COMMON COUNCll. OF
lHE CITY OF SAN BERNARDINO AS FOllOWS:
SECTION 1.
The Mayor and Common Council of the City of San
Bernardino oppose the 1998 Electric Utility Proposition (Proposition 9).
SECTION 2.
The City Administrator is directed to send copies of this
resolution to the League of California Cities, area legislative representatives, and other
parties that may request such copies.
23 III
24
25
26 III
27
III
28 August 19, 1998
1
~".....",..........""'".
RESOLUTION OPPOSING TIm 1998 ELECfRIC urn.ITY PROPosmON
(pROPOsmON 9).
.
1
2
3
I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Mayor
4 and Common Council of the City of San Bernardino at a meeting thereof,
5 held on the _day of ,1998, by the following vote, to wit:
6 Council Members AYES NAYS ABSTAIN ABSENT
7
ESTRADA
8
LIEN
9
10 ARIAS
11 SCHNETZ
12 DEVLIN
13 ANDERSON
. 14
M"TT T FR
15
16
17 City Clerk
18 The foregoing resolution is hereby approved this _day of
, 1998.
19
20 JUDfIH VALLES, Mayor
21 City of San Bernardino
Approved as to form and
22 legal content:
23 James F. Penman,
24 City Attorney
25
26
. 27
August 19, 1998 2
28
-.'-' ---
The
. A Mil';'; * 1- S
Utility Rate Reduction and Reform Act
eT10N 1. Findings and Declarations
The People of California find and declare as follows:
The cost and dependability of California's electric utility service are threatened by a new law that was
intended to reduce regulation of electric utility companies in this state.
Any change in the way electricity is sold should benefit all electric utility customers, including
residential and small business customers, and should result in a fair and competitive marketplace.
Instead of creating a fully competitive market for electricity, the new law unfairly favors existing
electric utility monopolies by forcing customers to pay rates more than 40 percent higher than the market
price in order to bail out utilities for their past bad investments.
As a result of this 528 billion bailout for electric utility companies, the average California household will
pay more than 5250 more per year for electricity than they would in a fully competitive market.
Residential and small business customers should not be required to bear the costs of bonds used by
utility companies to pay for past bad investments.
It is against public policy for residential and small business customers to be required to pay for the
imprudent and uneconomic decisions of electric utility companies to invest in nuclear power plants
which the public did not want and which threaten the health and safety of this state.
.er the new law, deregulation of electric utility companies may result in marketing abuses that harm
ential and small business customers. Such abuses may include the selling of information about
u ese customers to other companies for profit. .
Therefore, the People of California declare that it is necessary to protect residential and small business
customers from unfair and unjustified taxes and surcharges that will force them to subsidize electric
utility companies. It is also necessary to ensure that residential and small business customers directly
benefit from deregulation of electric utility companies.
SECTION 2. Purpose
The purpose of this chapter is to:
1. Reduce residential and small commercial electricity rates by 20 percent to assure that these
customers receive a direct benefit from the transition to the competitive marketplace for electricity.
2. Prohibit ta.xes, surcharges, bond payments or any other assessment from being added to electricity
bills to pay off utility companies' past bad investments in nuclear power plants and other generation-
related costs.
3. Prohibit bonds from being used to force residential and small business customers to pay for past
bad investments by electric utility companies.
4. Provide for fair and public review of California Public Utilities Commission decisions related to
electricity price and services.
.5. Protect the privacy of utility customers and provide the information consumers need to obtain low
st and high quality electric service.
I
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SECTION 3. The following Sections are added to the Public Utilities Code:
electric Utility Rate Reduction
Section 368.1
(a) No later than January 1, 1999, electricity rates for residential and small commercial
customers shall be reduced so that these customers receive rate reductions of at least 20 percent
on their total electricity bill as compared to the rate schedules in effect for these customers on
June 10, 1996.
(b) The rate reductions described in subsection (a) shall be achieved through cutting payments to
electric corporations for their nuclear and other uneconomic generation costs as described in
Sections 367.1 and 367.2. .
(c) No utility tax, bond payment, surcharge, or any other assessment in any form shall be levied
against any electric utility customer to pay for the rate reductions described in subsections (a) and
(b).
ProhibitiQn Against Utility Taxes, Bond Payments, Surcharges or Any Other Assessments
To Pay For Nuclear Power Plants
.ectlon 367.1
(a) Effective immediately, costs for nuclear generation plants and related assets and obligations
shall not be paid for by electric utility customers, except to the extent that such costs are
recovered by the sale of electricity at competitive market prices as reflected in independent
Power Exchange revenues or in contracts with the Independent System Operator.
(b) No utility tax, bond payment, surcharge or other assessment in any form shall be levied
against any electric utility customer for the recovery of nuclear costs described in subsection (a).
(c) This section shall not apply to reasonable nuclear decommissioning costs as referenced in
Section 379 of the Public Utilities Code.
e
2
Limitation On Utility Taxes, Bond Payments, Surcharges, and Any Other Assessments Ta-
Pay for Electric Utility Company Investments in Non-Nuclear Generation Assets
.section 367.2
(a) Effective immediately, costs for non-nuclear generation plants and related assets and
obliga,tions shall not be recovered from electric utility customers under the cost recovery
mechanism provided for by sections 367 through 376 of the Public Utilities Code except to the
extent that such costs are recovered by the sale of electricity at competitive market rates from
independent Power Exchange revenues or from contracts with the Independent System Operator,
unless the electric utility first demonstrates to the satisfaction of the Commission at a public
hearing that failure to recover such costs would deprive it of the opportunity to earn a fair rate of
return..
(b) This section shall not apply to costs associated with renewable non-nuclear electricity
generation facilities described in Section 381(c)(3), or to costs associated with power purchases
from qualifying facilities pursuant to the Public Utility Regulatory Policies Act of 1978 and
related commission decisions.
Prohibition Against Utility Taxes, Bond Payments, Surcharges and Any Other Assessment
To Pay For Securitization Bonds.
Section 840.1
aotwithstanding current Sections 840 thrOU~h 847 of the Public Utilities Code:
(a) No electric corporation, affiliate of an electric corporation or any other financing entity shall
assess or collect any utility ta.,,<, bond payment, surcharge or any other assessment authorized by a
Public Utilities Commission financing order issued pursuant to Sections 840 through 847 of the
Public Utilities Code for the purpose of paying principle, interest or any other costs of any bonds
authorized by those sections.
(b) The Public Utilities Commission shall not issue any financing order pursuant to Sections 840
through 847 after the effective date of this measure.
(c) Any electric corporation, affiliate of an electric corporation or any other financing entity
which is subject to a financing order issued under Section 841 that is determined by a court of
competent jurisdiction to be enforceable despite subsection (a) of this section, shall offSet any
utility tax, bond payment, surcharge, or other assessment described in subsection (a) collected
from any customer with an equal credit to be applied concurrently with the collection of the
utility ta.,,<, bond payment, surcharge or other assessment.
