Modesto suing Stanislaus County for $3 million

City says it's owed $3M after ruling

kvaline@modbee.comJuly 17, 2013 

Modesto is suing Stanislaus County for roughly $3 million, claiming that's how much the county overcharged it for administrating the city's property taxes over several years.

Counties assess and collect property taxes and then disburse them to cities, less the fees they deduct for the service.

But in November, the state Supreme Court ruled that counties had been improperly charging fees for the property taxes sent to cities through a complicated budget formula the state started in 2004, called the triple flip and vehicle license fee swap, which involves replacing some of a city's sales taxes and its license fees with property taxes.

Stanislaus County charged its nine cities these fees for six years, from its 2006-07 through its 2011-12 budgets. Modesto estimates it was overcharged about $500,000 in each of those years.

The county stopped charging the fees in 2012-13.

No other Stanislaus County city has filed a lawsuit against the county, but some have filed claims seeking reimbursement. The amounts owed to the other cities are significantly less.

For instance, county officials said in January that the annual fees were about $40,000 for Oakdale, $80,000 for Ceres and $154,000 for Turlock.

One of the main points of contention in the lawsuit is how many years in fees Modesto is owed.

The city contends in its lawsuit that it is entitled to recoup the fees for all six years in which it was overcharged.

The county's position is that the city had the opportunity to challenge the fees but failed to do so in a timely manner. The county reports annually how much it will charge in administrative fees and gives cities 90 days to question the fees.

County Counsel John Doering said it is county officials' understanding that Stanislaus is the only California county that provides cities this opportunity.

Additionally, he said, most of the other cities and counties resolving this issue are using three years for the number of years owed, which he said is based on state law.

He said in instances where a city is seeking reimbursement for more than three years, it's often because the city had put the county on notice years before the Supreme Court decision, and the city and county agreed to wait for the court decision before resolving their dispute.

Doering said Modesto did not do this. "We don't see much if any basis that cities that did nothing get to go back for six years," he said.

Cities across California have received payment or are seeking payment from their counties over the improperly charged fees. For instance, cities in San Joaquin, Santa Clara and Sacramento counties have received or are seeking reimbursements, according to information provided by Stanislaus County.

Modesto filed its lawsuit in April in Stanislaus County Superior Court, naming the county and Auditor-Controller Lauren Klein as defendants. Klein's duties include allocating property taxes to the cities and other local governments.

One of the attorneys representing the city declined to comment. Benjamin Fay with the Oakland law firm of Jarvis, Fay, Doporto & Gibson declined to speak to The Bee because the lawsuit has not been resolved and he did not want to jeopardize settlement talks.

In addition to the $3 million, the city is seeking 7 percent simple interest on the money it is owed. The next court date in the lawsuit is July 31.

Bee staff writer Kevin Valine can be reached at kvaline@modbee.com or (209) 578-2316.

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