By Shannon Barry and Eliza Ridgeway
Faced with a looming statewide budget crisis, government agencies are trying to make every penny count – sometimes at each other’s expense. The grim predictions have affected Los Altos and Los Altos Hills. Last month both cities filed a claim with the board of supervisors asserting that Santa Clara County has overcharged them, in efforts to increase revenues.
Many cities have filed similar claims, arguing that the county has assessed too large an administrative fee for distributing tax dollars to city coffers. The county collects property and sales taxes, then distributes the funds to the cities – and charges an administrative fee to do so.
The Los Altos Hills City Council resolved April 10 to file a claim to recover overcharges in the county’s tax administrative fees. The Los Altos City Council reported its decision to file April 22.
In 1991 the state Legislature authorized counties to charge cities a fee for the administrative costs incurred from collecting and distributing local property tax dollars. As part of the 2004 state budget package, the Legislature fundamentally changed the makeup of property tax distribution. In exchange for appropriating a portion of the sales tax, the state included revenue sources such as vehicle license fees and sales tax revenues, which contributed approximately $205 million in additional funds funneled through the counties to cities.
Los Altos’ Assistant City Manager Starla Jerome-Robinson explained this juggling act – confusing even for seasoned civic administrators – as part of an ongoing effort to stretch public dollars by changing how they move through government agencies.
The cities claim that the county is effectively double-dipping when it charges for administering the additional sources, because the state also charges an administrative fee for those funds.
“That’s the whole problem with the state budget – the structure of it is ridiculous,” Jerome-Robinson said. “It’s like chasing your tail. The structure of the budget lacks transparency because of its complexity.”
“We are being double- charged. … I don’t think there’s any added value (from the county),” said Los Altos City Councilman Ron Packard.
Los Altos has seen an increase of approximately $45,000 in fees from the county this year related to the additional funds packaged with the property tax.
Los Altos Hills has seen a 68 percent, or $13,000, increase in its property tax administrative fees this year due to the county’s new tabulation, according to Los Altos Hills Finance Director Nick Pegueros.
Other cities have been hit even harder by increases.
“Our fees went up around 50 percent, (but) there were communities that went up 300 percent,” Jerome-Robinson said.
Campbell, Cupertino, Gilroy, Los Gatos, Milpitas, Morgan Hill, Palo Alto, Santa Clara, Saratoga and Sunnyvale have also filed claims against the county to recover the rise in administrative fees.
Santa Clara County Finance Director John Guthrie described the fee system as a statewide issue.
“We feel that we are in concert with what the state law is, and that’s that,” Guthrie said. “We are going to stay with the (imposition) guidelines until this is clarified by legislation or if there is an agreement or settlement.”
“It is somewhat representative of what is to come in terms of the state’s balancing their budget,” Pegueros said. “It is forcing the counties to find creative ways of increasing their own revenue and I expect to see a series of actions very similar to this, but … it’s impossible to predict where it’s going to pop up.”
Jerome-Robinson predicted that the cities stood a decent chance of resolving the dispute administratively outside the courts by hashing out the details of the fee, and a possible compromise, with the county.
Contact Eliza Ridgeway at elizar@latc.com and Shannon Barry at shannonb@latc.com.
