STANISLAUS COUNTY — Stanislaus County has offered to repay Modesto and other cities for 3.5 years of excessive fees charged to administer property taxes, The Bee has learned.
Sources said the county responded with that level of reimbursement, with interest of 1 percent or less per year, to settle months of negotiations with the nine cities. If it accepts the offer, Modesto would receive about $1.6 million, about half of what it sought in a lawsuit filed against the county in April.
Officials contacted by The Bee said the county made the same settlement offer to all nine cities.
Modesto Mayor Garrad Marsh said Thursday that he would not discuss details of the negotiations or the city’s response to the county offer because of the litigation. He said the City Council, meeting in closed session Tuesday, gave direction to City Manager Greg Nyhoff for responding to the county.
“We have made three or four proposals and they made three or four counterproposals,” Marsh said. “They started at one goal line, and we started at the other, and we are getting close to the center of the field.”
County Counsel John Doering declined to comment, citing the confidential settlement negotiations between the county and cities.
In updated information, Modesto is expected to ask the county for more interest in the range of 2.5 percent.
County Supervisor Terry Withrow said the county originally thought the property tax administration fees were proper. Reimbursing the cities for 3.5 years of overcharges is an attempt to meet the cities in the middle ground, Withrow said.
The county proposed paying interest of 1 percent or less for on the money owed for certain years, because that's the interest it received for money held in the county treasury, two supervisors said.
Last year, the state Supreme Court ruled that counties had overcharged for administering certain property taxes that are sent to cities through a budget formula the state started in 2004. The formula, known as the “triple flip” and vehicle license fee swap, involves replacing some city sales tax revenue and license fees with property taxes.
Stanislaus County charged its cities the excessive fees for six years, from the 2006-07 fiscal year to 2011-12. Modesto officials believe the city was overcharged $500,000 each of those years.
Oakdale, Riverbank and Patterson filed claims with the county in December seeking losses that occurred from 2006 to 2012, and, along with Turlock, have asked the county to return a combined $1.25 million. Ceres and other cities have sought reimbursement from the county. Only Modesto has filed suit; the other cities agreed to confidential talks with the county.
County leaders initially said county code set a 90-day limit on appealing the annual fee but later backed off that position.
Turlock City Manager Roy Wasden said recently that he could not discuss the county’s latest offer, which came in response to a model proposal city managers had sent to the county a few weeks ago.
“We will be responding to them, and it’s still in negotiation,” Wasden said. Turlock has sought as much as $526,000 from the county.
Ceres also has a six-figure amount at stake in the negotiations.
Mayor Chris Vierra said the council looked at the county’s latest proposal in closed session and gave direction to staff. “It’s not the six years we feel we are owed, but nobody is going to come out a winner if we all go to court over this,” Vierra said, declining to discuss specifics.
Ceres looked at reimbursements other counties are giving to cities in California based on the Supreme Court ruling. The average agreements in other counties are reimbursing cities for three to four years of overcharged fees, Vierra said.
Riverbank City Manager Jill Anderson said the city filed a protest after the county started charging the extra fees in 2006. She referred to a May 2007 county board meeting at which county officials said they would make the cities whole if the court determined the fee rate was improper.
“Ideally, we would like to see the county reimburse for the full amount due,” Anderson said. “We are still working on an agreement.”
Some cities could dispute the small amount of interest the county offered on top of what was owed. “The law is on our side,” Modesto Councilman Dave Geer said. “The county is not negotiating from a position of strength.”
Bee staff writer Ken Carlson can be reached at firstname.lastname@example.org or (209) 578-2321.