.
3
Section 841.1
.y underwriter or bond purchaser who purchases rate reduction bonds after November 24, 1997
sued pursuant to current Sections 840 through 847 shall be deemed to have notice of the
provisions of Sections 367.1, 367.2, 368.1, and 840.1
Public Participa~ion and Judicial Review For Consumer Protection and Electric Company
Accountability
Section 1701.5
(a) Any action or proceeding of the Public Utilities Commission pursuant to Section 367. I,
367.2, 368.1 and 840.1 of the Public Utilities Code shall require a public hearing where evidence
is taken by and discretion is vested in the Public Utilities Commission.
(b) Any change to the amount of above-market costs for non-nuclear generation plants and,
related assets and obligations being recovered from utility customers shall only be made after the
electrical corporation has provided notice to the public pursuant to Section 454 of the Public
Utilities Code.
(c) Any action or proceeding to attack, review, set aside, void or annul a determination, finding,
or decision of the Public Utilities Commission relating to electric restructuring under Chapter 2.3
.Of Part I of Division 1 of the Public Utilities Code and financing of transition costs as described
Article 5.5 of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code shall be in
cordance with the provisions of Section 1094.5 of the Code of Civil Procedure. In any such
action the writ of mandate shall lie from the court of appeals to the Public Utilities Commission.
The court shall not exercise its independent judgement but shall only determine whether the
determination, finding or decision of the Public Utilities Commission is supported by substantial
evidence in light of the whole record.
Electric Utility Customer Privacy Protection
Section 394.1
The confidentiality of residential and small commercial customer information shall be fully
protected as provided by law. No entity providing electricity services including an electric
corporation shall provide information about a residential or small commercial customerto any
third party without the express written consent of the customer.
.
4
Electric Utility Customer Information
aection 393
~he Public Utilities Commission shall require each electric utility or electric service provider to
provide such information or materials with each utility bill issued to residential and small
commercial customers as the Commission determines to be necessary to assist consumers in
obtaining low cost, high quality electric servlce options, including electric service options that
reduce environmental impacts such as those that rely on renewable energy sources and to protect
consumers' interest in all matters concerning safe and dependable delivery of electric service.
Definitions
Section 330.1 Definitions of Charges
(a) ''Utility tax" "bond payments" "surcharge", "assessment" or "involuntary payment" mean
any charge that serves to permit an electric corporation to recover the value of uneconomic assets
from ratepayers, and includes but is not limited to a "fixed transition amount" as defined by
Section 840(d), and the "competition transition charge" that is the nonbypassable charge referred
to in Sections 367 to 376, inclusive.
(b) For purposes of Sections 330.1, 367.1, 367.2, 368.1, 393, and 840.1, the terms "electric
utility", "electric utility company", and "electric corporation" have the same meaning as the term
"electrical corporation" as defined in Section 218 of the Public Utilities Code.
.epeal of Existing Law
ections 367(a), 368(d), 368(h) of the Public Utilities Code !lIe repealed
SECTION 4. Initiative Integrity
(a) This act shall be broadly construed and applied in order to fully promote its underlying
purposes, and to be consistent with the United States Constitution and the Constitution of the
State of California. If any provision of this initiative conflicts directly or indirectly with any
other provisions oflaw, including but not limited to the cost recovery mechanism provided for by
Sections 367 through 376 of the Public Utilities Code, or any other statute previously enacted by
the Legislature, it is the intent of the voters that those other provisions shall be null and void to
the extent that they are inconsistent with this initiative and are hereby repealed.
(b) No provision of this act may be amended by the Legislature except to further the purpose of
that provision by a statute passed in each house by roll call vote entered in the journal, two thirds
of the membership concurring, or by a statute that becomes effective only when approved by the
electorate. No amendment by the Legislature shall be deemed to further the purposes of this act
unless it fur;thers the purpose of the specific provision of this act that is being amended. In any
judicial action with respect to any legislative amendment, the court shall exercise its independent
judgment as to whether or not the amendment satisfies the requirements of this subsection.
.
5
(c) If any provision of this act or the application thereof to any person or circumstances is held
invalid, that invalidity shall not effect other provisions or applications of the act that can be given
. effect in the absence of the invalid provision or application. To this end, the provisions of this act
are severable.
(d) It is the will of the 'People that any legal challenges to the validity of any provision of this act
be acted upon by the courts upon. an expedited basis.
.
.
6
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League of California Cities
1400 K Street. Suite 400 . Sacramento. California 95814
Phone: (916) 658-8200 Fax: (916) 658-8240
www.cacities.org
FOR IMMEDIATE RELEASE
AUGUST 18, 1998
CONTACT: Yvonne Hunter
916.658.8242
LEAGUE OF CALIFORNIA CITIES OPPOSED TO PROPOSITION 9
Sacramento, CA - After careful deliberation. the League of California Cities Board of Directors voted
unanimously to oppose Proposition 9. the electric utilities initiative slated for the November ballot.
The League is opposed to Prop. 9 because of the potentially harmful effects it would have on future
funding to local governments. the negative impacts it would have on the municipal bond market and
the uncertainty that would result in California's emerging competitive electricity market.
"We are concerned about the potential for revenue loss to local governments should Prop. 9 pass. This.
coupled with the negative impact the measure would have on the municipal bond market. gave our
Board great concern," said Don Benninghoven, Executive Director of the League of California Cities.
.y impairing the collection of bonds already sold. Prop. 9 could adversely affect the ability of cities
and municipalities to sell their own bonds due to an increase in perceived risk associated with the
California initiative process. Already, Orrick, Herrington & Sutcliffe. the state's leading bond counsel.
has identified potential credit and bond rating problems should Prop. 9 pass.
"This initiative could seriously hamper the ability of our member cities to secure low-cost financing for
local education bonds, local infrastructure bonds and other types of bonds." Benninghoven said. .. At
the very least. it would create an aura of uncertainty in the California municipal bond market:'
In addition., Benninghoven noted that the League was active in the negotiations that led to electricity
restructuring in California.
"Numerous cities throughout California are evaluating their options in the new competitive electricity
market," said Benninghoven. "Some have already signed contracts with new electric service providers
or are negotiating to do so. The League is concerned that passage of Prop. 9 will cause uncertainty and
produce a chilling effect on the newly emerging competitive electricity market.
Founded in 1898. the League of California Cities is a member organization that represents everyone of
California's 471 cities. The League strives to protect the local authority and autonomy of city
government and help California's cities effectively serve their residents. In addition to advocating on
.'ties' behalf at the State Capitol. the League provides its members professional development programs
d in~ormation resources, conducts educational conferences and research. and publishes WeSTern OTy
agazme.
