SV lands $2.1 million from county lawsuit

Scotts Valley has won $2.1 million in a court case challenging Santa Cruz County’s practice of deducting redevelopment taxes from the city’s share of property tax revenues.
San Mateo County Superior Court Judge Steven Dylina issued a tentative decision in the nearly 2-year-old case Monday, May 18, and is expected to make it final next week.
The judge’s order stops the county from making the deductions, which will provide the city an additional $400,000 to $450,000 a year in revenues.
Mayor Randy Johnson said he was “gratified that the judge saw fit to give us everything we asked for.”
The city based its case on state law that gives a city at least 7 percent of the total property taxes collected from that city’s taxpayers. Because the county deducted an amount equal to the city redevelopment revenue, Scotts Valley received only about 4 percent of every tax dollar.
Unlike property taxes, redevelopment revenues are restricted for use only in a city’s redevelopment area and only for specific purposes.
“The court finds that there is no legal authority supporting the county’s determination that the city’s (tax allocation) should be reduced by the tax increment received by the redevelopment agency,” the judge said in the decision.
“This was an issue of basic fairness,” City Councilman Jim Reed said. “Other cities in the county that have (redevelopment agencies) get back substantially more of their tax money.”
City Attorney Kirsten Powell said the city was forced to sue in 2007 after county officials refused to settle the matter short of court action.
The $2.1 million figure represents withheld taxes back to 2003.
In response to the city’s original lawsuit, the county countersued, claiming the city had not honored its initial agreement with the county that formed the city redevelopment agency.
Judge Dylina tossed out most arguments in the countersuit, but several remain. Powell said it was possible a jury trial would be conducted to resolve those issues.
The windfall comes as the city is facing the phaseout of the Measure C temporary sales tax, which ends in 2011.
Whether the city will see any cash soon, however, remains to be seen. Powell said the judge probably will permit the county to delay payment until it exhausts any appeal.
The county’s attorney, Bill Marticorena of Costa Mesa, said there is a “very reasonable chance” the county will appeal, but it will be up to the board of supervisors to make that decision in early June.
Powell said she doesn’t anticipate a county appeal, if there is one, to be successful.
“The judge said this clearly was a case of statutory interpretation, and he believed our interpretation was correct,” she said.