County of Orange to State of California: You Owe Us $23 Million, Pay Up!

The County of Orange has filed a $23 million claim against the State of California, which is accused of shortchanging the county that much in property tax revenues since 2005.

But the dispute was actually set in motion by a complicated funding mechanism and the county's infamous bankruptcy in the mid-1990s.

Ironically, the predictor of financial doom back then, John Moorlach, is now the Orange County Board of Supervisors chairman calling out the state.

"Going back to 2005, the State of California has received the benefit of millions of dollars in property taxes that should have been available to provide services to the people of Orange County," Moorlach says in a county-issued statement. "This claim seeks to restore some of the property tax funding that Orange County should have received."

Local and county governments in California receive funds through the state's Vehicle License Fee (VLF). As the smoke was clearing from Orange County's bankruptcy, the Board of Supervisors in the mid-'90s diverted a portion of its VLF to creditors.

In 2003, the State Controller decided the .65 percent VLF rate was insufficient to meet state needs, so it was raised to 2 percent, a move that led to the recall of then-Gov. Gray Davis. After the recall, the VLF was reduced back to .65 percent, and the state at first dipped into its General Fund to backfill the amounts lost by local governments

But in 2004, the state Legislature voted to keep all VLF revenues, having cities and counties instead draw additional property tax revenue from the Educational Revenue Augmentation Fund that would have otherwise gone to California schools. This caused some scrambling because under Prop. 98, public schools are guaranteed set minimum amounts of funding. Take away ERAF, and the state had to find the difference and give it back to schools.

Another complication was Orange County's set-in-stone payments to creditors, which were tied to the VLF. Special legislation was enacted to preserve the amount of OC's VLF that serviced the bankruptcy agreement.

Through all this, the county now believes proper adjustments were not made to rates to give the county all it was owed from the state for fiscal year 2010-11, $23,075,736 to be exact. The claim follows on the next page . . .

County of Orange to State of California: You Owe Us $23 Million, Pay Up!
County of Orange to State of California: You Owe Us $23 Million, Pay Up!

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