Officials in Four Cities Lobby for Property-Tax Sharing Bill

Officials in four South Bay cities are campaigning for passage of a state bill that could provide hundreds of thousands of dollars to help pay for projects ranging from extra police protection to major street improvements.

The bill, authored by state Sen. William Campbell (R-Hacienda Heights), would allocate a portion of property taxes collected by counties to cities that do not levy property taxes of their own.

Representatives from Carson, Lawndale, Lomita and Rolling Hills Estates attended a Sacramento hearing earlier this month and are continuing to lobby local legislators for support of the Senate bill.

For these cities--many of which say the bill is the most important one affecting them in the current session of the Legislature--the issue is simple: Their residents pay the same percentage of property tax as everyone else in the state, but none of the money they pay comes back directly to their communities. Los Angeles County and special districts keep all of their property taxes, even though most other cities in California reap some share of that income.

Cities that levy no property tax say the issue is equity.

County Would Lose

But for financially strapped Los Angeles County--which would lose $18.5 million a year in tax revenue from its 20 cities affected by the bill, including the four in the South Bay--the legislation would give money to cities that have not proved they need it, officials contend.

They say residents throughout the county stand to suffer from the bill because the revenue loss would erode the county’s ability to provide services for all its citizens.

To understand the issue, one has to look at the history of California’s property tax laws.

When California voters overwhelmingly approved Proposition 13 in 1978, a limit was placed on the property tax rate statewide. The taxes for residents of all areas were leveled off to 1% of their property’s market value.

(The market value is based on a March 1, 1975, assessment, if the property has not changed hands. Property is reassessed each time ownership changes. Assessments may be increased 2% a year--unless the inflation rate is less than that--and for any new facilities added to a property.)

Percentage Frozen

To implement that tax cut, the state Legislature passed a series of bills that froze the percentage of revenue that each government agency was getting from a property.

For example, if a Torrance resident was paying $150 in property tax to the city and $850 to the county and such other agencies as school, fire and library districts, then 15% of that resident’s reduced tax dollars went to the city and 85% was directed to the county and the other agencies.

The problem that arose from the new distribution system--which many city officials say they did not foresee--was that it left out cities that did not have property taxes when Proposition 13 was passed.

Officials from those cities then slowly began to protest what they saw as a great disparity. Before Proposition 13, residents in cities like Carson enjoyed a lesser tax rate because Carson had no city property tax; after Proposition 13 those residents paid the same rate as citizens in other cities but Carson received no percentage of its residents’ tax dollars.

Yorba Linda Bill

Protests about the disparity have recently developed into a concerted campaign, officials say, because a similar bill was passed last year affecting only the city of Yorba Linda. The only city in Orange County that did not share in property tax income, Yorba Linda had been facing severe financial problems because it is almost entirely a residential community and had few businesses to generate other tax revenues.

Like the Yorba Linda legislation, the current bill would give cities that were left out of the post-Proposition 13 distribution system 10% of the money that the county and special districts collect in property taxes. The bill would not take any property tax revenue from school districts.

The current bill is set for a hearing in the Senate Appropriations Committee on May 6, after passing through the Local Government Committee on April 10. If approved, it will next be directed to the full Senate, after which it will be considered by Assembly committees, the full Assembly and the governor.

“We’re going to have someone at every hearing that pertains to this cause,” said Lomita Councilman Leonard Loy. “This cause is quite vital to us. I can’t see any justification for us not getting the tax money that’s coming from our people.”

In the county’s opinion, however, there is plenty of justification.

No Need, Says County

“Many of these no-property-tax cities are in better shape than the cities that are receiving property tax revenue,” said Cliff Caballero, assistant head of the legislative section of the county’s chief administrative office.

If these cities want to receive additional revenue, Caballero said, they ought to prove they are in a worse position financially than the county and the other cities. “Is their need worse than the county where we have a $19-million deficit this year?” he asked.

County officials also say that the loss of revenue that the bill would cause--projected at $12.9 million from the county general fund and $5.6 million from its special districts, mostly fire districts--is unfair because residents of these cities use county services.

County officials point out, too, that they cannot tighten the county budget for some of the programs they provide, such as public assistance, judicial services and public health care, because they are state-mandated.

License Fee Bill

However, another bill that may help the county recoup some of its losses from the property tax legislation was passed in the Senate Local Government Committee last week. That $220-million bill--from which Los Angeles County stands to gain $75 million--would increase vehicle license fees statewide by changing the depreciation schedules on which those charges are based.

And that bill probably bolsters the chances for passage of the property tax legislation because it states that counties will not get the new vehicle tax revenue unless the other bill passes. Moreover, it says that new revenue from increased license fees will go first toward reimbursing counties and special districts that lost money under the property tax legislation.

Whatever the outcome, many South Bay city officials say the county’s budget problems are not the issue.

“There’s no logic to the county’s position,” said Rolling Hills Estates Councilwoman Nell Mirels. “They say, ‘I need money so I’m keeping yours.’ It’s like going to the guy next door and saying, ‘I have all these bills so I’m keeping your paycheck this week.’ ”

Mirels added, “I think the county needs money, but they need to get their own source of revenue and not take it from my city.”

Utility Tax Cited

The county has suggested, however, that the cities find other revenue from such sources as utility taxes. Caballero points out that 80% of cities statewide have utility taxes, while none of the cities that would be affected by the bill does.

“I don’t want to impose more taxes,” argued Carson Mayor Kay Calas. “That’s not the point. The other cities are getting their fair share, and I think we’re entitled to ours.”

Many South Bay officials say they feel that the effect of the Proposition 13 distribution system was to penalize the cities that had tightened their budgets to the point where property taxes were not required to operate their local government.

“Why should Lawndale be penalized for being fiscally responsible?” asked Mayor Sarann Kruse. “We face the same problems that other cities face. We have the same need for the dollars.”

South Bay officials say that the money they would receive--which would increase budgets in the four cities anywhere from 8% to 16%--would be directed toward badly needed city services. These cities currently finance their operations only with various government grants and revenues from sales, gasoline, cigarette and other taxes.

Street Improvements

In Hawthorne and Rolling Hills Estates, officials say that street improvements are long overdue, but there is little money for them. Lomita officials said they also would use the funds for public improvements and, if possible, more police protection.

Carson officials, who speculate that federal revenue-sharing funds may soon be abolished, say they need the property tax revenue to replace that money, which is used to pay for law enforcement. If there were extra money beyond that, Mayor Calas said it might be used for street repairs or more police protection.

Beyond the specific services that the cities might be able to provide with the property tax revenue, officials maintain that such money would help stabilize often unpredictable city budgets and encourage cities to help foster new development.

“The bill would provide a consistent source of revenue for the city so we wouldn’t be as much at the mercy of other factors, like whether sales taxes were up or revenue-sharing was going to be cut,” said Carson Councilwoman Vera Robles DeWitt.

She added, “Without this bill there’s no incentive for us to encourage development because every cent of the property tax revenue from it goes to the county and we have to pay more to increase services for the new development. It’s almost counter-productive for us.”

South Bay Cities Affected by State Property Tax Legislation

1984-85 Budget Revenue Increase Percent City in Millions If Legislation OK’d Increase CARSON $22.5 $3,512,384 15.6% LAWNDALE 5.3 423,460 8.0 LOMITA 3.0 436,885 14.6 ROLLING HILLS ESTATES 3.8 606,922 16.0

Note: 1984-85 budget figures were provided by each city. Revenue increase statistics, projected for the 1984-85 fiscal year, were provided by the office of Legislative Analyst of the state Joint Legislative Budget Committee.