###
Axr;K!ftl{ eI(j 1#2
WE'RE OPPOSED TO
PROPOSITION 9
TaxDaver
California Taxpayers' Association
National Tax Limitation Committee
Contra Costa Taxpayers Association
Kern County Taxpayers Association
Orange County Taxpayers Association
Ventura County Taxpayers Association
Sonoma County Taxpayers Association
Environmental
Planning and Conservation League
Natural Resources Defense Council
Environmental Defense Fund
Mothers of East Los Angeles - Santa Isabel
Forest Resources Council
Project Go. Inc.
California Natural Gas Vehicle Coalition
Citizens for Total Energy
Sierra-Pacific Environmental. Inc.
Volunteers of Shaver Lake
eifOrnia Labor Federation. AFL-CIO
Los Angeles County Federation of Labor
Central Labor Council of Butte and Glenn
Counties, AFL-CIO
International Brotherhood of Electrical
Workers, Local 1245
International Brotherhood of Electrical
Workers, Local I!
Labor
Laborer.s Union Local 220
South Bay Labor Council. AFL-CIO
Laborers. International Union of North
America Local #806
Five Counties Central Labor Council.
AFL/CIO
Teanlsters Union Local No. 439
Union Publications. Inc.
Local Government
League of California Cities
California State Association of Counties
Independent Cities Association
Association of California Water Agencies
California Municipal Utilities Association
West Basin Municipal Board
North Coast County Supervisors Association
County ofImperial
County of Kings
ety of California City
ty of La Puente
Regional Council of Rural Counties
City of Lynwood
City of McFarland
City of Tulare
City of Upland
City of Laguna Hills
City of Carson
Shafter City Council
City of Willows
Orland City Council
City of Seaside
Revised on 8/25/98
1---
Walnut Creek City Council
City of Mission Viejo
elifornia Contract Cities Association
y Point Municipal Advisory Council
Board of Supervisors, El Dorado County
El Dorado Hills Community Services
District
City of Marysville
City of Fortune
County of Plumas
City of San Rafael
Christopher Becker - Director of
Public Works, Placentia
Education
California Teachers Association
California School Boards Association
Association of California School
Administrators
Ventura County Superintendent of Schools
Office
California School Employees Association
California Association of Suburban School
Districts
Buena Vista Elementary School
Oak Valley Union School District
Jefferson Union High
Eastside Union School District
A;;io Verde Union School District
_anta Maria Joint Union High School District
Woodlake Union Elementary School District
Sundale Union Elementary
Tulare County Board of Education
Tulare Joint Union High School District
College of the Sequoias Community College
District Board of Trustees
David Sandell - Superintendent of El Monte
Charles Menoher - Superintendent, Shasta
Union High School District
Barbara Nemko - Superintendent of Schools,
Napa County
Diane K. Sirri - Superintendent. Santa Cruz
Terence K. McAteer - Superintendent of
Schools. Nevada County
Peggy J. Womiak - Superintendent. Mammoth
Unified School District
Geraldine A. Evans - Chancellor, San Jose City
and Evergreen Valley Community
College District
Leon Beauchamon - Governing Board
Member. Campbell Union School
District
Richard Teagarden - Superintendent of
Schools. Yuba County
Charles Menoher - Superintendent of
Schools, Shasta County Office of
Education
Paul Wagner. Principal, Fremont Unified
William Kelly - Vice Chancellor. Saddleback
College District
Elizabeth Dorn Parker - Member. Orange
County Board of Education
Delaine Eastin - California Department of
Education
Public Safetv
California State Firefighters' Association
Peace Officers Research Association of
California
California Professional Firefighters Association
California Organization of Police & Sheriffs
.ction Fire Protection
anta Cruz Deputy Sheriffs Association
Tulare Professional Firefighters' Association
Association of Bakersfield Police Officers
Oswald-Tudor Fire Department
Kern County Fire Fighters Union. Inc.. Local
l30l
Fresno Fire Fighters Association
Stockton Professional Firefighters
Warren E. Rupf - Sheriff. Contra Costa
County
Revised on 8/25/98
Sherman Block, Sheriff, County of
Los Angeles
Michael S. Carona - Marshall. Orange _
County
.
Consumer
American Association of Business Persons with
Disabilities
Consumers First
Consumers Coalition of California
Americans for Competitive Telecommunications
Westside Action Group
Committee On Jobs
Enel"2\' Service Providers
New Energy Ventures
Enron
Kinder Morgan Energy Partners, 1. P.
Independent Energy Producers Association
Inland Empire Utilities Agency
Sonoma County Releaf
Political Grouns
California Democratic Party
California Republican Assembly
California Congress of Republicans
_ilipinO-American Political Association
.mong American Political Association
San Francisco Democratic Party
Young Republican Federation of California
Lincoln Club of Orange County
Madge Overhous - Region 5 Director.
California Democratic Party
Al!riculture
California Farm Bureau Federation
Butte County Farm Bureau
California Forestry Association
AMS Farm Management, Yuba City
Santa Barbara County Farm Bureau
Bi-County Irrigation. Inc.
