Property Tax Borrowing by the State (Prop 1A)
Under terms of the new budget, the State will borrow property tax revenue from the Counties. The Counties are creating bonds thru the California Statewide Communities Development Authority (CSCDA) to purchase the receivables due to cities, counties and special districts which will have the property taxes borrowed. By creating the bonds, the cities, counties and special districts will receive cash flow from the sale of bonds to offset some of the loss of cash from property taxes.
Timing is going to be an issue. The first installment of property taxes will be transferred to the State by January 15, 2010 but securitization cannot occur until March 2010, two months later. Several parties including the League of Cities are working with the State Department of Finance and the State Legislature to have this situation fixed.
In Orange County, the estimated gap between borrowing of property tax revenues and issuing bonds will impact the General Fund by $37 million, OC Parks by $4.1 million, OC Libraries by $3.1 million, and the Flood Control District by $5.3 million.
Outlook for the Economy
In July, unemployment rose from 11.6% in June to 11.9%. Job losses are slowing down, but job losses are continuing. There were 63,000 jobs lost on average each month from March to June 2009 compared to 87,500 lost from November 2008 to February 2009.
Residential real estate shows signs of stabilizing with the number of sales up 20% from last year.
The cash flow situation is not good. Most sources of revenue are running behind projections.
- Personal Income Tax was $74 million below the May Revise budget.
- Sales Tax was $76 million below the May Revise budget.
- Corporate tax revenue was $104 million above the May Revise budget.
- Vehicle License Fee (VLF) was $36 million below May Revise budget.
- Other taxes were $8 million above May Revise.
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