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CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
Dept: City Manager's Office
Subject: Resolution of the Mayor and
Common Council of the City of San
Bernardino authorizing a Tolling
Agreement between the City of San
Bernardino and the County of San
Bernardino concerning property tax
administration fees.
From: Lori Sassoon,
Acting City Manager
Date: 9/29/2008
Council Meeting Date: 10/20/2008
Synopsis of Previous Council Action:
Recommended motion:
Adopt resolution.
-1JJR
Signature
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Contact person: Catherine Pritchett, Management Analyst I
Phone: 384-5122
Supporting data attached: Staff Report, Resolution, Agreement Ward: All
FUNDING REQUIREMENTS:
Amount: None
Source:
Finance:
Council Notes: 6.50 200,>3 ~9!.c>
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Agenda Item No. 9
l"I.20/o?
STAFF REPORT
Subiect:
Resolution of the Mayor and Common Council of the City of San Bernardino authorizing a
Tolling Agreement between the City of San Bernardino and the County of San Bernardino
concerning property tax administration fees.
Backe:round:
Each year, the County of San Bernardino Auditor - Controller calculates and distributes to
local governments their share of the property tax revenue. For this service, the County
charges a fee known as the Property Tax Administration Fee (PT AF). This fee covers costs
associated with data processing, collection and any appeals that are acquired by the county
auditors, assessors and tax collectors. Each agency's PTAF is automatically withheld from
the annual property tax allocation distributed by the County in approximately June of each
year.
Effective July I, 2005, the Revenue Taxation Code reduced the sales tax rate paid to cities
and counties in order to repay State-issued economic recovery bonds. In lieu of that sales tax
amount, cities and counties received property taxes that would otherwise have been allocated
to the County's Education Revenue Augmentation Fund (ERAF). This revenue swap is
commonly known as the "Triple Flip" and was intended to last as a temporary measure until
the economic recovery bonds were repaid.
At the same time, the Revenue and Taxation Code reduced the amount of vehicle license fees
(VLF) paid to cities and counties and in return, guaranteed that each city and county would
receive an in-lieu payment of property taxes equal to the lost VLF. The substitution is
commonly known as the "VLF Swap" and was intended to be permanent. In addition, in
2006-07 the Revenue and Taxation Code was amended to allow counties to charge
administrative fees for the abovementioned services, provided that the fee did not exceed the
actual cost of providing the services.
A dispute between California cities and counties has recently arisen over whether the
additional PT AF fees that have been imposed by counties on cities should cover only the
incremental costs associated with the VLF Swap and the Triple Flip or should be based on
the total increased distribution of property tax earnings. For larger cities, such as San
Bernardino, the latter interpretation results in substantially higher PT AF fees, while the
former interpretation results in only a minimum increase to PT AF fees. The County of San
Bernardino calculates their PT AF based on the total increased distribution of property tax
earnings. The table below illustrates the PTAF fees imposed by the County of the City from
FY 04/05 to FY 07/08.
Fiscal Year 2004/2005 2005/2006 2006/2007 2007/2008
Total PT AF Paid 154,927 181,141 565,791 664,517
In Los Angeles County, a group of 43 cities have filed suit against the County of Los
Angeles challenging the amounts of the PT AF currently charged. These cities are seeking a
ruling that the County's formula for the PT AF is incorrect and that the fees should not exceed
the costs involved with distributing the taxes. The 43 cities in the suit are seeking a refund of
the difference between the fees that should have been paid and the fees that were actually
paid, as well as a court order mandating the correct formula for determining these fees on a
go~forward basis.
Similar to Los Angeles County, many agencies in San Bernardino County are seeking the
same relief. The Cities of Rancho Cucamonga, Adelanto, Fontana and Yucaipa have
approved Tolling Agreements, each have been ratified by the County of San Bernardino.
This Agreement essentially stops the applicable statute of limitations of two years and
extends the time period for filing suit against the County until I) either three years from the
date of the Tolling Agreement, or 2) from the date of a final judgment or opinion by a
California court of a competent jurisdiction adjudicating the lawsuits mentioned above, or in
any such similar suit elsewhere in the state. In the instance a legal judgment is made, the City
will have approximately 9 months, the remaining time from the original statute of limitations,
to file a claim against the County. However, because of the importance of this issue, it is
likely that a final judgment in this matter will wind up having a binding legal effect on
agencies throughout the state.
