In a decision filed Nov. 19, the court unanimously decided in City of Alhambra vs. Los Angeles County that the county improperly withheld a portion of property taxes being funneled by the county to the city.
According to Zane Johnston, Tracy’s finance director, that decision will likely affect counties up and down the state. He said what was ruled an improper practice in Los Angeles County was copied by many other counties, including San Joaquin.
Johnston estimated the ruling could mean that San Joaquin County owes Tracy up to $800,000 in improperly collected tax money.
He said it could also add about $100,000 a year to Tracy’s general fund when the improper collection ceases.
Johnston said the court’s ruling regards a state action called “the triple flip.”
Typically, the state collects property, sales and vehicle license fee and funnels that money back to cities through the counties. Under the flip, the state increased the property tax it sent to cities instead of sending through sales and vehicle license fee money.
Counties charge an administrative fee to handle property tax money sent by the state to cities, and according to Johnston, many decided to apply that fee to the additional property tax money sent to cities because of the flip.
But the court ruled that action by counties was improper, since the flip was supposed to be not supposed to the amount of money the city received. Adding the fee also decreased the amount of cash flowing into city coffers.
Johnston said by increasing the fee, Tracy’s administrative property tax cost jumped from $180,000 to $330,000 in one year. The administrative fee for the 2011-12 fiscal year was $390,000, he said.
Johnston said the city’s revenue should have remained the same under the flip, even though it might have come from a different source.
“They just changed the flow of money from one category to another, but (it was) the same exact amount of money,” he said.
Johnston said the county and Tracy had an agreement to follow the ruling of the court in the Los Angeles County case.
Johnston said Tuesday, Nov. 27, he hadn’t been in touch with the county about how exactly the repayment will happen.
“We’ll find out here in the near future,” he said. “I’m sure everything will be resolved to each party’s satisfaction.”
• Contact Jon Mendelson at 830-4231 or firstname.lastname@example.org.