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| CITY COUNCIL AGENDA ITEM NO. 4
Meeting Date: March 25, 2008
Subject/Title: Authorize the Mayor or his designee to sign a letter protesting the Determination of Property Tax Administrative Cost Recovery for 2007/08 and direct staff to send the letter to the Contra Costa County Board of Supervisors.
Submitted by: Kerry Breen, Business Services Manager
Approved by: Pam Ehler, Director of Finance and Information Systems
Authorize the Mayor or his designee to sign a letter protesting the Determination of Property Tax Administrative Cost Recovery for 2007/08 and direct staff to send the letter to the Contra Costa County Board of Supervisors.
In 2004 the California State Legislature was dealing with severe budget deficits. One of their solutions was the implementation of the “Triple Flip” which reduced sales and use tax revenues to cities and replaced those revenues with property taxes. In addition, the State also reduced cities vehicle license fee revenues and once again, backfilled those revenues with property taxes. In effect, the State was able to “borrow” sales tax and vehicle license fee revenues, hold on to them for a while, and pay them back once they collected property taxes.
For the first few years under the triple flip the impact to the City of Brentwood was minimal –we were forced to adjust to a new cash flow schedule and suffered a reduction in interest income as we now waited much longer to receive our revenues.
A larger impact was felt in fiscal year 2006-07 as counties (including Contra Costa County) began including the repayments of the sales tax and vehicle license fee as property tax revenue for purposes of calculating the property tax administration fees they charge back to cities. This inclusion has led to significant increases in property tax administration costs for all cities in Contra Costa County. The City of Brentwood endured a massive 63% increase in fiscal year 2006-07 as County administration charges to the City soared from $58,054 to $94,550 in just one year. Attached to this staff report is a two year history of property tax administration fees in Contra Costa County which documents the tremendous increase in administrative costs for cities in our County.
On January 7, 2008 the State Controller’s Office opined that the sales tax and vehicle license fee reimbursements should not be included in the calculation of property tax administration. Staff was optimistic that Contra Costa County would recognize the opinion of the State Controller’s Office but was disappointed when on February 26, 2008, the County issued their proposed fees for 2007/08 and once again included the sales tax and vehicle license fee repayments as property taxes for the purposes of calculating administration. These higher property tax calculations have resulted in a proposed administration charge of $130,003 for 2007/08.
The Contra Costa County Board of Supervisors is holding a public hearing on April 8, 2008 to approve the 2007/08 property tax administration fees. The City wishes to protest the fee calculation through the attached letter.
There is no fiscal impact associated with this action. If the County removes sales and use tax and vehicle license fee adjustment amounts from their calculation of property tax administration charges the City’s General Fund would save approximately $45,000 on an annual basis.
Two Year History of Property Tax Administration Fees in Contra Costa County
Letter to Board of Supervisors of Contra Costa County
* PROPERTY TAX ADMINISTRATION FEES *
CONTRA COSTA COUNTY
VLF SWAP 06-07
1 YEAR PERCENT
ANTIOCH $ 77,939 $ 10,143,193 $ 153,125 $ 75,186 96.5%
BRENTWOOD $ 58,054 $ 4,557,107 $ 94,550 $ 36,496 62.9%
CLAYTON $ 5,980 $ 842,077 $ 11,875 $ 5,895 98.6%
CONCORD $ 86,728 $ 15,809,700 $ 207,117 $ 120,389 139.0%
DANVILLE $ 55,571 $ 4,104,900 $ 80,751 $ 25,180 45.3%
EL CERRITO $ 41,142 $ 2,396,520 $ 55,362 $ 14,220 34.6%
