The city of Bell assessed property owners for sewer fees without getting required voter approval, according to the state controller's office, marking the second time auditors have found that taxpayers in the working-class city were overcharged.
In a letter to the city obtained by The Times on Thursday, Controller John Chiang said Bell property owners overpaid $621,737 in fees that were illegally increased in 2007. The hike tacked on about $20 per parcel for each of the last three years' tax bills.
The finding comes several weeks after auditors found taxpayers were overcharged $2.9 million for a "retirement tax" to fund city employee pensions. The city, which made national headlines when The Times revealed that top city officials were among the highest-paid in the state, has the second-highest property tax rate of any city in Los Angeles County.
FULL COVERAGE: High salaries stir outrage in Bell
After the salary scandal surfaced in July, scores of residents protested at City Council meetings, saying they believed that their taxes were too high. Many residents said they had noticed assessments on their tax bills that they didn't understand or were never fully informed about.
Bell officials initially were "in full agreement with our finding," Chiang wrote. But they later "suggested that the property tax levy in question may not have required a vote of property owners" and requested more time to research it.
"I urge you to quickly complete your review so that, if the increased levy was indeed an unallowable assessment, the City of Bell will have sufficient time to reduce the assessment for FY 2010-11," he wrote, referring to tax bills due in November.
Interim City Manager Pedro Carrillo declined to discuss the matter pending the city's review, which he said could be completed as early as Friday.
"We just want to make sure we get it right before we make any public statements," he said. "Obviously we are going to fix it if it is incorrect. We will roll out a solution if need be."
If the city concludes the assessment was legal, it will have to prove its case to the controller, Chiang wrote. Nothing in the documents from Bell so far would justify the increase, he said.
Even if Chiang's finding holds up, it is unclear if taxpayers will get their money back because the state Constitution does not spell out a remedy for overcharged assessments in prior fiscal years.
However, Chiang told city officials that if taxpayers were overcharged, the city should either refund the money or use it to offset future assessments.
For the sewer assessment, property owners have paid as much as $33.12 per parcel since 2007, the controller said; the maximum allowable is $12.70.
The controller's office is one of several outside agencies that have been brought in to investigate the city since the salary scandal broke. Both the L.A. County district attorney's office and the California attorney general's office are looking into allegations of financial irregularities and voter fraud.
Chiang's previous finding of a tax overcharge has led to likely relief for residents. Although it initially appeared that the overpayment would be directed to public schools in the city, a bill to refund the $2.9 million to property owners has cleared the Legislature and is awaiting the governor's signature.
It is one of several legislative reforms launched since The Times reported in July that the city of about 39,000 was paying its administrators and police chief the largest municipal salaries in the state, with then-City Manager Robert Rizzo making nearly $800,000 a year.
Chiang's findings appear to confirm Bell property owners' longstanding complaints of being overtaxed. All county property owners pay a 1% general property tax, along with special or direct assessments levied by their municipalities. The countywide average of all tax rates is 1.16%, or $11.60 for every $1,000 of assessed value.
Bell's total property tax rate is 1.55%. But even after the rate is reduced in November, to reflect the reduction of the retirement tax, the city southeast of downtown Los Angeles will still have a higher rate than many others in the county.
Bell's high tax rate is due to several factors, records show, including bond debt for municipal improvements, including a sports complex now under construction. Since 2006, county records show, Bell's local taxes have doubled, as have direct assessments for trash collection, sewer maintenance and other services.
Revenue from the tax increases went to designated funds or services and did not directly pay for administrators' salaries.
But by freeing money from the city's general fund, the higher taxes appeared to have made the outsized salaries more feasible for the small city.
Times staff writer Evan Halper contributed to this report.