Local News

Wednesday, Mar 19 2014 05:38 PM

County, city settle nasty tax fight

BY JAMES BURGER Californian staff writer jburger@bakersfield.com

Kern County and the city of Bakersfield have agreed to settle a long, contentious legal battle over how they divide property taxes after annexations, the two agencies announced Wednesday evening.

But a second battle -- over property taxes dedicated to fire protection -- remains unresolved.
The deal announced Wednesday would transfer about $715,837 in property tax revenue -- money the city claimed but the county has been withholding -- to the city.

In return, the city has promised to drop a lawsuit against the county and open negotiations with county officials about how the city's share of the disputed tax money will be calculated in the future.

The city and county have 60 days to hash out that future agreement. If they can't, a mediator will be brought in.

County supervisors and Bakersfield City Council members hammered out Wednesday's deal after 20 months of, at times, nasty argument.

Leticia Perez, chair of the Board of Supervisors, said business leaders had called on her and other city and county leaders to patch the city-county rift.

"At the end of the day, elected officials on both sides realized that the only loser in a long, drawn-out legal battle was the taxpayers," said Councilman Russell Johnson. "We all realized we wanted the same thing."

City officials said they were happy with Wednesday’s announcement and thought real progress was possible — despite the two agencies' previous enmity.

“I’m delighted that it’s resolved. The city’s getting its money back. Good bridge to have crossed, happy to have crossed it,” said City Manager Alan Tandy.

Vice Mayor Weir agreed.

“We’re very excited that that’s behind us and we look forward to a new tax fund agreement and moving forward with a cooperative spirit with the county in the future,” Weir said.

FIGHT

At issue is how much property tax revenue is shifted to the city from the county, schools and special districts when the city annexes county land.

When Bakersfield pulls county land into the city, much of the taxes the property owner pays funds city services ranging from police protection to solid waste handling.

How much cash the city receives is based on complex calculations laid out in a 1995 memorandum of understanding renewed in 2005.

The battles started when former Kern County Auditor-Controller Ann Barnett notified the city that the county had calculated the split property taxes incorrectly since 2005.

Barnett and her successor, Auditor-Controller Mary Bedard, said they were required by law to correct the mistake.

Ultimately the county withheld about $1 million the city expected to receive and the city slowed down the pace of annexations to prevent new properties from being developed under the disputed formula.

City Manager Alan Tandy disputed the county's new method of calculation and demanded funds be returned.

Fighting escalated when the county questioned the way the city had calculated its share of the property taxes that go to city and county firefighting operations in metro Bakersfield.

Bile from the dispute spilled over into other areas of the county-city relationship, including souring efforts to build side-by-side animal shelters.

The city ultimately filed lawsuits attacking the county's interpretation of annexation tax split and fire fund distribution methods.

In recent months, that court fight seemed to be roaring along hot and heavy.

A mid-January ruling from Fresno County Superior Court Judge Dale Ikeda on the annexation tax split blocked a Bakersfield request for the money the county withheld, saying the fact the money was in trust eliminated any risk the city had of not being paid back.

City and county lawyers couldn't even agree on what that meant.

"The judge essentially gutted their lawsuit and made a finding that they were not likely to prevail on the merits, " said Kern County Counsel Theresa Goldner.

"The judge said, when he reads the contract, it is 'inherently ambiguous,'" said Bakersfield City Attorney Ginny Gennaro. "We see that as a clear win for the city of Bakersfield. It lends credence to our argument that history is going to play a big role" in the suit.

But behind the scenes, city and county elected officials were working to end the fight.

DEAL MAKING

Supervisor Perez said she joined Bakersfield City Councilmen Harold Hanson and Terry Maxwell in a meeting with business leaders who said the rift was putting projects in limbo.

Perez said there were serious trust issues between the city and county, but at the meeting she and the councilmen agreed a settlement had to happen.

"I became convinced in that moment that they really wanted to reach settlement," Perez said.
Bakersfield Vice Mayor Ken Weir got involved soon after that and helped spearhead the deal, Perez said.

A series of back-and-forth talks eventually landed the agreement announced on Wednesday.
"I think the role elected officials played in this recent decision was critical," said Bakersfield Councilman Willie Rivera. "It's because folks came to the table with open minds and open ears."

But Wednesday's deal does not completely end the tax battles. They still must resolve the dispute over how property taxes for fire protection are shared out between them.

The county is not holding onto any disputed money in the fire fund case. But Supervisor David Couch said he believes a deal will also be struck on that front.

"That's a separate issue and it's a smaller issue," Couch said. "Hopefully we'll target that next."
 

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