PICO RIVERA : Bond Issue Considered to Repay Sales Taxes

The City Council will consider issuing $3 million in bonds that would allow the city to repay sales tax revenue that courts have ruled was improperly collected from aerospace firms.

The city is one of about 150 statewide that must reimburse the federal government hundreds of millions of dollars during the next five years. Pico Rivera owes $2.8 million, plus interest.

The refunds stem from a case brought in the early 1980s by El Segundo-based Aerospace Corp., which contended that it was improper for cities to tax purchases made by companies in connection with work performed for the Department of Defense.

In 1990, a state Court of Appeal ruled in favor of Aerospace, opening the way for hundreds of other claims. The Department of Defense then ordered all of its California aerospace contractors to file claims so the federal government, which paid sales taxes as part of contracts to more than 300 aerospace firms, could recover the funds. Pico Rivera is the site of a large Northrop Grumman Corp. plant and dozens of small firms that sell supplies to the plant.

Under a recent settlement agreement, California cities and counties will reimburse about $380 million to the federal government.

The Pico Rivera City Council voted 3 to 1 earlier this month to hire a bond consultant and financial adviser and to schedule a public hearing on the issue for late June. Councilwoman Helen O’Hara dissented, saying she favors cuts in city spending to cover the costs. Councilwoman Beatrice Proo was absent.

Pico Rivera one of several cities in the Southeast area grappling with how to repay the federal government.

Long Beach must return $1.5 million. Santa Fe Springs owes the third largest amount, $890,000. La Habra Heights owes $4,700, the lowest amount.