Report Prepared by: Brad Grant - Finance Officer
Title
SUBJECT: Revenue Sharing
REPORT IN BRIEF
The report describes the history of Revenue Sharing and latest proposals between the City and County.
RECOMMENDATION
City Council - Provide direction to City Manager on next steps to be taken.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Approve, subject to modifications as conditioned by City Council; or,
3. Refer to staff for reconsideration of specific items; or,
4. Deny.
AUTHORITY
Charter of the City of Merced, Section 200. State of California Revenue and Taxation Code.
CITY COUNCIL PRIORITIES
Economic Development.
DISCUSSION
History of Revenue Sharing
The State of California Revenue and Taxation Code requires an agreement for the sharing of property taxes between cities and counties prior to the Local Agency Formation Commission (LAFCO) reviewing an application for annexation.
Prior to the passage of Proposition 13 such an agreement was not required because city tax rates were added to the existing county tax rate as part of an approved annexation.
Prior to Proposition 13, the property tax rate throughout California averaged
less than 3% of market value. Additionally, there were no limits on increases for
the tax rate or on assessed value changes. Some properties were reassessed 50%
to 100% in just one year and their owners' property tax bills increased accordingly.
On June 6, 1978, nearly two-thirds of California's voters passed Proposition 13,
reducing property tax rates on homes, businesses and farms by about 57%.
Under Proposition 13 property tax values were rolled back and frozen at the
1976 assessed value level. Increases on assessed values on any given property were limited to no more than 2% per year, as long as the property was not sold and the tax was limited to 1% of assessed value. Once sold, the property was taxed at 1% of the sale price, and the 2% yearly cap became appl...
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