Stanislaus County — Stanislaus County has agreed to pay $2.87 million to refund cities for excessive charges for property tax administration.
County officials said last week that a joint agreement was reached with eight cities: Modesto, Turlock, Ceres, Oakdale, Riverbank, Patterson, Hughson and Waterford. Each city still needs to sign the deal. The county continues to talk with Newman.
In announcing the settlement, the county said that reaching an agreement benefits the public by avoiding costs of a legal battle. Modesto expects to receive $1,372,665 for overcharges dating to the 2008-09 fiscal year, plus interest.
The state Supreme Court ruled in November 2012 that a calculation used by counties for charging cities for property tax administration wasnt legal and had resulted in millions of dollars in overcharges. With the court decision, Stanislaus County stopped collecting the excessive fees and the cities sought reimbursements, triggering months of negotiations to settle the matter.
Stanislaus County used the improper fee calculation for six years, starting in 2006. The county has agreed to return from 31/2 to 41/2 years of overcharges to the eight cities, which is comparable to settlements between other counties and cities in California.
Modesto had sought roughly $3 million in reimbursement in a lawsuit filed in April, claiming it was overcharged about $500,000 each of the those years. Mayor Garrad Marsh said Thursday it made sense to settle with the county.
We were not clear that we would be able to recover all the money they stole from us, Marsh said. (The $1.37 million) is more than we felt we were guaranteed to recover in a lawsuit and this way we wont be suing each other. So it is the best thing to do.
According to the agreement, the county will reimburse Modesto for excessive fees of $402,816 in 2011-12, $393,689 in 2010-11 and $361,678 in 2009-10, and half of the overcharges in 2008-09, or $172,254.
Marsh noted that county supervisors in 2006 said they would repay the cities if the courts determined the disputed calculation was wrong. Counties across the state were charging the same administration fees, and a group of cities filed suit in a case titled City of Alhambra v. County of Los Angeles.
The Supreme Court found that counties could not collect fees on the property taxes sent to cities through a complicated budget formula the state began in 2004, called the triple flip and vehicle license fee swap, which replaced some of a citys sales taxes and license fees with property taxes.
Although some cities in Stanislaus County thought they should be repaid for all six years, the county maintained that cities did not challenge the fees in a timely manner.
The local settlement will give $643,045 to Turlock, $360,447 to Ceres and $58,695 to Waterford.
The county agreed to reimburse those cities for 41/2 years based on tolling agreements, a legal maneuver in disputes involving a statute of limitations, and already has paid a total of $396,000 to them.
Riverbank will receive $147,480, Oakdale $135,399, Patterson $114,576 and Hughson $37,856.
According to the news release, the county will pay the eight cities what they are owed within 30 days of their signing the joint agreement. The county will make total interest payments of almost $97,000 to the eight cities, or 3.5 percent of the principal, based on the rate earned on funds in the county treasury for those years.
Marsh said the $1.37 million in payments to Modesto will help the city avoid some budget cuts in the coming year.
Our preliminary budget estimates show that even with this and another (court) settlement we will have to make $5 million in cuts to balance the budget, the mayor said.