Fresno County charged local cities excessive fees when calculating property-tax revenues for three years under a complex formula devised by the state, a Fresno County Superior Court judge has ruled.
But Fresno County last week filed motions for a new trial in a case in which Judge Jeff Hamilton ruled the county must repay seven cities $1.4 million plus interest.
Hamilton ruled in February that the county incorrectly changed how it computes the administrative fee, and he required the county to recalculate the fee and refund the difference to cities.
The county also will have to pay 7% interest on the amounts overcharged dating back to the 2006-07 budget year, city officials said.
City officials noticed the escalating fees corresponded to a change in the state tax distribution formula, called the "triple flip."
The formula was triggered after voters approved Proposition 57 in 2004. The ballot measure created a $15 billion bond issue to close the state's budget gap.
Under the "triple flip," 0.25% of local sales and use taxes were committed to pay off the Prop. 57 bonds, then vehicle-license fees were swapped for property-tax dollars, and the revenues lost by local governments were then replaced with property-tax revenues that had been previously dedicated to schools. The schools' money was backfilled by the state's general fund.
The formula was proposed to keep cities, counties, special districts, redevelopment agencies and schools at the same funding levels as in previous years.
But the cities -- Fresno, Clovis, Selma, Sanger, Kerman, Kingsburg and Fowler -- sued Fresno County, saying the county overcharged fees to distribute the revenue.
The city of Fresno claims it paid $948,346 more than in previous years for a tax-distribution program that the state Legislature declared would not cost cities any additional money. Clovis' losses were $198,240.
"The whole idea of the 'triple flip' was to move tax revenue around, but not have local government entities pay anything [more] out of pocket," said Jim Sanchez, Fresno's city attorney.
The Fresno Court decision was contrary to a ruling by a Los Angeles County Superior Court judge last year against 47 cities that had sued Los Angeles County over how it charged administrative fees for property taxes. That decision is being appealed by the cities.
Kevin Briggs, Fresno County counsel, contends that Judge Hamilton's ruling was incorrect, leading the county to file a motion for a new trial earlier this month.
In seeking the new trial, the county is arguing that it had more revenue to distribute, including some revenue previously distributed by the state, so the county should be entitled to higher fees.
The county's charges are far lower than actual costs to distribute the revenue, said Vicki Crow, Fresno County's auditor-controller-tax collector.
"It doesn't come close to recovering the full cost," she said.
But the cities should only have to pay for the staff time to calculate the revenue distribution, and not take a percentage of the revenues, said Nancy Jenner, the lawyer who represented the cities.
She estimates the county's cost should be about $5,000 per year.
The county's motion also contends that the seven cities received about $3 million more through the "triple flip" formula than they would have received under the previous formula with vehicle-license fees and sales taxes.