Appeals court agrees that county owes Scotts Valley property tax

The city of Scotts Valley can breathe a little easier after an appeals court ruled that the city is entitled to back property taxes that had been kept by Santa Cruz County since the 2003-04 fiscal year.
The decision was issued Oct. 26 by the 1st District Court of Appeal in San Mateo. The appeals court agreed with a judge who, in 2009, had ruled the county was using the incorrect formula to determine Scotts Valley’s property tax allocation. Instead of paying Scotts Valley 7 percent of property tax revenue, the county had turned over between 3.5 and 4.5 percent each year since 2003-04.
Scotts Valley’s victory means the county owes the city more than $2 million in back taxes and will owe the city about $250,000 per year going forward.
City manager Steve Ando said the money will be injected into the city’s general fund. The city will continue to spend against a deficit, but the city’s reserves will increase from two years to about five years.
“It won’t cover the city’s ongoing deficit, but it will reduce it,” Ando said.
The decision did not go entirely in Scotts Valley’s favor, however.
The appellate court ruled that the city still owes a small portion of the property taxes the county collects to a special account that funds schools.
In addition, the county has filed a cross-complaint against the city that says the city improperly used its Redevelopment Agency funds to build Skypark and the new library branch.