Lake County Farm Bureau
El Dorado Irrigation District
Nisei Farmers League
Kings County Farm Bureau
Chambers of Commerce
Azusa Chamber of Commerce
Bell Gardens Association of Merchants and
Commerce
California Black Chamber of Commerce
California Chamber of Commerce
California Coalition of Filipino American
Chambers of Commerce
Carson Chamber of Commerce
.hamber of Commerce. EM/SEM
ompton Chamber of Commerce
Corona Chamber of Commerce
Costa Mesa Chamber of Commerce
Cudahy Chamber of Commerce
Daly City-Colma Chamber of Commerce
East County Regional Chamber of Commerce
Encinitas North Coast Chamber of
Commerce
Eureka Chamber of Commerce
Fairfield - Suisun Chan1ber of Commerce
Filipino American Chamber of Commerce of
Solano County
Revised on 8/25/98
Gal~ta Valley Chamber of Commerce
Gateway Chamber Alliance
.eater CoronaINorco Hispanic Chamber of
Commerce
Greater Delano Area Chamber of Commerce
Greater Riverside Chamber of Commerce
Greater Tehachapi Chamber of Commerce
Greater Tulare Chamber of Commerce
Greater Westminister Chamber of
Commerce
Gridley Ar~a Chamb~r of Commerc~
Hanford Chamb~r of Comm~rce
Hayward Chamb~r of Comm~rc~
Hollywood Chamb~r of Comm~rce
Imp~rial B~ach Chamb~r of Comm~rc~
Inland Empire African American Chamb~r of
Comm~rce
Inland Empir~ Hispanic Chamb~r of
Commerc~ Association
Irvin~ Chamb~r of Commerc~
Kor~an Am~rican Chamb~r of Comm~rc~ of
Los Ang~les
Korean Chamb~r of Comm~rce, Orang~
_ County
~cast~r Chamb~r of Comm~rc~
Latino Chamber of Comm~rc~ of Santa
Lomita Chamb~r of Comm~rc~
Long B~ach Ar~a Chamber of Comm~rce
Mant~ca Chamb~r of Comm~rc~
Maywood Chamber of Comm~rce
Monter~y County Hispanic Chamb~r of
Commerc~
Mont~r~y Park Chamber of Comm~rc~
Moorpark C1i.amb~r of Comm~rce
Morgan Hill Chamb~r of Comm~rc~
Norwalk Chamb~r of Comm~rce
Oakland-Five East Bay Counti~s Black
Chamber of Comm~rc~
Ontario Chamb~r ofComm~rc~
South Orange County R~gional Chamb~rs of
Commerce
Orang~ County Hispanic Chamber of
Comm~rc~
Otay M~sa Chamb~r of Comm~rc~
Axnard Chamb~r of Comm~rc~
"cific Grove Chamb~r ofComm~rc~
Pajaro Vall~y Chamb~r ofComm~rce _
Palos V ~rd~s Peninsula Chamb~r of Comm~rc~
Perris Valley Hispanic Chamb~r of
Pico Riv~ra Chamb~r of Comm~rce
Placentia Chamb~r of Commerc~
Pomona Vall~y Latin Chamb~r of Commerce
Port Huen~m~ Chamb~r of Comm~rce
Pu~nt~ Hills Ar~a Chamb~r of Commerc~
Ros~mead Chamb~r of Commerc~
Sacram~nto Black Chamb~r ofComm~rc~
Sacramento M~tropolitan Chamb~r of
Commerc~
San B~nito County Chamb~r of Comm~rc~
San Diego County Black Chamber of
Comm~rce
San Gabri~l Black Chamber ofComm~rc~
San Gabri~l Vall~y Hispanic Chamb~r of
Commerc~
San Jacinto Valley Chamb~r of Commerc~
San Rafa~l Chamb~r of Comm~rc~
Santa Clara County Hispanic Chamb~r of
Comm~rc~
Santa Clarita V all~y Chamb~r of Commerc~
Santa Cruz Ar~a Chamber of Commerc~
Santa Paula Chamber of Comm~rc~
Santa Paula Mexican American Chamber of
Commerce
Simi Valley Chamber of Commerce
South Bay Association of Chambers
South Gate Chamber of Commerce
Stanislaus County Hispanic Chamber of
Commerce
Torrance Area Chamber of Commerce
Tulare-Kings Hispanic Chamber of
Commerce
Tustin Chamber of Commerce
U.S African American Chamber of Commerce
Upland Chamber of Commerce
Victor Valley African American Chamber of
Commerce
Vietnamese-American Chamber of Commerce
of Santa Clara Valley
Y orba Linda Chamber of Commerce
Revised on 8/25/98
Communitv Groups
~ChO Downey Homeowners Association
o Hondo Boys and Girls Club
oor of Hope Community Center, Los Angeles
EI Dorado County Citizens for Water
Port Hueneme Boys and Girls Clubs
Kamala Neighborhood Council
Economic Council of Pass Area Communities
Affordable Communities, Inc.
San Jose Conservation Corps.
Long Beach Church of Christ
Youth Opportunities
Boys and Girls Club of Oxnard
Durley Park Neighborhood Watch
American GJ. Forum. Department of
California
Asian Business Association
Asian Business Association, Orange County
eian Pacific Community Fund
sian Pacific Policy and Planning Council
Black Business Association
Black Business Empowerment Network
Black Chamber of Orange County
California Coalition of Hispanic Organizations
Chicano Federation of San Diego County
EI Concilio of San Mateo County
Filipino American Business Association of
Glendale
Filipino American Educational and Cultural
Association
Hispanic Business & Trade Association
Hispanic Business Women
Hispanic Youth Task Force
Inland Area Kwanzaa Committee
Jurupa Hispanic Association
The National Center for American Indian
Enterprise Development
.
Benecia Historical Museum
Pittsburg Vietnam Memorial
Tulare Improvement Program
Juvenile Diabetes Foundation
Redwood Empire Association
EI Shaddal Christian Fellowship Church
Boys and Girls Clubs of Pomona Valley
Fairfield-Suisun Community Action Council.
Inc.
Kings United Way
Girls Pocket Softball
Greenhaven Soccer
Ethnic
National Korean American Grocers
Foundation
Korean American Grocers Association of
Orange County
Korean Health. Education and Information and
Research Center. Los Angeles
Korean Youth & Community Center
La Raza Round Table
Latin Business Association
League of United Latin America Citizens-
California District 12
Mexican American Opportunity Foundation
NAACP Pasadena Branch
Para T odos
Singapore-American Business Association of
Southern California
Southeast Hispanic Business and Professional
Services
United Latino Fund
United Minority Business Entrepreneurs
Urban League of Riverside and San Bernardino
Counties
Revised on 8/25/98
r
euman Services Association
teelworkers Oldtimers Foundation
Golden Agers of Los Angeles
Filipino American Service Group, Inc.
Lockheed Martin Missiles & Space
California Small Business Association
California Grocers Association
California Healthcare Association
Association for California Tort Reform
California Large Energy Consumers
Association
California Business Roundtable
California Retailers Association
Consulting Engineers and Land Surveyors of
California
California Business Properties Association
California Employer Advisory Council
CellNet Data Systems
edUStry Manufacturers Council
a1ifornia League of Food Processors
California Independent Petroleum Association
California Industrial Users
Western States Petroleum Association
Pacific Gas and Electric
California Restaurant Association
Southern Counties Oil Co.
California Manufacturers Association
California Council for Environmental and
Economic Balance
Independent Oil Producers' Agency
Coachella Valley Economic Partnership
North American Refractories
Commerce Industrial Council, City of
Commerce
Hewlett-Packard
San Diego Gas and Electric
Orange County Business Council
San Diego Regional Economic Development
Corporation
.
Senior
Placer County Commission on Aging
American Coalition for Filipino Veterans
Tulare Senior Services. Inc.
Business
Building Industry Association of Southern
California. Inc.
California City Economic Development
Corporation
Small Business Coalition of Southern
California
Antelope Valley Board of Trade
Inland Valley Economic Development Corp.
Greater Oxnard Economic Development
Corporation. Oxnard
Pacific Incubation Network
North County Economic Development
Council
Southern California Edison
East San Diego County Economic
Development Council
San Gabriel Valley Economic Council
Valley Industry and Commerce Association
Harbor Association oflndustry and Commerce
South Coast Metro Alliance
Building Industry Association -
Coachella Valley Chapter
Baldy View Building Industry Association
Monterey County Business Council
Hispanic Lifestyle Magazine (RDS Media
Group)
Building Industry Association -- Orange
County Chapter
Atkins Environmental H.E.L.P, Inc.
