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Deirdre Newman

Newport Beach and Costa Mesa will each lose about $2 million for the

next two fiscal years, based on a tentative agreement announced by

Gov. Arnold Schwarzenegger Wednesday.

Schwarzenegger reached the agreement with the League of California

Cities board of directors, but the league membership hasn’t ratified

the decision yet. They are expected to do that today. Costa Mesa

Mayor Gary Monahan and City Manager Allan Roeder are in Sacramento

for that vote.

The projected $2.1-million annual loss would be $700,000 more than

Newport Beach officials originally anticipated, City Manager Homer

Bludau said.

While the loss is tough to bear, it’s a short-term sacrifice in

exchange for the potential of more financial security in the future,

he added.

“All cities hate to lose money, but having the governor say he

will support a November ballot measure that will make it very, very

difficult for the legislature in the future to take money away from

local government, I think is something that everybody feels it’s

worth pain and suffering for the next two years,” Bludau said.

The agreement is based on reducing three revenue sources that

cities depend on: vehicle license fees, property tax and sales tax.

The formula, developed by Schwarzenegger’s administration, calls for

cities to receive one-third less than the already expected reduction

in vehicle license fees; one-third less property tax and one-third

less sales tax for the next two fiscal years, Bludau said.

The league was in a position to negotiate with Schwarzenegger

since it submitted an initiative for the November ballot that would

require a majority vote of the people before the state legislature

can take and use local government funds, as they have done in the

past, Roeder said. If it passes, that initiative would take effect in

January. It would also strengthen an existing law that calls for the

state to reimburse local governments in a “timely manner” for

mandated program and service costs.

Schwarzenegger’s bargaining chip was his offer to push a similar

initiative through legislature for the November ballot, except that

it wouldn’t take effect for two more years, Roeder said.

Schwarzenegger has said he would oppose the league’s initiative if it

goes forward, Roeder said. But if his initiative gets on the ballot

also, he would throw his popular support behind it and help fundraise

and campaign for it, Roeder added.

Costa Mesa is expected to lose about $2 million for the next two

fiscal years, according to the league’s website. City officials

originally anticipated a loss of $860,000, Roeder said.

Monahan said he and Roeder are in Sacramento to look out for Costa

Mesa’s best interest.

“I’m sure there are some details that are still fluid,” Monahan

said. “We’re up here to see what those details are and what can be

accomplished between now and tomorrow and to get a feel of what the

assembly is looking at. The best thing we can do is make a deal with

the governor. At the same time, we have to make sure the deal is

palatable and that we can live with it.”Newport Beach stands to lose

2.7% of its general fund, Bludau said. And Costa Mesa would lose 2.3%

of its general fund, said Marc Puckett, Costa Mesa’s director of

finance.

Even if the league’s membership approves the agreement today, it

could be challenging for Schwarzenegger to persuade the state

legislature to adopt the exact agreement reached Wednesday, Puckett

said.

“If the legislature starts changing the protection for local

government in terms of local revenues or changing the formulas in

terms of how it’s distributed, there will be an erosion of support

for the agreement,” Puckett said.