Rather than pursue duplicative, expensive litigation against the County, staff is
recommending that the City of San Bernardino enter into the attached Tolling Agreement
with the County. Should circumstances change during the term of this Agreement, each
party can opt out of the Agreement with 90 days written notice to the other party. The City
will then have the remaining time from the original statute of limitations to file a claim
against the County.
Upon approval by the Mayor and Common Council, the attached Agreement will be
presented to the County Board of Supervisors for their review and approval. The County
supports this action and has requested that the Mayor and Council execute two copies of the
Agreement so each agency can have an original document for their records.
Financial Impact:
None by this action.
Recommendation:
Adopt Resolution.
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RESOLUTION NO.
RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN
BERNARDINO AUTHORIZING A TOLLING AGREEMENT BETWEEN THE CITY
OF SAN BERNARDINO AND THE COUNTY OF SAN BERNARDINO CONCERNING
PROPERTY TAX ADMINISTRATION FEES.
BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE
CITY OF SAN BERNARDINO AS FOLLOWS:
SECTION 1. The City Manager of the City of San Bernardino is hereby authorized
and directed to execute on behalf of said City, a Tolling Agreement between the County of San
Bernardino and the City of San Bernardino concerning Property Tax Administration fees,
which is attached hereto, marked Exhibit "A", and incorporated herein by reference as fully as
though set forth at length.
SECTION 2. The authorization to execute the above-referenced Tolling Agreement
is rescinded if the parties to the agreement fail to execute it within ninety (90) days of the
passage of this resolution.
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RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN
BERNARDINO AUTHORIZING A TOLLING AGREEMENT BETWEEN THE CITY
OF SAN BERNARDINO AND THE COUNTY OF SAN BERNARDINO CONCERNING
PROl'2RTY TAX ADMINISTRATION FEES.
I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor
and Common Council of the City of San Bernardino at a
meeting thereof, held on the
, 2008, by the following vote, to wit:
_ day of
Council Members:
AYES
NAYS
ABSTAIN ABSENT
ESTRADA
BAXTER
BRINKER
DERRY
KELLEY
JOHNSON
MCCAMMACK
City Clerk
day of
The foregoing resolution is hereby approved this
2008.
Patrick J. Morris, Mayor
City of San Bernardino
Approved as to form:
JAMES F. PENMAN,
City Attorney
at- ?~~~
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TOLLING AGREEMENT
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This Tolling Agreement is entered into this
day o( .
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, 2008 by and between the County of San Bernardino ("COUNTY") and the
3 City of San Bernardino ("CITY" or "San Bernardino").
4 WITNESSETH:
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WHEREAS, a dispute has arisen between the City and the County regarding the
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amount of property tax administration fees charged by the County and its County
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Assessor/Tax Collector to cities, beginning in fiscal year 2006/2007 and continuing through
fiscal year 2007/2008, pursuant to Revenue and Taxation Code sections 95.3 and 97, in light
of the provisions of Revenue and Taxation Code sections 97.68 and 97.70. The City
contends that the County has charged more for property tax administration fees than its
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statutory mandate allows, whereas the County contends that it has charged property tax
administration fees within the statutory authority (the "Administrative Fees Dispute").
WHEREAS, that same Administrative Fees Dispute has arisen between the
County and many other cities located within the County, and has also arisen between other
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California counties and many cities within those counties' territory.
WHEREAS, conflicting legal opinions as to the Administrative Fees Dispute
have been rendered by various state and local agencies and their counsel.
WHEREAS, many California cities have filed claims against counties seeking
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reimbursement for alleged overcharges of property tax administration fees, and litigation
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between cities and counties over the Administrative Fees Dispute has been threatened and has
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been filed or is imminent in the County of Los Angeles and possibly other jurisdictions.
WHEREAS, the City and the County wish to preserve their respective rights
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concerning the Administrative Fees Dispute but want to avoid duplicative and potentially
wasteful litigation of an issue that will likely be resolved in other litigation.
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TOLLING AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
I. All general and specific statute of limitations on the time within which the City ma
file a claim under the Tort Claims Act or any applicable claims statute or County ordinance,
challenging the County pursuant to the Administrative Fees Dispute, and lor claiming
damages therefore, shall be, and hereby is, tolled and extended until the earlier of (a) three
years from the date of this Tolling Agreement or (b) date of a final judgment or opinion by a
California court of competent jurisdiction adjudicating the Administrative Fees dispute
between the County of Los Angeles and any city therein, or between any other California
county and cities or (c) termination of this Agreement as hereinafter set forth. The County
does hereby waive any defense of statute of limitations, laches, or other time related defense,
to the filing of a claim by the City arising from the Administrative Fees Dispute when such
claim is filed consistent with the tolling period described herein.
