City votes to join in tax lawsuit

CITY HALL — A forthcoming lawsuit alleging the county is overcharging cities to collect and administer property taxes found a new ally Tuesday after the City Council voted unanimously to join in the legal action.

In doing so, Glendale joins at least 24 other cities in Los Angeles County that plan to sue in an effort to recoup what city officials argue are unreasonable charges being levied by the county to cover the administrative costs of collecting and distributing property taxes.

County officials counter that the administrative fees charged to cities are fair compensation for a restructured collection formula and a service that they have, until recently, had to shoulder largely on their own.

Anger among cities throughout the state has been brewing since the 2006-07 fiscal year, when they lost a reprieve from county charges and saw property tax administration fees balloon.

The lawsuit, which is expected to be filed later this month, would seek reimbursement from the county, plus interest, on the higher charges and force a different rate structure.

“It really should have been a nominal fee,” Senior Assistant City Atty. Lucy Varpetian said.

Instead, Glendale is paying about $308,000 more than it was before 2006, Varpetian said.

County auditors contend that figure is closer to $288,000. Either way, the recouped funds would be a welcome reprieve during a tight fiscal year, city officials said.

Los Angeles County holds $13.5 million of the $40 million that counties statewide have allegedly overcharged their cities, said Michael Colantuono, the lead attorney representing the cities, which include Cerritos, Paramount and Sierra Madre.

Long Beach, Santa Monica and Culver City are all contemplating joining the lawsuit.

County governments are charged with collecting and redistributing property tax revenue to their respective cities and, according to state code, are allowed to charge fees that “shall not exceed the actual cost of providing these services.”

During the 2004 financial crisis, state lawmakers gave cities a greater share of property tax revenues to make up for a decreased share of sales taxes that were used to pay off a $15-billion voter-approved bond measure.

City officials contend increased county administration charges have unfairly siphoned off that compensation.

“They’re saying what they think the law should be, not what the law is,” Colantuono said.

Officials on both sides said legal action over the charges, especially as cities and counties alike grapple with tight budgets and an economic downturn, has been a waiting game.

“I think we have been anticipating that a county would likely be sued,” said Jennifer Henning, executive director of the County Counsel’s Assn. of California, the legal arm of the statewide county association.

While Colantuono and the League of California Cities point to a legal opinion issued in January from state Controller John Chiang’s office that sided with their position, counties have pointed to a subdivision in the tax code that states “county governments have borne an unfair and disproportionate part of the financial burden of assessing, collecting, and allocating property tax revenues for other jurisdictions.”

Essentially, the charges address a “long standing grievance,” said Thomas Tyrrell, principal deputy counsel for Los Angeles county.

“It’s a frustrating position from a county’s perspective,” he said.

“Counties have borne this burden for a couple decades.”

The coalition of cities could be in for a long fight, even beyond the initial lawsuit. An appeal, no matter the ruling, is expected.

That could put any final court opinion on the issue at least two years away, attorneys said.