Anaheim Settles 6-Year Tax Dispute With County

Orange County should receive a multimillion-dollar windfall and resolve a six-year dispute with Anaheim because of a revision in the tax code that cleared the Legislature on Thursday.

Proponents said the bill would make moot an Anaheim lawsuit against the county in which the city claimed it was not receiving its share of interest and penalties paid by delinquent taxpayers. The statewide bill would allow counties to keep all of those funds.

Since the Anaheim suit was filed in 1983, most of the county’s 28 other cities have filed similar suits. Meanwhile, the county has been setting aside the disputed money, which totals $28 million, Auditor-Controller Steven E. Lewis said.

Most of that money is expected to be released to the county, although Lewis said the full amount might not be available for the current fiscal year, when the county faces a projected deficit of about $13 million.

For weeks, the bill being lobbied by state Sen. Marian Bergeson (R-Newport Beach) was being attacked by her rival in the state lieutenant governor’s race, state Sen. John Seymour, R-Anaheim.

Despite the opposition--including threats from Seymour that he would try to add hostile amendments to the bill--an aide to Bergeson said she still appeared to have the votes for passage.

But earlier this week, the County Board of Supervisors averted the showdown by reaching a closed-door, out-of-court settlement with Anaheim, leading Seymour to withdraw opposition.

Under the settlement, Seymour said the county will pay Anaheim $1 million from the disputed money. Deputy County Counsel David Chaffey, who negotiated the deal, declined to comment on its terms.

Lewis said about $1.8 million of the money set aside was for Anaheim, the balance for other cities.

Lewis also said the county will receive $5 million to $7 million more each year, because it will keep penalties and interest it collects on delinquent property taxes.

The dispute began when a court ruled for Los Angeles against Los Angeles County. The court agreed with the city’s argument that Proposition 13 had rewritten the tax code and erased a provision that allowed counties to keep the tax penalties and interest revenues.

County proponents argued that the money should go to county governments to cover administrative costs, because they are responsible for collecting and distributing property taxes.

Anaheim sued Orange County shortly after the Los Angeles decision and also won in Superior Court. The case is on appeal, but it is expected to be dropped when the governor signs the tax legislation.