Stanislaus County must repay cities in tax collection ruling

STANISLAUS COUNTY -- California cities expect additional tax revenue since a November state Supreme Court decision that established that counties have overcharged them for property tax administration.

It's estimated that Stanislaus County could owe as much as $2.4 million to Modesto for charging excess administrative fees to the city since 2006. Turlock, Oakdale, Riverbank and Patterson have asked the county to return a combined $1.25 million for miscalculating the fees, which the county charges for collecting property tax and disbursing the revenue to local agencies.

In future years, the ruling could require Stanislaus County to give up $789,000 in annual revenue to its nine cities, including about $400,000 to Modesto and $150,000 to Turlock, money that could help pay for staff or other needs.

Any decisions on whether to adjust the administrative fees or return money to cities for overcharges in previous years are awaiting the Supreme Court's final review of the case in February.

While some cities claim they should be reimbursed for overcharges since 2006, the county is taking a different view.

County Chief Executive Officer Monica Nino said public hearings on the property tax administration fees were held every year and the county code set a 90-day limit to appeal the fees. That means the county is looking at reimbursing cities only for the 2011-12 fiscal year.

"We are waiting for the final review of the suit to tell us how the decision should be implemented," Nino said.

In claims submitted to the county in December, Oakdale, Riverbank and Patterson said their losses occurred between 2006 and 2012. According to their claims, which are a first step to litigation, state laws set a four-year limit on reimbursements, but the cities noted the statute of limitations was an issue in the Supreme Court case, titled Alhambra v. Los Angeles County.

Waiting for a decision

By agreement, Stanislaus County and its cities have restrained their attorneys until the lawsuit between agencies in Southern California was completely decided. According to the ruling, the county can charge fees to collect property tax and disburse the money to cities, special districts and schools, but revenue allocated from local agencies to a fund for education is exempt from the fees.

The court said Los Angeles County was wrong in charging the fees on education revenue. Stanislaus and other counties did the same based on advice from their statewide association.

The ruling is expected to result in less funding for the county assessor, auditor, and treasurer-tax collector offices and the Assessment Appeals Board, all of which rely on the administrative fees.

Auditor-Controller Lauren Klein said money was included in fund balances this year to pay potential claims from cities. She said the county departments aren't able to charge fees on education revenue, which represents almost 50 percent of allocations, and that raises questions about how to pay for their services.

The departments could ask for help from the county general fund, cut staff and expenses, or hope the Legislature passes a bill to fund their services, Klein said.

No calculations yet

Modesto officials said they have not calculated what the city is owed for overcharges and are waiting for the final court review in February. If the county stops withholding $400,000 a year in administrative fees from Modesto, the revenue could cover most of the annual subsidy for Modesto Centre Plaza or put more police officers on the streets.

Turlock City Manager Roy Wasden said an additional $150,000 a year would "help us maintain a balanced budget. We have a great deal of needs for costs such as roads and infrastructure, and we have reduced our work force."

Turlock previously asked for $526,600 in reimbursements going back to 2006. "We believe the county will work with us to reach an equitable solution," Wasden said.

Ceres City Manager Art de Werk said the county should return the money for previous years. He estimated that the city is owed $400,000 to $500,000 since 2006.

"So far as back payments, that matter still has not been settled," he said. "It is my understanding we have been fighting this all the way back to the 2006-07 timeframe. That should be the starting point for calculating what is now owed to the cities."

Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or (209) 578-2321.