Proposed Tax Sharing Agreement with Merced County Workshop – Understanding Revenue Sharing in Livingston, California

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Introduction

Welcome to The GardeningSnail channel, where you can stay up to date with the local politics and activities happening at City Hall in Livingston, California. In this video, we will be discussing the tax sharing agreement workshop held on October 1st, 2019. The focus of this workshop was to understand the concept of revenue sharing and why it is necessary. This article will provide a detailed overview of the workshop, including key points and explanations of terms used. So, let’s dive in and explore the world of tax sharing in Livingston!

Why is Revenue Sharing Important?

To understand the need for revenue sharing, we have to go back to Proposition 13, which was approved by the voters in 1978. This proposition limited property taxes to 1% of assessed value and imposed a limit of 2% on assessment increases unless there was a change in ownership or a temporary reduction in value. These limitations resulted in a significant drop in property tax revenue for local governments across the state. Prior to Proposition 13, each local government had the authority to set its own property tax rates, which often exceeded 2.67%. The voters demanded a change, as they were struggling to keep up with high property tax rates and were at risk of losing their homes. As a result, Proposition 13 was implemented to ensure a cap of 1% on property tax rates, and the revenue from property taxes had to be shared among all local governments.

Historical Context of Revenue Sharing in Livingston

In the city of Livingston, revenue sharing agreements have been in place since September 2004. However, in July 2009, the agreement between the city and Merced County was canceled due to a conflict between the city’s general plan and the county’s general plan. Negotiations have been ongoing since then to establish a new agreement that addresses this conflict. The focus of these negotiations has mainly been on property taxes, as the previous agreement only included property taxes and not sales taxes. It is important to note that revenue sharing specifically pertains to property tax sharing under Section 99 of the California Revenue Taxation Code.

Understanding Revenue Sharing Terms

Before we delve further into the workshop, let’s familiarize ourselves with some key terms related to revenue sharing:

  1. Annexation: Annexation refers to the attachment or addition of property to a city. In the context of revenue sharing, it typically involves moving property from the unincorporated area to the city.

  2. Ad Valorem Property Tax: This term refers to the tax imposed on real and tangible personal property based on its assessed value. Property owners receive an annual tax bill, and the amount they pay is the ad valorem property tax.

  3. Base Property Tax: The base property tax is the tax assessed on a property when it is annexed or brought into the city. It is the starting point for calculating property tax.

  4. Incremental Property Tax: The incremental property tax is the increase or decrease in the assessed value of a property over its base property value. This tax is applicable when there is a change or development on the property.

  5. ERF (Education Revenue Augmentation Fund): ERF is a percentage of property tax revenue required by the California Revenue Taxation Code to be transferred to the state. This fund is intended to support education in the state.

Breakdown of Property Tax Distribution

To visualize how property tax dollars are distributed, let’s take a look at the breakdown of property tax distribution for unincorporated properties in Merced County. Various entities, including mosquito abatement, Winton Cemetery, schools, community colleges, and fire departments, receive a portion of the property tax revenue. The breakdown shows that property tax revenue is distributed among several entities, and only a fraction of it directly benefits the city of Livingston. However, for properties within the city limits, more of the property tax revenue is allocated to the city, along with the ERF fund and the general fund.

Previous Revenue Sharing Negotiations

In previous negotiations regarding revenue sharing, the county proposed retaining 100% of the base property tax and splitting the increment 75% to the county and 25% to the city. This proposal was acceptable to the city at that time because they had a contract with the county for fire services. The city proposed a fairer distribution, taking into account the costs of services, suggesting a split of less than 75% to the county and more to the city. Another point of contention was the sharing of sales tax revenue. The county proposed that the city share 2.5% of its sales tax revenue, but the city argued that the sharing of sales tax revenue was not addressed in the previous agreement and should not be part of the new agreement. The negotiations also included the duration of the agreement and the conditions for termination.

Conclusion

In conclusion, the tax sharing agreement workshop provided valuable insights into the concept of revenue sharing and its importance in the context of Livingston, California. The workshop highlighted the impact of Proposition 13 on property tax revenue and explained the need for revenue sharing among local governments. The breakdown of property tax distribution shed light on how various entities benefit from property tax revenue, with a portion allocated to the city of Livingston. Previous negotiations between the city and county were discussed, highlighting the differences in proposals regarding the sharing of base property tax, incremental property tax, and sales tax revenue. These negotiations aimed to establish a fair and mutually beneficial agreement for revenue sharing. Overall, the workshop served as a platform for discussion and understanding, ensuring that local politicians and residents are aware of and engaged in the process of revenue sharing in their community.

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