2. All general and specific statute of limitations on the time within which the City may
commence an action under the Tort Claims Act, any mandate proceeding, or any applicable
statute or County ordinance, to challenge the County pursuant to the Administrative Fees
Dispute, and/or claiming damages therefore, shall be, and hereby is, tolled and extended for a
period equal to the time for commencement of claims described immediately above plus the
time for processing of any claim which is a requisite precursor to the commencement of an
action. The County does hereby waive any defense of statute of limitations, laches, or other
time related defense, to the commencement of an action by the City arising from the
Administrative Fees Dispute when such action is commenced consistent with the tolling
period described herein.
3. Upon the expiration of the tolling period described hereinabove, the City shall be
entitled to file such claim or commence such action as it may deem appropriate. The date of
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TOLLING AGREEMENT
expiration of the tolling period shall be the date upon which the time for filing a claim or
commencing an action by the City shall commence to run.
4. Each party represents and warrants that the individuals executing this Tolling
Agreement on each party's behalf possess full authority to execute this agreement and to
settle and compromise all claims settled and compromised by this agreement.
5. This Tolling Agreement contains the entire agreement of the parties and supersedes
any and all prior or contemporaneous understandings, negotiations, representations, promises
and agreements, oral or written, by or between the parties with respect to the matters set forth
in this Tolling Agreement. This Tolling Agreement shall not be amended, modified, or
otherwise changed except by a writing duly signed by authorized representatives of each
party.
6. In entering into this Tolling Agreement, each party has had the opportunity to
consult with and rely upon the advice of the attorneys of its own choice. Each party
represents and warrants that the terms of this Tolling Agreement have been completely read
by and explained to it by its attorneys, and that those terms are fully understood and
voluntarily accepted by it. Accordingly, any rule of law, including but not limited to Section
1654 of the California Civil Code, or any other statutes, legal decisions, or common law
principles of similar effect, which would require interpretation of ambiguities in this Tolling
Agreement against the party that has drafted it are of no application and are expressly waived.
7. This Tolling Agreement shall be construed and interpreted in accordance with the
laws of the State of California.
8. This Tolling Agreement shall become effective upon execution by all parties. This
agreement may be executed in counterparts, each of which shall be deemed to be an original
and all of which shall be deemed to constitute one and the same document.
9. Either party may terminate this Agreement by providing written notice to the other
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TOLLING AGREEMENT
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party at least ninety (90) days before the date of termination. The amount of time tolled prior
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to the date of termination pursuant to this Agreement shall not be affected by suc
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termination. Any applicable statute of limitations shall continue to toll during the 90 days.
The date of expiration of the tolling period shall be the date upon which the time for filing
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claim or commencing an action by the City shall commence to run.
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IN WITNESS THEREOF, the parties hereto have executed this Tolling Agreement on
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the day and date set forth below.
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Date: October
COUNTY OF SAN BERNARDINO
,2008
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By:
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,2008
CITY OF SAN BERNARDINO
Date: October
15
By:
Lori Sassoon, Acting City Manager
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Approved as to Form
JAMES F. PENMAN,
City Attorney
Approved as to Form
County Council
By:
James F. Penman,
City Attorney
By:
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TOLLING AGREEMENT
This Tolling Agreement is entered into this
day of
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, 2008 by and between the County of San Bernardino ("COUNTY") and the
3 City of San Bernardino ("CITY" or "San Bernardino").
4 WITNESSETH:
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WHEREAS, a dispute has arisen between the City and the County regarding the
amount of property tax administration fees charged by the County and its County
Assessor/Tax Collector to cities, beginning in fiscal year 2006/2007 and continuing through
fiscal year 2007/2008, pursuant to Revenue and Taxation Code sections 95.3 and 97, in light
of the provisions of Revenue and Taxation Code sections 97.68 and 97.70. The City
contends that the County has charged more for property tax administration fees than its
statutory mandate allows, whereas the County contends that it has charged property tax
administration fees within the statutory authority (the "Administrative Fees Dispute").
WHEREAS, that same Administrative Fees Dispute has arisen between the
County and many other cities located within the County, and has also arisen between other
California counties and many cities within those counties' territory.
WHEREAS, conflicting legal opinions as to the Administrative Fees Dispute
have been rendered by various state and local agencies and their counsel.
