New Tax Formula Could Provide City With $2 Million a Year

Malibu could reap a $2-million annual windfall--an amount equal to nearly one-third of its annual municipal budget--thanks to a new law expected to force county governments to allot a bigger chunk of property tax receipts to newly formed cities.

The measure, signed into law Monday by Gov. Pete Wilson, clarifies the formula used to determine how much county governments are required to reimburse newly incorporated cities for the services cities take over from the county.

Malibu filed a lawsuit against financially strapped Los Angeles County earlier this month contending that its $1-million annual allotment is $2 million shy of what it should be.

The lawsuit has yet to be served.

In effect, the law signed by Wilson validates Malibu’s method of calculating property tax reimbursements, triggering a rush of optimism at City Hall that the 16-month-old city is on the verge of cashing in big.

“By any standards this would be the dominant revenue source for the city for this year and for years to come,” City Manager Ray Taylor said.

Malibu’s annual budget is about $7 million.

Earlier this year, the city concluded that it should receive $3 million a year from the county after commissioning a study by Rodney Smith, a property tax expert from Claremont College.

Smith concluded that the county was shortchanging Malibu by $2 million, prompting the city to file a claim with the county auditors office and back legislation affirming Malibu’s interpretation of the disbursement formula.

The measure was sponsored by state Sen. Ed Davis (R-Santa Clarita) and is expected to benefit his community, Diamond Bar, Highland and several others as well as Malibu.

Specifically, the law affirms that counties must base property tax reimbursements to cities on current revenue data. In Malibu’s case, the county based its 1991 reimbursement on 1988 property tax figures, failing to take into account substantial increases in tax receipts in the ensuing three years before incorporation.

“They attempted to apply a three-year-old number to the city,” Assistant City Atty. Amanda Susskind said.

Additionally, the new law upholds Malibu’s contention that it should be reimbursed for the indirect costs of taking on new services--such as overhead and salaries--as well as direct costs.

The hope in Malibu is that the new law will spur the county to pay up.

“We hope there will be discussions with the county that will result in fair treatment of the City of Malibu,” Susskind said. “We absolutely want to avoid litigation if we can.”