State Says County Can Legally Void 1% Sales Tax

State regulators gave legal cover Wednesday to Ventura County’s ordinance to wipe out a 1% sales tax that sends $85 million to local cities, as the battle with the city of Ventura over the tax revenue continued to heat up.

Ventura city officials said they have no plans to budge from their vote to withhold the county’s sales tax share of more than half a million dollars, while other cities watched the fight with growing concern.

“We’ve made our decision,” said Ventura City Councilman Jim Friedman. “We’re not here to play games.”

On Tuesday, the county Board of Supervisors passed an ordinance that would kill the 1% tax completely, taking $85 million from the cities and $6.5 million from the county treasury.

State officials said the county is within its legal rights to kill the tax, and there’s nothing local cities can do about it. The state charged the counties with the responsibility of creating the tax and allowing cities to receive money from it.

Still, Ventura is considering legal solutions to the standoff and the potential impact of the new county ordinance, said Ventura City Atty. Bob Boehm. That ordinance would repeal the 1% sales tax--a huge chunk of cities’ revenues--if Ventura goes ahead with its plan to withhold the $572,000 in tax money it owes the county.

For the county ordinance to take effect, the Ventura City Council must vote to increase the share of the sales tax it keeps to the full 1% that is collected, and must submit its plan to retain the tax money to the state Board of Equalization in October.

Boehm said the city, which could lose $15.6 million in sales tax, has no plans to negotiate with the county, and officials on both sides of the battle referred to the situation as “a game of chicken.”

City and county officials had an unsuccessful meeting a week ago. The county contingent included Frank Sieh, chief assistant county counsel, who called Ventura City Manager Donna Landeros “demanding and arrogant and uncooperative” in a telephone interview Wednesday.

At the core of the dispute is the distribution of money collected by the 1% sales tax created by a 1956 county ordinance. Cities collect the tax and then are to pay $3.30 of every $1,000 collected to the county’s general fund for a range of services.

In June, however, Ventura’s City Council cited its budget shortfalls and decided to stop paying its share. County officials worried that would have a domino effect among other cities. If others ended their payments it would result in a loss of millions of dollars for the cash-strapped county.

Ventura city officials point to Ojai, which hasn’t paid its share to the county since the 1970s, and complain that the cities haven’t been treated equally. Also, they say, the original sales tax agreement came when the county offered more services than it does now.

County Chief Administrative Officer Harry Hufford said he was still hoping that Ventura would agree to meet with the county, and said that the county was “open to options that they might suggest.”

During a conference call he held Tuesday with city managers from across the county, Hufford acknowledged that most cities were unhappy with his attempt to rein in the city of Ventura.

“I basically said, ‘We’re not trying to start a range war. This is not a burn-and-slash strategy,’ ” he said of the call. “ ‘We don’t know how to cope with the city of Ventura, and we want help.’ ”

After Ventura showed little sign of backing down, county officials voted Tuesday to use an escape clause from another 1956 ordinance that allows them to eliminate the 1% sales tax completely if any city withdraws. Board members said it’s their only weapon in this fight.

If things get that far, there’s little the cities can do to keep the money, a state official said.

Counties, said Debby Nelson, a senior tax auditor with the state Board of Equalization, are “the first in line. If counties choose not to have this tax in place, the cities have no way to do it themselves.”

At most, the cities can seek a ballot measure--something that could take months--and hope it passes, Nelson said.

While most cities say they’re still watching from the sidelines, the stakes for them are high. Much of their money comes from the sales tax.

Thousand Oaks, for example, gets $21.7 million of its $51.2-million budget from the tax. If it loses the money, said Deputy City Manager Scott Mitnick, “we have no choice not to fight it.”

Camarillo, which could lose more than $7 million, is also examining its options, said City Manager Jerry Bankston. “Clearly the mood and direction have changed with the actions of Ventura and the county.”

Only one city-county tax battle has gone this far, according to the state Board of Equalization. Twenty years ago, the Northern California city of Red Bluff withheld sales taxes from sparsely populated Tehama County. When the county repealed its sales tax law, local sales taxes weren’t collected for nine months and no county services were provided until a new law went into effect.

“Tehama is a small county,” said Peter Detwiler, staff director for the state’s Senate Local Government Committee. “This [Ventura County] is serious stuff involving substantial amounts of money. These are adult dollars.”