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November 30, 2005

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Publication Date: Wednesday, November 30, 2005

Christmas comes early for Portola Valley, Woodside Christmas comes early for Portola Valley, Woodside (November 30, 2005)

** County abides by 17-year-old law and boosts tax revenues to the two towns.

By David Boyce

Almanac Staff Writer

Officials from the towns of Portola Valley and Woodside may be forgiven if they're tempted to look a gift horse in the mouth.

The two towns last week received large, unexpected checks from the San Mateo County Controller's Office -- $915,000 for Portola Valley and $1.1 million for Woodside.

The money is payment, with interest, of supplemental property tax revenue the towns were entitled to for fiscal years 2003-04 and 2004-05. The money was owed because Portola Valley and Woodside are two of only four towns in the county that receive a lower share of property tax revenue than is required by state law.

Based on a complicated formula put in place after the 1978 passage of Proposition 13, Portola Valley's share of its local property tax revenues has been 4 percent; Woodside's has been 5.7 percent.

Proposition 13 shrank the size of the state's property tax revenue pie, which gets divided among agencies that levy taxes. But because the formula for distribution is based on the average property taxes that the towns levied in the three fiscal years before Proposition 13 passed, it left the most frugal towns holding the short straws when it came to how to share that pie.

In response to the inequity, a law passed in 1988 requires counties to boost the revenues of small-share towns so that none would receive less than 7 percent of local property tax revenues.

But for reasons that remain unclear, San Mateo County didn't comply with that law.

Portola Valley Town Attorney Sandy Sloan said she spent the last several months pushing for action by the county counsel's office to make the county comply. "I'm very glad that San Mateo County has recognized that they have this obligation to the low-tax cities, and I'm very glad they sent us this check," she said last week.

Mayor Ed Davis said the Portola Valley Town Council, at its next meeting, will discuss the new revenue source and its immediate and long-term impacts, including a likely lowering of the 5.5 percent utility tax rate. The next scheduled council meeting is at 8 p.m. Wednesday, December 14, in the Historic Schoolhouse at 765 Portola Road.

"We clearly are going to be changing the utility tax (rate)," he said. "I just don't know how much."
Revisiting the issue

The effort to force the county to comply with the property tax-supplement law wasn't a new enterprise for Ms. Sloan. When she was the town attorney for another small-share town, Los Altos Hills, from 1990 to 2002, she joined a successful effort requiring Santa Clara County to make the supplemental payments, she said.

Ms. Sloan, Portola Valley's attorney since 1996, said she began pursuing the matter in Portola Valley this summer after Mayor Davis spoke publicly about the necessity for voters to renew the 5.5 percent utility tax in November. She learned that town staff was unaware of the 1988 law, as were the staffs of Woodside, Colma and Half Moon Bay, all towns with revenue shares of less than 7 percent of local property tax revenues.

Ms. Sloan said when she contacted county officials, she was told that San Mateo County may be exempt from the law, at which point she hired the attorney who had gotten Santa Clara County to make the payments.

The county reversed itself after being pressed for months. "They were diligently looking into it," Ms. Sloan said. "It just took a while."

Mayor Davis said he has been following her efforts and had weighed asking the council to support a lawsuit against the county. He was "flabbergasted" by the sudden appearance of the check, he said. "The county, prior to that, was saying 'No way, Jose,'" he said.
Just two years?

The checks received last week account for two of the 17 years that the law has been on the books. What about those other 15 years? That's another matter, said San Mateo County Deputy Controller Kanchan K. Charan.

The State Controller's Office audits the county's property tax allocations every four years, the last audit having been done in 2002-03. Once an audit affirms that revenues were properly allocated, the results cannot be challenged, said Mr. Charan.

Asked why the county did not start paying the towns in 1988, he replied: "Basically, at that time, it was not implemented. It was good that Portola Valley brought this up."

"If you owe a bill and you haven't paid it, I don't understand why an audit is the linchpin for the timing," said Mayor Davis. "I hope we can convince them that they might want to pay."

Ms. Sloan said she wants more information about the formula used to calculate revenues owed each year. She also plans to meet with attorneys from Woodside, Colma and Half Moon Bay to study the tax code and gauge the strength of the county's argument that its obligation goes no further back than 2003-04, she said.

Mayor Davis said he was "a little concerned" about where the cash-strapped county is getting the money for these rebates. "The county itself is pressed for funds," he said. "It's our county. It's my left hand going after my right hand."

The county budget of $1.41 billion dwarfs the payments, but the county "will definitely feel it," said Mr. Charan.

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