AQC Environmental Engineers
Western States Petroleum Association
Tehama Local Development Corporation,
Red Bluff
Ventura County Economic Development
Corporation
Revised on 8/25/98
~.
Statewide Elected Officials and Candidates
An Lungren. Republican Gubernatorial
_ Candidate
Gray Davis, Democratic Gubernatorial
Candidate
Phil Angelides, Democratic Candidate for
Treasurer
Curt Pringle. Republican Candidate for State
Treasurer
Dave Stirling. Republican Candidate for
Attorney General
County Elected Officials and Candidates
E. Tom Bamert - Supervisor. Amador County
Fred C. Davis - Supervisor, Butte County
Robert J. Schroder - Former Supervisor. Contra
Costa County
John M. Gioia - Supervisor Elect, Contra
Costa County
Walt Shultz - Supervisor. El Dorado County
John Upton - Supervisor. El Dorado County
Ray Nutting - Supervisor, El Dorado County
Sharon Levy - Supervisor, Fresno County
Gary Freeman - Supervisor, Glenn County
Denny Bungarz - Supervisor, Glenn County
eene L. Taylor - Supervisor, Kings County
ee Lockhart - Supervisor, Kings County
Anthony Barba - Supervisor, Kings County
Jon Rachford - Supervisor. Kings County
Joe Neves - Supervisor, Kings County
Patty Logoluso - Vice-Chair Board of
Supervisors, Madera County
John Silva - Supervisor, Madera County
Tracy Kennedy-Desmond - Treasurer/Tax
Collector, Madera County
Harry Baker - Chairman of the Board,
Madera County
Ernie LiCalsi - District Attorney. Madera
County
Robert M. Weygardt - Supervisor. Placer
County
William N. Dennison - Supervisor. Plumas
County
Michael Yaki - Supervisor. San Francisco
City & County
Gavin Newsom - Supervisor. San Francisco
City & County
Leslie Katz - Supervisor. San Francisco
City & County
Mike Ryan - Supervisor. San Luis Obispo
County
Mike Nevin - Supervisor. San Mateo County
Dianne Jacob - Supervisor. San Diego County
Glenn E. Hawes - Supervisor. Shasta County
John F. Silva - Supervisor. Solano County
Casey Kroon - Supervisor. Sutter County
Dick Akin - Supervisor. Sutter County
Bill Borror - Supervisor. Tehama County
William Sanders - Supervisor. Tulare
County
Charles Harness - Supervisor. Tulare County
Mel Richmond - Supervisor. Tulare County
Jim Maples - Supervisor. Tulare County
Bill Maze - Supervisor. Tulare County
Tom Stallard - Supervisor. Yolo County
City Elected Officials and Candidates
Leroy Harrington - Board Chair. Antelope
Valley Transit Authority
Allen D. Payton - Councilman. Antioch
eoger Chandler - Mayor Pro Tempore. Arcadia
ss Ortiz - Mayor, Arvin
Robert E. Huber - Councilmember. Atherton
Randy Bomgaars - City Councilmember.
Bellflower
Quintin Kidd - Councihnember. Brentwood
Rosalie M. O'Mahony - Council member.
Burlingame
Revised on 8/25/98
r
Stephanie Harlan - Mayor, Capitola
Ron'Graves - Councilmember. Capitola
.'1 W, Sweeney - Councilmember.
Carson
llliam H. Armstrong - Mayor Pro Tempore.
Clovis
Helen Fisicaro - Councilmember. Colma
Frossarma Vallerga - Mayor, Colma
Lela R. Leon - Councilmember,
Commerce
Basil Kimbrew - Board Member, Compton
Unified School District
Mary L. Hornbuckle - Former Mayor.
Costa Mesa
George Perez - Mayor, Cudahy
Araceli Gonzales - Mayor Pro Tempore,
Cudahy
Alex F. Rodriguez - Councilmember. Cudahy
David M. Silva - Councilmember. Cudahy
Sal Torres - City Councilmember, Daly City
Richard L. Waldo - Mayor, Danville
Anthony Martinez - Mayor. Delano
Arthur B. Armendariz - Mayor Pro Tempore,
. Delano
mond K. Millard - Mayor, Dinuba
eith McCarthy - Mayor Pro Tempore, Downey
Guy S. Houston - Mayor. Dublin
Jack Thurston - Councilman. El Monte
Lori Holt Pfeiler - Mayor Pro Tempore.
Escondido
Jim Lawrence - Vice Mayor, Foster City
Alex Torres - Mayor, Exeter
Jim Fournier - Candidate for City Council of
Fountain Valley
Ken Steitz - City Councilman, Fresno
Annett La Rue - Retired Judge, Fresno
County
Gwen Duffy - Councilmember, Gardena
Elizabeth Williams - Mayor, Gonzales
John W. Kistinger - DDS, Mayor Pro Tempore,
Gonzales
Louis S. Garcia - City Councilmember,
Gonzales
Bill Ward - Councilmember, Hayward
.ve Winn - Mayor. Industry
ilip L. Iriarte - City Manager, Industry
oe Esquivel - Vice Mayor, Lakewood
Wayne Piercy - Councilmember, Lakewood
Art Madrid - Mayor. La Mesa
Barry Jantz - Councilmember, La Mesa-
Edward L. Chavez - Councilmember. La
Puente
Dwight Shelley - Councilmember, Lemon
Grove
Phillip Pennino - Councilmember. Lodi
Margaret Estrada - Councilmember. Lomita
Timothy L. King - Councilmember. Lomita
Rhonda A. Morillas - Mayor. Loomis
Michael Boberg - Vice Mayor, Loomis
Gerald O' Brien - Councilmember. Los
Banos
Louis Byrd - Councilmember. Lynwood
Ricardo Sanchez - City Councilmember.
Lynwood
M. J. Nabors - Councilmember. Madera
Herman Perez - Mayor Pro Tempore. Madera
Rob Schroder - Councilmember. Martinez
Dirk J. Helder - Councilman. Marysville
Sherri Butterfield - Councilwoman. Mission
Viejo
Larry Smith - Councilmember. Mission Viejo
Tom Adams - Councilmember. Monrovia
Jacqueline E. Heather - Former Mayor,
Newport Beach
Dick Lyon - Mayor. Oceanside
Jim Beam - Former Mayor. Orange
Frederick C. Thompson. Board Member-
Palmdale School District
Joseph P. Davies. Jr. - Mayor Pro Tempore.
