Cities to Recapture Tax Revenue; When and How Much Uncertain

Several South Bay cities that receive little or no property tax revenue are jubilant that after battling for years they will finally get a share of the taxes that their landowners pay to Los Angeles County.

The bill allocating the funds was passed by the Legislature only hours before it adjourned for the year on Sept. 12, causing confusion about when the cities will receive the money. Some cities have discovered that they actually will lose funds for a few years.

Under provisions of the bill, cities with no property tax or low taxes--including El Segundo, Carson, Lawndale, Rolling Hills, Rolling Hills Estates, Rancho Palos Verdes and Lomita in the South Bay--will receive gradually increasing amounts of money over 10 years until they are receiving 10% of the 1% county property tax, based on assessed valuation, which all California property owners pay.

The annual allocation will then remain the same. Cities with low tax rates will begin receiving money when the new allocations exceed what they now get.

Gov. George Deukmejian is expected to sign the bill next week. “The governor leans toward signing, but he wants to look at all the provisions,” said assistant press secretary Tom Beermann.

Because the measure is new, South Bay cities have no specific plans for use of the money.

“We’re ecstatic over the fact that this legislation was approved and sent to the governor,” said Ray Taylor, Rolling Hills Estates city manager, whose city has no property tax and stands to gain between $60,000 and $70,000 next year. That will grow to $700,000 in a decade, he said.

El Segundo officials were happy at first because they thought they were going to get an estimated $237,000 in the first year. “We have a 5% tax, so we won’t get money for six years,” said Don Harrison, administrative analyst.

He was referring to the city’s share of the 1% property tax. Under Proposition 13, passed in 1978, the 1% is divided among school districts, the county, special districts and, in some cases, cities, in proportion to the tax rates in effect when the measure was passed. All cities lost tax revenue under the measure, but especially hard hit were those with no property tax or very low rates.

In Rolling Hills, City Manager Terrence L. Belanger said it is his understanding that the city will receive $18,000 in the first year and the City Council intends to develop a long-range plan for the money. “As each year progresses, it becomes a more significant source of revenue,” Belanger said.

But in Sacramento, lobbyist Anthony Gonsalves--whose father, lobbyist and former Norwalk Assemblyman Joseph Gonsalves, is considered responsible for getting the measure passed--said that Rolling Hills will have to wait four years for money because it already receives 4.3% of the property tax.

Peter Schaafsman, a legislative analyst, said the initial list of the amounts each city would receive did not include the 10-year phase-in, which “was added at the last moment.”

Some South Bay cities, including Carson, Rancho Palos Verdes and Lomita, are concerned that they may initially lose money because the bill takes away certain state funds they now get, including a share of the state’s cigarette tax. But officials said the bill is to their advantage in the long run.

Lomita, which has no property tax and will get $51,000 in the first year, could lose more than that in other state funds , officials said. Rancho Palos Verdes, which does not get money until the third year because of its 2.9% property tax, will lose $160,000 during the interim, according to Finance Director Kevin N. Smith. But the first allocation of the new revenue will be $200,000, “which would make up for what we lost.”

Smith and other officials said the elimination of the other state funds was an error in the bill that will be corrected in the next legislative session. “The League (of California Cities) has assured us they will introduce legislation,” Smith said.

Under the legislation, Carson, which has no property tax, will get $400,000 next year, but Finance Director Bill Parrott it will lose $300,000 in other state money.

But when the allocation reaches its full 10%, Carson will get $3.9 million. “We’re glad we’re getting it,” he said.

Lawndale officials at first thought that the city was going to get $510,000 next year, according to Paula Cone, assistant city manager. Then, officials realized that the city would get only 10% of that amount at first, which comes to $51,000.

She said the money will probably just be added to the general fund.

‘No Dramatic Changes’

“There will be no dramatic changes in our programs at first,” said Taylor of Rolling Hills Estates. “But as we get into the 10-year phase-in, after five years, we will begin to have a fund balance and can undertake capital projects we have put in abeyance.” These include road work, landscaping and park development, he said.

“We need money for roads and streets,” said Lomita City Councilman Hal Croyts, w ho is president of the California Contract Cities Assn., which for a decade has lobbied for the legislation to offset losses under Proposition 13.

Several officials said that counties, fearing a loss of revenue, have long opposed the concept. But they said it succeeded this year because it was tied to a measure that shifts court costs from counties to the state, thus freeing up some county money.

“I’m elated,” Croyts said. The bill “has established a philosophy that our citizens will receive some benefit from the taxes they pay. Previously . . . money paid to the county was not coming back.”

But there are other officials who believe that the measure, hastily put together in what has been described as a deal between legislative leaders and the governor’s office, gives money to some cities that already have enough.

“Legislation to take it back is in the wind,” said lobbyist Anthony Gonsalves. “There are some legislators who want to have this based on need.”