Council agrees to pay tax bill, but will fight it

The Costa Mesa City Council agreed at an emergency meeting Thursday to pay the state $1.4 million it has asked for in property tax revenues from the city's dissolved Redevelopment Agency.

"It's our belief we don't owe them anything," Finance Director Bobby Young told the council. "It's very unusual. I think it goes to the intent of the state to dissolve redevelopment agencies in the quickest manner possible, to claw back money they see fit."

Every RDA in California was formally dissolved Feb. 1. Costa Mesa's replacement, the Successor Agency — the City Council by another name — kept about $1.5 million in reserves from the RDA.

The city will deplete that reserve so it doesn't have to dip into the city's general fund to make the payment, Young said.

In an unanimous vote, city officials said they had little choice but to pay the county, which will forward the money to the state, and fight over it later. The city is exploring its legal options, including possibly joining other municipalities in a lawsuit to get the money back.

If the city didn't agree to pay Thursday, it would face a 10% penalty, plus 1.5% interest added every month. And the county would withhold Costa Mesa's monthly sales and property tax revenue.

The state Department of Finance gave counties less than two weeks to collect the money from cities. The cities had less than a week to pay up.

"It's a byproduct of the Legislature acting very suddenly," said Kimberly Hall Barlow, special counsel to the Costa Mesa Successor Agency. "What we're hoping for is the county and state will let us slow down a little and get us on the same page so we don't have to end up in front of you over and over again."

The city's disagreement with the county and state stems from when state lawmakers considered RDAs to be defunct and their revenues part of the state's normal operations.

Legislators approved a law last summer dissolving California's RDAs to reclaim millions in property tax revenue that is traditionally recycled directly back to the redevelopment agencies without being siphoned through other public agencies.

Cities then sued. While the law was litigated over the fall and winter in court, business went on as usual. In December, Costa Mesa's RDA was given $2.3 million to pay its bills. Young said the county is seeking a portion of that figure.

But after Costa Mesa received its money, in the week between Christmas and New Year's Day, the California Supreme Court upheld the law eliminating the redevelopment agencies.

Counties and the state Department of Finance agreed that the money that used to go to RDAs would now be funneled through public agencies like all regular tax revenues, but a certain portion would be set aside so the dissolved agencies' outstanding bills and projects-in-progress could still be paid.

In a letter to the county auditor, Barlow wrote that the city is agreeing to pay the money, if only because penalties loom if it doesn't.

"In light of the absence of due process, the Successor Agency is paying under protest," she wrote.

Twitter: @JosephSerna

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