Gann Law Mandates Limit : Westlake Residents May Get Tax Rebate

Residents of other cities get tax bills from their leaders.

But every resident of Westlake Village may soon get a $6.63 check in the mail from officials of their city.

The unusual rebate has been ordered by the state, which says that Westlake Village doesn’t need all the tax dollars that are pouring into the 5.4-square-mile city’s coffers.

City officials have been told to return $75,602 this year. And they are being warned that the rebate is just the tip of the iceberg: About $58,000 may have to be reimbursed to residents next year and another $111,000 the year after that.

By 1991, the yearly refund is expected to total more than $908,000, which translates to about $80 per person.

The refunds are a result of the Gann Spending Limitation, a statewide tax-reform measure approved by voters in 1979 as a follow-up to the previous year’s tax-slashing Proposition 13.

The Gann initiative imposed a ceiling on government spending to prevent cities from sidestepping Proposition 13, which put limits property taxes.

Under Gann’s provisions, cities are limited to the amount of tax revenues they can collect and spend. A formula based on population growth and increases in the consumer price index allows small annual increases to a base limit.

Westlake Village’s initial base was $1.5 million--an amount determined by the Los Angeles County Local Agency Formation Commission before the city incorporated in 1981. The city’s budget has increased since then to about $3 million annually, including sources of income other than state-controlled taxes. Its current revenue limit under Gann is $1.9 million.

The base revenue limit was calculated on the basis of projected city revenues and expenditures. City officials say that the county revenue projections turned out to be much too conservative, however.

Boom Boosted Revenue

The computer industry boom in the early 1980s boosted the sales of several major electronics firms in the city. At the same time, new retail businesses opened in an industrial area at the northern edge of the city to send sales tax revenues mushrooming.

“LAFCO underestimated our sales tax revenue,” said Westlake Village City Manager James Emmons. “I feel that is half the problem. But the other half is that the Gann law only allows adjustments based on residential growth.”

Emmons said the 3,000-house city has grown little in population since its formation. Its commercial base has increased and is still growing, however--including the pending opening of the city’s first major shopping center and supermarket.

“We’re essentially built out, residentially. We’ll only see 1,200 more homes between now and forever,” Emmons said. “The rest of the development here is going to be commercial.”

$1 Million by 1992

Such new commercial growth will pump sales-tax money into the city treasury so fast that Westlake Village will be nearly a million dollars over its authorized revenue limit by 1992, he said.

If that amount has to be refunded, the city will face cutbacks in public services to cover it, Emmons said.

The city’s accountant said Westlake Village is looking for “the most equitable way” to refund the first $75,602 this year. He said Westlake Village is one of only 10 cities in the state facing such a repayment.

“Sending everybody a check is a possibility we’re looking into. Another is a negative tax rate,” said David DeRoos of Arthur Young & Co.

Another alternative, he said, might be to simply deduct $75,000 from residents’ assessments for street lighting and public landscaping.

Override Vote Suggested

For the long term, DeRoos is advising the City Council to hold an override election to change the revenue limit. That would allow voters to set a higher limit and avoid cuts in city services, he said.

But the override-election idea may be tough to sell in Westlake Village, where voters heavily supported the Jarvis tax amendment in 1978.

When the election idea was first discussed, Councilman Franklin Pelletier said he would write the ballot argument against it.

Now, however, Pelletier said, he sees the need for a one-time adjustment to the LAFCO-set spending limit.

Mayor John McDonough said the council may create a “blue-ribbon citizens committee” to advise the city on both the election and the rebate issues. The council is expected to discuss such a move Jan. 28.