Palmdale
Willie White - Vice Mayor. Pomona
Paula Lantz - Councilmember, Pomona
Robert E. Turner - Councilmember, Port
Hueneme
Toni Young - Mayor Pro Tempore. Port
Hueneme
Gary Reed - Past Councilmember.
Porterville
Robert W. Bruesch - Mayor. Rosemead
Margaret Clark - Councilmember. Rosemead
Jay T. Imperial - Councilmember. Rosemead
William A. Smallman - Former City
Councilman. Sacramento
Edward Simon - Mayor, San Bruno
David L. Buckmaster - Councilmember.
San Carlos
Revised on 8/25/98
Steve Apodaca - Councilman, San Clemente
Joe' Anderson - Councilman, San Clement
_oude Wysbeek - Councilmember,
San Fernando
enry Perea - Councilmember,
San Francisco
Harry Baldwin - Councilmember, San Gabriel
Dominic S. Polimeni - Councilmember, San
Gabriel
Frank Fiscalini - Councilmember, San Jose
John Diquisto - Councilmember, San Jose
Marty Blum, Councilmember,
Santa Barbara
Jo Anne Darcy - Mayor Pro Tempore,
Santa Clarita
Mary J. Klajic - Councilmember,
Santa Clarita
Robert T. Holbrook - Mayor, Santa Monica
John A. F. Melton - Councilmember. Santa
Paula
Don Jordan - Mayor, Seaside
Helen B. Rucker - Mayor Pro Tempore,
Seaside
.
.
Richard Ortiz - Councilmember. Soledad
Fred J. Ledesma - Councilmember. Soledad
Brian Donahue - Councilmember. Stanton
Harry M. Dotson - Mayor Pro Tem. Stanton
Philip A. Smith - Mayor Pro Tempore.
Linda D. Crase - Councilmember. Tulare
William Cooke - Vice Mayor. Tulare
Diane Mathis - Mayor, Tulare
Nettie Washington - Councilmember, Tulare
John Lazar - Councilmember. Turlock
Tracy Worley - Mayor Pro Tempore. Tustin
Ed Estes. Jr. - Councilman. Vista
Gene Wolfe. Mayor. Walnut Creek
Kathy Hicks. Councilmember. Walnut
Creek
Oscar Rios - Mayor Pro Tempore. Watsonville
Frank G. Fry - Mayor, Westminister
Vincent H. Holvik - Mayor. Willows
Lorn Pride - Vice Mayor, Willows
Mike Murray - Councilmember. Willows
Dr. Bill Wesley Brown - Councilmember,
Willows
Revised on 8/25/98
see: PUEl.!C R"FAIRS
Fax:626-302-197?
Sep 1 '98 9:53
P.Ol
.
.
App-~, H
ABoUT THE AUTHORS
.'
:METROPOLITAN WEsT FINANCIAL Sp-iti;...- In advisiq (lUbli~
A.1'IiD STRATEGIC SERVICES ami private _titi_ 011 issues
(METWEST) reIamd to srar.e aDd 10cal
. lOVf!f'ftrn#!f:# Du4ptary "'''.-os,
~ relating to capital financing for zmmic:i:palities, we poliey, regulatory issues. state
and local govcmnent proC=lmE propms, public-Private pazmetSbips, and l'cdera1
isaw:s n:latmi to state mci loc:a1 FVCl"","-t.
Principals in the fi:m who coattibuted to this aualysis i%II:lud.e:
ThomlLt W. Hayes, President: Prior fa joimDi MctWcst, Mr. Hayes served as Cbicf
Fiscal Aci~ to C3liicmia's Govcmor, Ca1ifomia's Stata Tzeasurer, and A:w:titor
Ckneral for the Start of California;
.'
Russell S. Gould, Principal :uad Seaiar Advisor: Prior to joming MetWest, Mr. Oould
serv~ the State of Califomia as CliefFiKal Advisor to the Governor of California and
was S~eta.-y of C1lifamia's Heallh and Welfare AICllCY.
Other members of Met West who conttibured to ~s stlIdy:
L. Steven Spears, MaIlagillg Director: Prior to joinin, M.tn.p"litm W cst, Mr. Spears
Served as Califomia's Deputy State T:=sun:r for Public F"...."....... lcp1 coumel to the
Califomia State Boud: of Eqll~H"",rion, me!. !Glior consultant tD 1:f!,e Califomia State
Senate 011 rCYl:ZlUe and taxation issu~.
Lyle DeCe.ubaugh, Auistant Msugilll Director: Mr. Def'-"-'V ..pr--..t local
gOVct""'~f liCllcies before the Legi$l~'IPI me!. various stata .tl...imlll'PUivc: and.
rezuiatory bodies. He also bas served as the pMcipal cousuItlmt to the CalifanIia
Assembly Committee on Loeal Govemmcnt CD l'nCl1Ull md. -...ti"t' mattI:S.. He also
served as a con.sultam to ~ San Francisco Chamr ~isicm Comrnidion for fiDance =
adminimation.
LaFlD.1U "StaA" St3J1cdl" Aci'risor: Mr. Stmcell is a. former Cbief Dc:puz:y Director of
the State ofCalifomia's Departl:lll!l:lt ot'Fi""""" and has served mare than 30 Y=n in
budget-rclated capacities within the state. Mr. St:mccll ex:m:ised badF p1,,"m"~ mci
oversight for all capital outlay, higher ednc:ation, cconomic forecast:lng. and revemu:
~'ITI~rioa
.
g-l
1I=/u
9/rl9f
.
.
.
This 7'eport aurltn.a II:. resulr:t of a r.udy conducted by Me/1'Qpolitrm W.ur Fi1lf8ldtrl and
Strategic SDViCI:$ ro de1ermi1Ul lrudg'1 imp/icatt/)tu fo7 1M Stine and local govemmmrs wirhm
CaJifomia if Pnlposition 9 011 1M 'NtWemb.- /998 ballot were I2J1P7'OVI!4 by tM voters anti fully
implvnmrea.
TABLE OF CONTENTS
. .
Page No.
Exec:utive Summ.ary.... ....~. ..... ..... .......... 0_. ......... 00 .......00.......... .... ........... ES-l
~~~CL................................................................................ 1
Legislative HistoIy of Electric Industry ~ in
Califorrua................ ..... ...... ......... ........ ............ ....... ... ..,... 1
ImplcmCD!atiOll ofElcdric Utility Restructuring................. .._.......... 2
~sitiOll ~..................-........................................................
Cal''''---'-' T_=~ "'----~
llU~ S ~L.LA....ve ..-41J'lo~...... ............. ..... ............. o. ...................
Basic ProvisiollS of Propositi OIl 9... ......... .................. ....... ...........
