Still Trapped in Big Boxes

All in all, California’s cities and counties are getting a pretty good deal from the governor. Though their property tax treasuries would be plundered again by the state over the next two years, they would gain immunity after that from the raids Sacramento conducts every time there is a state budget crisis. But there remains a serious flaw in the arrangement: Local governments would continue to rely on sales taxes to prop up their budgets, meaning development decisions would still be based not on what’s best for residents but on what attracts tax-generating businesses such as big-box stores and auto dealerships.

The arrangement, announced Wednesday, is one of the side deals that Gov. Arnold Schwarzenegger has worked out as part of his attempt to assemble a budget that will get the state through the fiscal year starting July 1 without a tax increase. The revised budget is scheduled to be announced today. Schwarzenegger has negotiated several budget agreements without consulting the Legislature, irritating majority Democrats. All such agreements must be ratified by lawmakers by a two-thirds vote.

Under the deal, local governments would give up $1.3 billion in property tax revenue each of the next two years in exchange for a constitutional guarantee that they would be off the hook after that. And the state would begin paying back some of the money it has taken in recent years, partly by allowing cities and counties to keep a greater share of local property taxes. The local governments were ready to take their own plan to the November ballot but offered to drop that in exchange for a firm deal from the Schwarzenegger administration.

Since 1992, Sacramento has ripped off an estimated $33 billion from local governments to help the state meet its commitment to public schools, The Times’ Sue Fox reported. Promises to pay it back were never fulfilled, even during flush budget years. The local officials want an ironclad promise this time.

The deal should have been an opportunity to fix a separate but equally urgent problem: dependence by localities on sales taxes. The localities get to keep a penny of the sales tax on every retail dollar spent. This encourages city councils and county boards of supervisors to search for -- and entice -- auto malls and big-box stores such as Wal-Mart to settle in their jurisdictions, rather than seeking job-generating office projects or much-needed housing. The result is terrible planning, an oversupply of retail projects and increased traffic. Unfortunately, Schwarzenegger’s deal would lock sales tax dependence into the state Constitution, where it could be changed only by another vote of the people. That wouldn’t be likely for some time to come.

Schwarzenegger should see that mall-driven planning is good for no one. Guaranteeing local governments their property tax money is a good move that should have been made years ago, but the state should keep the sales taxes while finding a more stable producer of revenue for cities and counties.