Publication Date: Friday, March 19, 2004
Palo Alto could join lawsuit against state
Palo Alto could join lawsuit against state
(March 19, 2004) by Bill D'Agostino
Palo Alto could join a group of California cities suing the state in an ongoing wrangle over local tax dollars.
The group of cities, led by the City of Cerritos, claim the state's attempt to take away a quarter-cent of localities' sales tax dollars -- to repay its recently approved bond -- is illegal.
"Charter cities are basically allowed to be the rulers of their own fate," argued Steven Mayer, the lawyer for the cities.
Adding Palo Alto's name to the lawsuit would be primarily symbolic on the legal front, although it could add weight to the political side of the fight.
Participating would cost the city $16,000. Palo Alto would get the benefits of a successful lawsuit even if it did not participate.
The City Council's Finance Committee is scheduled to consider the lawsuit during its March 23 meeting.
The state has promised to repay the cities with property tax, but cities are skeptical, given that, in the past, long-promised funds have never been returned.
Since 1998, Palo Alto has lost approximately $33 million as the state has annually taken property tax funds away from cities and counties to give to schools.
"It's time that all cities join together to start taking cooperative action to stop the state from doing these things to local governments," said Carl Yeats, the head of Palo Alto's budget division.
Even if the state does repay the city next year for the lost sales tax dollars, the city will still have to pay administrative fees to move the money around, Yeats noted.
"There will be a built-in loss," Yeats said.
At the same time, the state is also threatening to take away other property tax revenues.
The complex maneuverings -- taking away sales tax, backfilling with property tax, but grabbing other property tax revenues -- is known in the capital, and among city officials, as the "triple-flip."
Palo Alto is planning to lose $1.7 million to the state during the next fiscal year, although that figure would grow substantially if the sales tax loss is not backfilled with property tax dollars.
Nearly 40 charter cities have joined the lawsuit. A hearing on the case is scheduled for May 14 in Alameda County Superior Court.
California cities are also in the process of collecting signatures to get a measure on the November ballot that would ask voters to protect local revenues.
Bill D'Agostino can be e-mailed at bdagostino@paweekly.com
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