2
2
2
Puzpose and Methodology of1'bis Study............................. ......... ..... 3
Impact 011 State of California Budget... ..... _...... ... .. ...... . . .. ...... .. ... ....... 3
Findings.... .............................................. ......... .:.............. -.. 3
State Impact AssociaIed with Liability for Rate Reduction BOIIds........... 4
ImpK:t on State Bonowing Casts.............. ................... ................ 7
Direct Impc on State ~CI1JCS ." .......... ..... .......... .................... 12
S......T1'I'"')' of State Budget Impact....... ......... .............. ......... ......... 14
State Budget Scenarios to Co=t2r the Nega1ive Impacts ofP~on 9.. .. IS
Option I - Tax In~ ...... ............ ............... .................. ....:.. 16
Option n -Expenditure Redul:tioIlS...... ........................... ............ 18
Option m - Combination ofRevenuc Increaes me! Eltpenditure
Rc~..ions. ................. ............... ............... ............ 24
'... ~..._ _~""'.....n ,
.
TABLE OF CONTENTS (CONTINUED)
.
Effcc;t of Proposition 9 on the Fiscal ConditiCll oCLocal QowmmIldS in
c:~--~---_..._...............................;................................. :Z~
Local BorrowiD.:Cost ~-Sft...................................................,.. '21
~tli oCPropoaitiOl1 9 011 DiscretiomIry Rcvama of Cities ami
~~~es....~......................................................................... ~
Impact ofPropositi0l19's Rcvmuc Redw::doas OIl Local
Pro~.. ....._....... ............... ........................................... ...- 35
Local r....F'ry Tax B.eve:nua ~l<1ion",."" ....... .................... ...... 38
State Pr"'1'""'tj Tax gbift Potclltial............ ....... ............. ................ 40
Diso::rimiDatoty r...l'....." ofProparitioll9 on Califamia
ltJ:si~ts...............-..........................-............................... ~l
S"...m,,'Y ofFisal Impacts to the State aml to Loc:al Gove. . ..n__ ...... .... 42
. Appendix A (Oni~k Hmington Lettuto Elizabeth Hill ClIlIuly 14, 1998)... A-I
Appendix B (DeprutmeDt ofFinance md. I.e;is1ative Amlyst Lctcr to
Honorable Daniel E. L1mlJl'CI1 Ol1Ianumy 26, 1998)...... .................. B.l
Appccdix C (Changes in Stale Tax Rcvc:l1ye.20% Rare R...I.......on)........... C-l
. Appendix D (Changes in SWC Tax Rcvc:'D.UC-OisallOW3l1C8 ofT1""'mtim:l
Ch2z1ges)....... .... .... ................... ... ......... .....:............. ................. D-1
Appenciix E (Calculalion ofEm:ctivc Utility User's Tax and. Ft""ch;lIa Fee
Rates)................ ...... ..........._.......... ....... .... ......... .............. E-l
Appendix F (Cban:es in Local Sales Tax Revenue-ZOo;. Rare.~1ion).... F-I
Appendix G {('h=ges in Local Sales Tax R.~CI1UO-Disall~ of
Tl'aIISition Charges)...... '.' ...... ....... ... ........ ....... ......... ........... ..... G-l
Appendix K. (About the Authon).................... ....... ........................ H-I
.
-..........., ........_....'..,~
-,
,
.
EXECUTIVE'.
.
SUMMARY
PURPOSE OF
Tms STUDY
The purpose of this stUdy is to determine the impact of the
provisions of Proposition 9 on the fiscal condition of the State
of California and local government agencies in California. Toward that end, and
notv.ithstanding the fact that we are aware of a number of serious legal questions that
likely will arise if Proposition 9 is approved by the voters,
we have assumed that the Proposition is valid and
enforceable in all respects.
SUl\'[MARY
OF FINDINGS
EFFECTS ON
THE STATE
If Proposition 9 is successful at the polls, it ""ill result in a significant
negative impact to the state's General Fund budget. Tnis ""ill result from three primary
considerations:
.
). The State will incur costs of between 55. 'i and 5i.3 billion in the form of principal
and interest payments to honor its pledge to make "adequate provision" to rate
reduction bondholders. Moreover, our analysis indicates that, because die courts ""ill
in all likelihood require immediate payments to bondholders and because the State
lacks explicit authority to strUcture a multi-year system of repayment, the budget
problem created by this liability will have to be addressed in its entirely in the 1999-
2000 fiscal year. With a consistent history of meeting its financial pledges and
obligations, the State, practically speaking, must honor its pledge to rate reduction
bondholders or face grave fiscal repercussions.
,. The State will pay additional borrowing costs of approximately 51 billion over the
life of bonds issued for public works projects during the transition period as a
result of a market penalty (increased interest costs) associated with Proposition 9's
invalidation of the revenue stream securing the rate reduction bonds. Our analysis
indicates that this increased interest penalty will range from a high of 50 basis points
to a low of 15 basis points. The actual amount and duration of this market penalry
will depend on the occurrence and success of other Proposition 9-like initiatives that
disrupt the revenue stre:un for bonds and notes. If no similar initiatives appear on the
ballot, the risk of the continuance of this penalty most likely will diminish over time.
.
). The State will experience General Fund revenue reductions of between 5150 and
5100 million because of reduced revenues for electric utilities caused by the
prohibition against collection of transition charges.
E5-1
.
Our analysis indic:ltes th:u: the combination of these factors will result in a 57 billIon
negative impact on the state's General Fund budget for the 1999-2000 fiscal year. 1l1is
57 billion gap will have to be closed through revenue increases, expenditure reductions,
or some combination of the two approaches.
An approach focused solely on increased revenues would require revenue increases of
'approximately 512 billion, because of the interplay of General Fund revenues with the
minimum funding guarantee for K-12 schools and community colleges established by
voter-approved Proposition 98. A revenue increase of this magnitude would require
raising:
;;. Personal income lax rates by 38 percent, so that the top marginal tIIX rate would
have to increase to 12.8 percentfrom the cun-ent 9.3 percent; or
> The minimum state IUId local sales tIl:c rate by approxirnmely 3.25 percentage
points,from 7.25 pen:ent to 10.5 percent.
If the Proposition 98 minimUIIl funding guarantee were suspended, revenues still would
have to be increased by over 56 billion. Under this scenario, the top marginal ta.'( tate for
the Personal Income Tax (pIT) would have to be increased to 11.1 percent or,
a1ternativelv, the minimum sales ta.x rate would have to be increased bv 1.6 cents to 8.85
. .
percent.
.
Without revenue increases, expenditures would have to be reduced by over 56 billion.
Expenditure reductions of this magnitude would result in severe impacts on all areas of
discretionary General Fund spending, including:
> Significant reductions in service levels and eligibility for lWedi-Cal recipients;
> Reductions in cash grants for aged, blind, IUId disabled clients and welfare
recipients;
> Increased student fees and reduced access to higher education; IUId
> The release of tens of thousands of inmates from state correctional institutions.
