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City joins lawsuit against the county
Burbank stands alongside 43 other municipalities alleging that L.A. County overcharged them on property tax collection.
By Jeremy Oberstein
CITY HALL — The long list of Southern California cities that say Los Angeles County is overcharging to collect and administer property taxes grew by one Tuesday when the City Council voted unanimously to include Burbank in the lawsuit.
The $4.3-million suit, which 43 other cities in the county, including Glendale, have already joined, alleges that the county wrongfully charged fees in excess of amounts permitted by state regulations. The county maintains that the fees collected are in line with a 2004 statute that cities agreed on when the state reached a budget compromise in 2004.
“The cities believe we’re being charged too much, and the county believes it’s fair,” said Patrick Flynn, Burbank’s grants and revenue manager. “This is a good time to join this lawsuit.”
Before the Legislature adopted new budget rules in 2004, property tax revenues were collected by the counties, which then distributed them to cities. As a result of the 2004 budget compromise, legislation was enacted to alleviate the state’s fiscal crunch, reducing the share of vehicle license fees allocated to each city. To compensate for the reductions, legislators said cities would instead receive additional property tax revenues to be paid in lieu of the vehicle license fees.
Starting in 2006, the counties were allowed to charge for the costs of administering the payments that they said should not exceed the actual cost of providing payment services. But the cities contend that they have been charged above what some say should usually be nominal fees.
According to the lawsuit, 88 cities around the state contend they were charged $13.5 million more than what they believe is fair. The Southern California cities said they were overcharged $4.3 million by the county, and Burbank says it was charged about $200,000 each year above the normal fee.
“The revenue shift was intended to be revenue-neutral but were actually a windfall for counties,” said Michael Colantuono, whose law firm is handling the case.
Colantuono estimated his litigation costs could be as much as $80,000, of which Burbank would be required to pay $4,000, which the council agreed to pay. Burbank’s share could decrease as other cities join the case, and at least one more, Highland Park, is expected to do so shortly, officials said.
Defense attorneys say the county is well within its right to assess the fees.
“What [Los Angeles] County is doing is what everyone agreed to,” defense attorney Scott Bertzyk said. “We think they are misreading the statutes. Basically, to endorse the cities’ argument would be to rewrite the argument.”
Supporting the cities’ case is state Controller John Chiang, a former tax law specialist for the Internal Revenue Service who wrote a legal opinion earlier this year against the county after he was asked to do so by the League of California Cities.
The case may not see a courtroom any time soon, as cities continue to join the lawsuit and attorneys contemplate a change of venue from Los Angeles County to San Francisco, which Colantuono believes would offer a more just setting. That is to say nothing of a possible settlement.
“Our goal would be to tee this up and resolve it in a way that’s efficient,” Bertzyk said. “However it’s resolved, the good news is these are entities that have got to deal with each other.”
The $4.3-million suit, which 43 other cities in the county, including Glendale, have already joined, alleges that the county wrongfully charged fees in excess of amounts permitted by state regulations. The county maintains that the fees collected are in line with a 2004 statute that cities agreed on when the state reached a budget compromise in 2004.
“The cities believe we’re being charged too much, and the county believes it’s fair,” said Patrick Flynn, Burbank’s grants and revenue manager. “This is a good time to join this lawsuit.”
Before the Legislature adopted new budget rules in 2004, property tax revenues were collected by the counties, which then distributed them to cities. As a result of the 2004 budget compromise, legislation was enacted to alleviate the state’s fiscal crunch, reducing the share of vehicle license fees allocated to each city. To compensate for the reductions, legislators said cities would instead receive additional property tax revenues to be paid in lieu of the vehicle license fees.
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According to the lawsuit, 88 cities around the state contend they were charged $13.5 million more than what they believe is fair. The Southern California cities said they were overcharged $4.3 million by the county, and Burbank says it was charged about $200,000 each year above the normal fee.
“The revenue shift was intended to be revenue-neutral but were actually a windfall for counties,” said Michael Colantuono, whose law firm is handling the case.
Colantuono estimated his litigation costs could be as much as $80,000, of which Burbank would be required to pay $4,000, which the council agreed to pay. Burbank’s share could decrease as other cities join the case, and at least one more, Highland Park, is expected to do so shortly, officials said.
Defense attorneys say the county is well within its right to assess the fees.
“What [Los Angeles] County is doing is what everyone agreed to,” defense attorney Scott Bertzyk said. “We think they are misreading the statutes. Basically, to endorse the cities’ argument would be to rewrite the argument.”
Supporting the cities’ case is state Controller John Chiang, a former tax law specialist for the Internal Revenue Service who wrote a legal opinion earlier this year against the county after he was asked to do so by the League of California Cities.
The case may not see a courtroom any time soon, as cities continue to join the lawsuit and attorneys contemplate a change of venue from Los Angeles County to San Francisco, which Colantuono believes would offer a more just setting. That is to say nothing of a possible settlement.
“Our goal would be to tee this up and resolve it in a way that’s efficient,” Bertzyk said. “However it’s resolved, the good news is these are entities that have got to deal with each other.”
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