Diamond Bar Loses Property Taxes Due to Technicalities

The city’s last hope of salvaging $1.2 million in property tax revenues has been dashed by Los Angeles County legal advisers, who refuse to exempt the newly incorporated city from technicalities in state law.

Diamond Bar officials have negotiated with the county for months trying to find a way around provisions in state law that say the city, because of the timing of its incorporation election in March, isn’t eligible to receive property taxes until December, 1990.

In a Dec. 11 letter to Mayor Phyllis Papen, Los Angeles County Supervisor Pete Schabarum said that after reviewing the city’s request, the county counsel has determined that “the county of Los Angeles does not have the authority to provide an allocation of property tax monies for the 1989-90 fiscal year to the city of Diamond Bar.”

Assistant County Counsel Lawrence B. Launer, in a Dec. 4 legal opinion to Schabarum, said Diamond Bar is classified as a no tax city because it incorporated after Jan. 1.

“The establishment of a Jan. 1 cutoff date is rationally based,” Launer said in the opinion.

But city officials think otherwise. Papen said Thursday that withholding property taxes from newly incorporated cities is unconstitutional and “an injustice to the city of Diamond Bar.”

“It puts the city in the position of having to provide the full scope of municipal services without the benefit of receiving property taxes,” she said. Diamond Bar assumed full financial responsibility for services on July 1.

Papen added that before Diamond Bar became a city, incorporation proponents may have been misled by the Los Angeles County Local Agency Formation Commission, which issued a feasibility report indicating what the city’s tax base would be during the first year. That figure included property taxes, Papen said, and didn’t specify any conditions for receiving the money.

But LAFCO Executive Officer Ruth Benell said it was the responsibility of cityhood proponents to determine when Diamond Bar would be able to receive property taxes and then schedule the incorporation election accordingly.

“They didn’t even ask me when they’d start getting property taxes,” Benell said Thursday. “If they had, I would have referred them to the controller’s office, which would have given them the right answer.”

In fact, cityhood proponents originally wanted a November, 1988, incorporation election. But right before the deadline, six residents formally asked LAFCO to reconsider the incorporation application. Because LAFCO decided to hold a hearing on their request, a November incorporation election was impossible.

The property tax disappointment is the second surprise development to result from the timing of Diamond Bar’s incorporation. Earlier, city officials learned that, under state law, three council members who thought they had won two-year terms would instead have to run for reelection after less than a year in office.

City officials tried to delay the required April, 1990, election until November, 1990, but were turned down by the county. Some approached Assemblyman Frank Hill (R-Whittier), who promised to look into the possibility of legislation extending the terms another year.

Hill said he would propose the legislation only if one of the three council members decided not to run against him for a state Senate seat. Later, under criticism for the remark, he dropped the idea of sponsoring the legislation altogether.