EFFECTS ON LOCAL
GoVER.~lExrs
In addition to its impact on state finances, Proposition 9 also
would have a significant impact on the fiscal condition of local
governments by:
> Increasing local bon-owing costs by S9.6 billion over the life of bonds issued for
local public wories projects as a result of the same market penalty which would be
imposed on the State;
.
E5-2
.
.
.
,
:> Reducing by 5111 to Sli6 million, the amount of discretionary revenues available
to cities and counties within the investor-owned utilities service areas as a result of
reduced utility user's t/IX andfranchisefee collections; and
:> Reducing the amount of property t/IX revenues available to cities, counties, schools.
and special districts near the Diablo Canyon and San Onofre nuclear facilities by a
significant amount. possibly as much as 5111 million during the transition period,
if those facilities are closed as a resul1 of Proposition 9.
These local revenue reductions will bave to be addressed throusth significant service
reductions or increases in general purpose ta.,<es. Obviously, to th~ eltt~t that the State
were to shift a portion of its fiscal problem to local governments, as it has done in the
past, the fiscal impact on local agencies would be even greater.
L"IPLE.MENT A TION OF
ELECTRICITY UTILITY
RESTRUCTURING
In January of 1998, the State of California
initiated a restructuring of the electric
utility industry. Legislation from 1996
(AB 1890, Brulte) and 1997 (SB 477,
Peace),i established a process for transition
to a competitive market for electricity for residential and business ratepayers. Basically,
this legislation:
,
,
Provided ratepayers with the oppommity for greater choice in their provide:- of
electricity as of January I, 1998;
:> Provided a 10 percent reduction in electric utility rates for residential and small
commercial users -- relative to the level of rates in place as of June 1996;
:> Established a process wberein utility companies have the oppommity to recover
the costs of investments that will be uneconomical under the competitive
environment (kno....ll as "stranded costs") through the collection of a competition
transition charge from ratepayers during a transition period defined as January I,
1998 throu2h March 31, 2002; and
)0 Established a power exchange and an independent system operator to further
develop a competitive market for electricity.
Investor-owned utility companies are authorized to finance the 10 percent rate reduction
with the sale of bonds through the California Infrastructure and Economic Development
Bank. a public body within the State of California. AB 1890 authorized payment of
principal and interest on the bonds by serting aside a portion of the collected transition
charges. Although the legislation declared these bonds not to be an obligation of the
State. the State did pledge in starute not to take any action to alter the rights of
i Chapter 854, Statutes of 1996, (AS 1890, Sr.lte) and Chapter 175, Statutes of 1997, (Sa 477, Peace).
ES-3
.
.
.
"
-
bondholders unless ~adequate provision is made 111 law for the protection of the
bondholders. "
PROPOSITION 9 Sponsored by the Utility Reform Network (TURN) and
Californians against Utility Taxes (CUT), Proposition 9
would become effective immediately upon approval of the voters in November 1998 and
would:
> Prohibit the electric utility companies from recovering transition charges related to
the costs of nuclear power plants;
). Prohibit electric utility companies from collecting transition charges related to the
recovery of the cost of most non-nuclear stranded costs unless the CPUC finds that
the collection of such charges is necessary for the utilities to earn a fair rate of return;
> Prohibit the collection of any charge related to repayment of the rate reduction bonds;
and
> Finance a 20 percent rate reduction for residential and small co=ercial ratepayers
from June 1996 rates - an additional 10 percent rate reduction over AS 1890 -
presumably from the disallowance of transition charges.
ES-4
.
I N T E R 0 F F ICE
MEMORANDUM
Date:
From:
Il-Sep-1998 11:36am PST
Melanie Miller
MILLER ME
CITY CLERK
Dept:
Tel No:
TO: Jan Wages
WAGES JA
Subject: Res 98-250
Just to give you a heads up.
I am sending you a copy of the complete resolution which states
the following instructions - "The City Administrator is directed
to send copies of this resolution to the League of California
Cities, area legislative representatives, and other parties that
may request such copies."
We will of course, give copies when they are requested.
But you will need to handle the first part of the direction.
Just let me know if you have any questions.
.. FOR OmCE USE ONLY - NOT A PUBUC DOCUMENT ..
PllS0LUTION AGENDA ITEM TRACKING FORM
Meeting Date(Date Adopttd): of / C',?I98 Item If /1/ Resolution If <j?- ..:?s-O
Vote: Ayes: < ~ t ..., Nays: ~ Abstain: 6)-. Absent: 3/ 5
Change to motion to atnend original docs: .nlc-
,
AttaChments:
ContraCt Term:
~~~
Resolution 1# On Attachments:
Conttact Expiration Date:
e~
/
tJ? /4/98
?J",,/ / /0 /98
Date Sent to Mayor:
Date of Mayor's Signarure: 09
vi'
c7?
/ tJ'j 198
/ /0 /98
Date Rerumed from Mayor:
Date of Clerk's Signarure:
Seal Impressed: /
/98 sf-ttN;htJ-t--
Date Received Back:
Reso Log Updated:
DateMemoSenttoDepartmentforSignature: tJ'l /
Date Lener Sent to Outside Party for Signature:
60 Day Reminder Letter Sent on 30th day:
90 day Reminder Letter Sent on 45th day:
_ day Reminder Letter Sent:
Date Received Back:
See AttaChed:
See Attached:
. See Attached:
Note With/On Reso of AttaChment stored separately: 170
Direct City Clerk-PUBLISH, POST. RECORD W COUNTY (circle I) Date:
I
/98
see Attached: ^"~
/
Request for Council Action & Staff Report Attached:
Updated Prior Resolutions:
Updated Personnel Folders (6413, 6429, 6433. 10584. 12634):
Updated Traffic Folders (3985, 8234, 655):
Yes--..!:::. No_ By mam
Yes_ No~ By mam
Yes_ No """""'--8y lI'I~m
Yes No"":::::" By mam
Datcf7f / "'7/98
DatrtJ '/ / II /98
Datfl?'f III IqR
Da~9 / // /98
Copies Distributed To: City Attornev & Others: ~& ~//?/7~~
By: mam Date: t?r / /1 /98
Other: /~1y adntlll/:s!7M-/P;e dJ'~if ~ ~ ~~ ~ ~
~l':;;;::J::: ~~~:~)
BEFORE ffiING REVIEW FORM TO ENSURE ANY NOTATIONS MADE HERE ARE TRANSFERRED TO THE YEAR'
RESOLUTION CHRONOLOGICAL LOG FOR FUTURE REFERENCE (Contract Tenn. etc,)
Ready to File:
-
Date: 01 I II /98
Last Uodated: OSnO/1998