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Riverside Cities to Get Increased Tax Payments

Surge in county real estate values drastically expands account paid to local entities, bringing to light 11 years of error in property tax system.

June 25, 2005|Susannah Rosenblatt | Times Staff Writer

More than $73 million in property tax money owed to Riverside County cities and government entities has remained in a county fund because of a bureaucratic error, according to an independent report released Friday.

A lack of communication among county financial departments contributed to the oversight, officials said. The problem went mostly unnoticed for 11 years until soaring Inland Empire home prices expanded the fund dramatically.

"What we owe the public is accuracy," Supervisor John F. Tavaglione said this week. "Big errors like this are found and lack of confidence begins to grow with the public. Let's try to make sure this system works."

The money was accumulating in a Teeter Plan fund, which is used by many California counties to buffer local governments from revenue shortfalls created by delinquent property tax payments. The counties assume all the debt created by the late taxes, and take out loans to pay the local governments.

When the delinquent property taxes are collected, the county pays off its debt.

According to the report, Riverside County mistakenly placed the non-delinquent supplemental property taxes, which are placed on properties sold for a higher value, into a fund it used to pay off the debt.

Because Riverside County collects and disburses large amounts in property taxes -- about $1.75 billion for the next fiscal year -- the over-accumulation of a few million a year in the debt fund was too small for the discrepancy to be noticed, the report to the county Board of Supervisors said.

But as home values in the county nearly doubled in the last few years, money piled up rapidly in the wrong account.

The report recommends excluding supplemental property taxes, which are highly unpredictable and change with fluctuations in the market, from Teeter Plan payments to local governments. The report also suggests ways the auditor's office could improve its accounting practices.

If the board approves the report June 28, the auditor-controller's office will dole out the $73.8 million to the 1,100 local entities that participate in the Teeter Plan, which was adopted in 1993.

"What I want to be able to assure all these jurisdictions is that they're going to get their money," said Denise Harden, principal management analyst with the county executive office.

The accounting trouble led to the supervisors' unanimous vote Tuesday to hire an outside consultant to analyze the county's property tax system and help the independently elected auditor-controller, assessor-county clerk-recorder and treasurer-tax collector collaborate more closely.

"The time is clearly right to bring in some outside experts to look at how we can enhance" the system, county Treasurer-Tax Collector Paul McDonnell told the board Tuesday.

County Executive Officer Larry Parrish told the board he should have emphasized the accounting inconsistency more strongly in his quarterly budget report.

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