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Cities Mount Their Own Tax Revolt : Temple City, Others Sue to Get Property Tax Revenues Denied Them by Prop. 13 Laws

April 06, 1989|SIOK-HIAN TAY KELLEY | Times Staff Writer

Temple City residents paid $7.5 million in property taxes in 1986-87, but the city received none of that revenue.

The city is not alone in that plight.

About 33 of Los Angeles County's 85 cities either did not have a property tax or were not yet incorporated when Proposition 13 was passed in 1978, according to Sam Olivito, executive director of the California Contract Cities Assn. Under state legislation enacted to implement the proposition, such cities do not qualify for a slice of the property tax pie.

"We were excluded forever" from receiving benefits, Temple City Manager Karl Koski said of his community, which has never levied a property tax.

Joined by Compton, El Segundo, Carson and Rancho Cucamonga, Temple City has taken the issue to court.

Charging that their residents are being taxed without receiving due benefits, the cities filed a suit with the state Supreme Court challenging the constitutionality of the current system of tax revenue distribution.

Although the Supreme Court last Friday declined without comment to hear the case, John Sturgeon, the attorney for the petitioners, said he will file the suit Friday in San Bernardino Superior Court.

The suit is being filed there, he said, because Rancho Cucamonga is the biggest loser from the current system among the five cities.

The suit was originally filed with the state's highest court because the issue is constitutional and the decision could shift millions of dollars among city coffers statewide, Sturgeon said. He had urged the court to act quickly because cities have to begin planning their 1989-90 budgets soon.

Temple City Councilman Ken Gillanders, who initiated the research leading to the suit, was not perturbed by the action by the Supreme Court.

"It'll just take a little longer to resolve, but the constitutional issues are the same," he said. "It will ultimately find its way to the Supreme Court."

The cities want the court to invalidate legislation adopted to implement the landmark tax-cutting initiative.

The suit charges that the legislation unfairly penalizes cities that levied low property taxes, or none at all, before Proposition 13. If successful, it would benefit 270 cities statewide, Olivito said. His organization, which has written to the court in support of the action, represents 65 California cities, 46 of them in Los Angeles County.

However, not every city would gain.

For example, six cities in the San Gabriel Valley, including Pomona and Pasadena, would stand to lose hundreds of thousands of dollars each year.

Proposition 13 limited property taxes to 1% of a parcel's assessed value and restricted increases in assessments to 2% annually. Although taxpayers pay at the same rate regardless of where they live, revenues have been distributed among cities according to how high their tax rates were before Proposition 13 was passed.

"The Legislature's scheme allocates property taxes without regard to who paid them," attorney Sturgeon stated in the suit, which was filed with the Supreme Court last month. He said this "completely arbitrary" formula punishes cities that had shown fiscal restraint before Proposition 13 by imposing low taxes, while rewarding those with high taxes.

The suit asks the court to order Los Angeles and San Bernardino counties to correct these inequities. The counties were named as respondents in the suit because they collect residents' property taxes and distribute them to cities.

The suit suggests that a fairer distribution system would rely on the total value of properties in a city to determine what proportion of the tax-revenue pie it should receive.

Temple City would have gained about $1.46 million in revenues in fiscal 1986-87 under the proposed system.

The biggest winner among the petitioners would be El Segundo, which would have received $7 million more that year. The city had a property tax of 0.15% in 1987.

Pomona, which had a 2.56% property tax, would be hurt more than any other city in the San Gabriel Valley, Olivito said. Under the proposed formula, it would have received about $1 million less than it did in 1986-87.

Pasadena, South Pasadena, San Marino, Sierra Madre and La Verne also would get less.

Larger Picture

Expressing disappointment that other cities are seeking a solution that would penalize his city, Pomona City Manager A. J. Wilson said the larger picture of who needs the money most should be examined. Each city's per capita spending also needs to be considered, he said.

"We're not going to give away the resources of our community," Wilson promised, adding that Pomona is exploring its legal grounds for a countersuit.

Pasadena City Manager Donald McIntyre acknowledged that the petitioning cities have a legitimate concern but said it was their choice not to levy higher taxes initially.

South Pasadena City Manager John Bernardi agreed: "I certainly feel for them, but I don't know why South Pasadena should suffer for (their) not imposing a property tax. We can't afford to lose any more than we've already lost."

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