Stanislaus County will start sharing taxes differently with Modesto and other cities
Stanislaus County leaders on Tuesday approved what some officials said is a more equitable tax-sharing arrangement with cities.
A current agreement has given the county 70% of revenue growth on properties annexed since 1996 and has allocated 30% to cities. The split will be an even 50-50 under the new agreement, giving the nine cities more revenue to cover the costs of services.
County officials said cities will need to approve the deal by July 20 for it to take effect for them in the 2022-23 budget year.
Cities like Turlock and Patterson stand to benefit the most initially from the tax-sharing agreement because of their growth in the last 15 to 20 years.
County Chief Executive Officer Jody Hayes said other cities with development plans will likely see significant benefits in five to 10 years. More tax revenue is generated as property grows in value and is taxed at the higher evaluation.
Hayes spent months talking with a group of city managers about concepts for replacing the current tax-sharing accord, which appears lopsided on the surface. The rationale for the 70% had to do with the many county services provided for city residents, but cities are facing rising costs today.
Modesto Mayor Sue Zwahlen said Monday she understood the city’s increase will be in the hundreds of thousands of dollars at first.
“Our initial amount is not nearly as much compared to what it will be with future growth,” Zwahlen said. “When (the current) agreement was first made, I did not understand why it was 70-30. I appreciate the county’s willingness to have this conversation about property tax revenue.”
Under a 50-50 tax-sharing arrangement, cities would have taken in a combined $2.1 million more revenue in the past five years and the county would have received $1.3 million less, a county staff report says.
Officials say Stanislaus County and its cities are at a disadvantage because Assembly Bill 8, which implemented the 1978 Proposition 13 tax reform initiative, created an uneven allocation of property tax revenue across counties and cities in California.
What happens to property taxes
Stanislaus County keeps a meager 12% of property tax, while Merced County gets 22% and San Joaquin gets 18%.
After the property taxes are divvied up each year, the county and cities are obligated to put money into what’s called the Education Revenue Augmentation Fund for schools and colleges. The county gives 55% to ERAF and the cities 26%.
As a result, the cities will end up with 68% of the total revenue growth under the new sharing agreement and the county net 32%.
Since the current agreement was signed in 1996, about 100 areas annexed by cities had a base value of $266.6 million, which has grown to $6.2 billion in value over the years.
With the new agreement, the county and cities can still negotiate individual tax-sharing deals that are exceptions to the master agreement for areas such as North McHenry Avenue or the Robertson Road area in southwest Modesto.
This story was originally published June 15, 2022 at 7:53 AM.