WHEREAS, many California cities have filed claims against counties seeking
reimbursement for alleged overcharges of property tax administration fees, and litigation
between cities and counties over the Administrative Fees Dispute has been threatened and has
been filed or is imminent in the County of Los Angeles and possibly other jurisdictions.
WHEREAS, the City and the County wish to preserve their respective rights
concerning the Administrative Fees Dispute but want to avoid duplicative and potentially
wasteful litigation of an issue that will likely be resolved in other litigation.
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TOLLING AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
1. All general and specific statute of limitations on the time within which the City ma
file a claim under the Tort Claims Act or any applicable claims statute or County ordinance,
challenging the County pursuant to the Administrative Fees Dispute, and lor claiming
damages therefore, shall be, and hereby is, tolled and extended until the earlier of (a) three
years from the date of this Tolling Agreement or (b) date of a final judgment or opinion by a
California court of competent jurisdiction adjudicating the Administrative Fees dispute
between the County of Los Angeles and any city therein, or between any other California
county and cities or (c) termination of this Agreement as hereinafter set forth. The County
does hereby waive any defense of statute of limitations, laches, or other time related defense,
to the filing of a claim by the City arising from the Administrative Fees Dispute when such
claim is filed consistent with the tolling period described herein.
2. All general and specific statute of limitations on the time within which the City may
commence an action under the Tort Claims Act, any mandate proceeding, or any applicable
statute or County ordinance, to challenge the County pursuant to the Administrative Fees
Dispute, and/or claiming damages therefore, shall be, and hereby is, tolled and extended for a
period equal to the time for commencement of claims described immediately above plus the
time for processing of any claim which is a requisite precursor to the commencement of an
action. The County does hereby waive any defense of statute of limitations, laches, or other
time related defense, to the commencement of an action by the City arising from the
Administrative Fees Dispute when such action is commenced consistent with the tolling
period described herein.
3. Upon the expiration of the tolling period described hereinabove, the City shall be
entitled to file such claim or commence such action as it may deem appropriate. The date of
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TOLLING AGREEMENT
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expiration of the tolling period shall be the date upon which the time for filing a claim or
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commencing an action by the City shall commence to run.
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4. Each party represents and warrants that the individuals executing this Tolling
Agreement on each party's behalf possess full authority to execute this agreement and to
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settle and compromise all claims settled and compromised by this agreement.
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5. This Tolling Agreement contains the entire agreement of the parties and supersedes
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any and all prior or contemporaneous understandings, negotiations, representations, promises
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and agreements, oral or written, by or between the parties with respect to the matters set forth
in this Tolling Agreement. This Tolling Agreement shall not be amended, modified, or
otherwise changed except by a writing duly signed by authorized representatives of each
party.
6. In entering into this Tolling Agreement, each party has had the opportunity to
consult with and rely upon the advice of the attorneys of its own choice. Each party
represents and warrants that the terms of this Tolling Agreement have been completely read
by and explained to it by its attorneys, and that those terms are fully understood and
voluntarily accepted by it. Accordingly, any rule of law, including but not limited to Section
1654 of the California Civil Code, or any other statutes, legal decisions, or common law
principles of similar effect, which would require interpretation of ambiguities in this Tolling
Agreement against the party that has drafted it are of no application and are expressly waived.
7. This Tolling Agreement shall be construed and interpreted in accordance with the
laws of the State of California.
8. This Tolling Agreement shall become effective upon execution by all parties. This
agreement may be executed in counterparts, each of which shall be deemed to be an original
and all of which shall be deemed to constitute one and the same document.
9. Either party may terminate this Agreement by providing written notice to the other
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TOLLING AGREEMENT
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party at least ninety (90) days before the date of termination. Tbe amount of time tolled prior
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to the date of termination pursuant to this Agreement shall not be affected by suc
termination. Any applicable statute of limitations shall continue to toll during the 90 days.
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Tbe date of expiration of the tolling period shall be the date upon which the time for filing
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claim or commencing an action by the City shall commence to run.
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IN WITNESS THEREOF, the parties hereto have executed this Tolling Agreement on
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the day and date set forth below.
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Date: October
,2008
COUNTY OF SAN BERNARDINO
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By:
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CITY OF SAN BERNARDINO
Date: October
,2008
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By:
Lori Sassoon, Acting City Manager
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Approved as to Form
JAMES F. PENMAN,
City Attorney
Approved as to Form
County Council
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By:
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