HERCULES $ 8,513 $ 2,028,627 $ 23,560 $ 15,047 176.8%
LAFAYETTE $ 24,096 $ 2,339,826 $ 39,717 $ 15,621 64.8%
MARTINEZ $ 53,507 $ 3,588,408 $ 74,654 $ 21,147 39.5%
MORAGA $ 11,806 $ 1,353,005 $ 21,016 $ 9,210 78.0%
OAKLEY $ 12,456 $ 2,581,874 $ 33,187 $ 20,731 166.4%
ORINDA $ 25,962 $ 1,506,006 $ 34,438 $ 8,476 32.6%
PINOLE $ 12,993 $ 2,163,084 $ 29,159 $ 16,166 124.4%
PITTSBURG $ 16,026 $ 6,643,269 $ 70,365 $ 54,339 339.1%
PLEASANT HILL $ 16,037 $ 4,172,998 $ 48,269 $ 32,232 201.0%
RICHMOND $196,327 $ 10,118,076 $ 243,560 $ 47,233 24.1%
SAN PABLO $ 449 $ 2,662,345 $ 21,996 $ 21,547 4800.0%
SAN RAMON $ 87,081 $ 5,649,097 $ 125,236 $ 38,155 43.8%
WALNUT CRK. $ 82,611 $ 9,560,407 $ 149,574 $ 66,963 81.1%
TOTALS $ 873,278 $ 92,220,519 $1,517,511 $ 644,233 73.8%
Prepared by: City of Clayton
Data Source: Contra Costa County
Date: June 12, 2007
OFFICE OF THE MAYOR
March 25, 2008
Contra Costa County Board of Supervisors
651 Pine Street
Martinez, CA 94553-1229
Dear Chair Piepho and Members of the Board:
In fiscal year 2006-07, counties throughout the State (including Contra Costa County) began including Sales and Use Tax (Revenue and Taxation Code section 97.68) and Vehicle License Fee (Revenue and Taxation Code section 97.70) adjustment amounts in their computation of property tax administration cost shares. This inclusion has led to significant increases in property tax administration costs for cities throughout the State. The City of Brentwood has been hit exceptionally hard by this change, having endured a massive 63% increase in fiscal year 2006-07.
While City staff did not agree with the County’s interpretation that the Sales and Use Tax and Vehicle License Fee adjustment amounts should be included in the calculation for administration charges, staff was aware that the State Controller’s Office (SCO) had been asked to weigh in on the issue and elected to wait for their opinion before formally protesting the County’s interpretation.
The SCO legal office offered their opinion in a letter dated January 7, 2008. In this letter, Jeffrey V. Brownfield, Chief of the Division of Audits for the State Controller’s Office stated “As the counties’ assessors and treasurer-tax collectors incur no additional costs in implementing Revenue and Taxation code sections 97.68 and 97.70, SCO legal counsel opined that Sales and Use Tax and Vehicle License Fee adjustment amounts cannot be added to Revenue and Taxation Code section 96.1 and section 100 computed property tax shares in order to determine administrative cost shares. Statutes clearly state that no amount should be charged for administrative services that exceeds the actual cost of providing such services. Legal counsel further opined that counties must maintain separate documentation for Sales and Use Tax and Vehicle License Fee charges, as fees must be based on actual costs and the actual costs relating to each type of charge might differ from one another.”
Staff recently received Contra Costa County’s proposed 2007/08 Property Tax Administrative Cost Recovery fees and were extremely disappointed that the recommendations of the SCO have not been followed. The revenues collected for Sales and Use Tax and Vehicle License Fee adjustments have once again been included the calculation of net revenue per jurisdiction. In a direct contrast to what the SCO opined, this net revenue, inclusive of the additional adjustments, is then used to calculate the property tax administration charges. In addition, no separate documentation for Sales and Use Tax and Vehicle License Fee charges was offered as recommended by the SCO.
We are therefore formally protesting the Determination of Property Tax Administrative Cost Recovery for 2007/08 as scheduled to be heard at a public hearing by the Contra Costa County Board of Supervisors at your meeting scheduled for April 8, 2008.
Cc: City Council Members
John Cullen, Chief Administrative Officer
City of Brentwood City Council
150 City Park Way
Brentwood, CA 94513
Fax (925) 516-5441