City Throws Down Gauntlet in Tax Fight

VENTURA — The City Council made good on its promise to pick a fight with county government by voting 7 to 0 Monday to withhold sales tax revenue given annually for decades.

“I am becoming a little more comfortable rattling cages,” Mayor Sandy Smith said. “It’s the only way anything constructive gets done.”

The city has every right to do this and needs the money to fix its roads, City Atty. Bob Boehm said. But county supervisors say they will retaliate.

Although Ventura’s $572,000 is a small fraction of the county’s $1-billion budget for the next fiscal year, if other cities follow suit, the cash-strapped county could be out as much as $2.5 million.

“The city needs to recognize that it is not an island,” said Supervisor John Flynn. “Lots of people hired by government live in the city. It should treat the county government in some kind of favored way.”

Flynn vowed to punish Ventura by “some pretty serious action,” including moving county services provided in Ventura across the river to Oxnard.

County officials are also threatening to repeal the countywide agreement that divides state sales tax revenue among the county and its 10 cities. That pact provides about $80 million annually for the county and cities and, if nullified, would have to be replaced with a new voter-approved tax law, said County Counsel Jim McBride.

The Board of Supervisors will discuss that and a range of lesser consequences to prevent other cities from following Ventura’s lead, McBride said.

“What’s important when the dust settles is whether or not actions will be taken by all the parties which risk losing the $80 million,” McBride said.

Thousand Oaks, Simi Valley, Oxnard and other cities are waiting for the county’s reaction before deciding whether to follow suit. The Camarillo City Council could discuss a similar move as early as July, but will also consider other options, City Manager Jerry Bankston said.

The cities’ agreement to share one third of 1% of their sales tax revenue with the county started in 1956, when cities across the state made similar arrangements as part of a law to keep sales tax rates uniform within each county.

That agreement is outdated, Ventura city officials say. Services the money once provided, such as animal control, are now contracted out, and the $572,000 goes straight to the county’s general fund.

City leaders face $33 million in road repairs, and they said the money should stay in the city, and the county must make up the difference elsewhere.

But county officials say the original law includes some provisions that allow a county to nullify its tax law to force uncooperative cities back in line.

If that happens, it’s possible that by Oct. 1 no local sales tax would be collected in the county, until a new tax was passed. Some county services could dry up, and local agencies would no longer qualify for many state and federal funds, said John Waid, senior tax counsel for the State Board of Equalization.

Only one other city and county have taken a tax brawl to such extremes, Waid said. Twenty years ago, Red Bluff, in Northern California, stopped giving money to Tehama County. When the county then invalidated its sales tax law, local sales taxes weren’t collected for nine months and no county services were provided until a new tax law went into effect.

Red Bluff and Tehama County recently approached the State Board of Equalization with the same squabbles, and Waid had to remind them of what happened the first time.

“They said, ‘Oh really?’ and we never heard from them again,” he said.

Other cities have come close, including the city of Napa and Napa County, but most settle their differences short of repealing tax laws. Fresno County gives cities flexibility by allowing them to yearly renegotiate their portion to the county.