Beall Enables Local Cities to Recover Tax Dollars

September 15, 2015

SACRAMENTO – For years, the state returned a lower percentage of property tax dollars to four Santa Clara County cities because of a discrepancy in the law.
With the Legislature’s passage of Senate Bill 107 that contains a provision sought by Senator Jim Beall, those cities can see that discrepancy eliminated with the stroke of the Governor’s pen.

“Residents in Saratoga, Cupertino, Monte Sereno and Los Altos Hills have been paying their property taxes for years but received less than their rightful share returned to them by the state,’’ Beall said. “SB 107 corrects this inequity and provides more dollars for their hometowns, money that will pour into their general funds to be spent on streets, libraries, parks, or whatever priority they deem fit.’’
Ending the inequity will enable the city of Saratoga to invest in critical services, Mayor Howard Miller said.

“Property tax revenue is the greatest source of income for Saratoga,’’ Miller said. “Correcting this 30-year inequity in property tax distribution will go a long way in allowing Saratoga to continue funding critical services and infrastructure improvements, such as public safety and road maintenance.”

Cupertino Mayor Rod Sinks said the additional revenue “means a lot of things’’ for his city. “It could be used for improved roadways, biked safety, and improved program for seniors or students.’’
He added, “I’m grateful to Jim for championing this over the years and getting it done.’’

Beall has fought to restore the money to the cities since 2008.  But instead of introducing a bill to specifically correct the inequity, Beall – who serves as a member of the Senate Budget and Fiscal Review Committee – worked to incorporate the issue into a committee bill that addressed several other local government matters. He arranged for talks between representatives from the cities and the State Department of Finance.

Cupertino, Saratoga, Monte Sereno, and Los Altos Hills are the only cities in the county that are allocated less than 7 percent of the property taxes than their residents pay into the state’s coffers. Their allocation hovers about 5 percent.

It is estimated the total value to the four cities based on current year property tax assessments is $2.5 million: Cupertino, $1.4 million; Los Altos Hills, $320,000; Saratoga, $650,000; Monte Sereno, $200,000.

The disparity began in 1978 following the passage of Proposition 13. The voter-approved initiative froze property taxes, creating a revenue problem for cities with low rates at that time. Legislation would later be approved to increase their property tax allocations.

But as time passed and the state’s ability to balance its own budget grew precarious, the cities were required to fund the Educational Revenue Augmentation Fund, or ERAF, at the county rate which has been higher than individual rates for the cities.

SB 107 calls for a five-year, phase-in period in which the cities would incrementally lower their percentage contribution to the county’s ERAF. At no time would this adjustment result in a rate lower than each city’s individual ERAF rate.