09-022 Waiver & Tolling Agreementcopy
ATKINSON . FI'ARASYN, LLP
ATTORNEYS AT LAW
660 WEST DF~NA STREET
REPLY TO: P.O. BC>X 279 J.M. ATKINSON (1892-1982
MARL G. HYNES MOUNTAIN VIEW, CALIFORNIA 94042
L.M. FARASYN (1915-1979)
TELEPHONE (650) 967-6941
FACSIMILE (650) 967-1395
MEMORI~NDUM
TO: DAVID KNAPP, CITY MANAGI~.R
CITY OF CUPERTINO
FROM: MARL G. HYNES, Interim City Attorney
RE: WAIVER AND TOLLING AGREEMENT
DATE: February 27, 2009
I am attaching a Waiver and Tolling Agreement which Santa Clara County has
requested every city in the county to sign relative to a potential dispute on property tax
administration fees (PTAF).
As you know the dispute is related to county administrative costs charged to cities
for assessing, equalizing, collecting and alloc~>,ting property taxes. In the 2004-2005 fiscal
year, the state legislature implemented what is known as the "triple flip" and the "VLF
swap" (Revenue 8z Taxation Code §§97.68 and 97.70). Under the triple flip, 0.25% of the
sales tax that had been received by cities went to the state. The state made the cities whole
by repaying the shifted sales tax from propert}- taxes received by the California Educational
Revenue Augmentation Fund (ERAF).
The VLF swap arose out of the reduction in the vehicle license fee in the VLF. When
the state reduced the fee, it first made up the lost revenues to cities with what was known
as the VLF backfill, a direct payment from the state's general fund to cover the lost
revenues- The VLF swap then replaced the backfill by transferring property taxes received
by ERAF to the cities-
In the 2006-2007 fiscal years, countiee began including revenues received by cities
from ERAF in the triple flip and VLF swap calculation of the cities' proportionate share of
the costs of property tax administration. T7zis increased the cities' fees- In effect, the
counties shifted to the cities the cost of collecting the taxes for ERAF. Previously the cost of
collecting the property taxes for ERAF and for school districts was borne by the county, not
the cities.
The League of California Cities has taken the position that as property taxes are
first allocated to ERAF, the county should absorb the cost of collecting those taxes. State
law, which authorized administrative costs to be charged to cities never included collections
related to ERAF. The counties always bore those charges. The legislature specifically
authorized counties to charge cities for the incremental costs of shifting funds with the
triple flip and VLF swap techniques_ So the argument proceeds that as the legislature
specifically considered costs imposed related to the triple flip and VLF swap on the
counties, it did not authorize the counties to shift to the cities administrative costs
associated with collecting property taxes that go to ERAI+'_ Even if those taxes are later
transferred to cities under the triple flip and ~'LF swap, the county should absorb the costs
of collecting the property tax for ERAF as it has always done.
The purpose of the tolling agreement is simply to hold open the ability of any
signatory to make a claim beginning fiscal gear 2004-2005 and subsequent years while
negotiations between the cities which have already filed claims and the county proceed.
The county wants to make sure that whatever deal it eventually reaches will protect it from
any city and, accordingly, is requesting that al]_ cities enter into the tolling agreement.
Entering into the tolling agreement costs the city nothing and preserves our right i_f
we ever wish to pursue it, to make a claim against the county relative to administrative fee
overcharges. I believe Cupertino will be well served by keeping its options open. This will
not sour our relations with the county as the county is requesting that the agreement be
signed by every city in Santa Clara County in the first instance.
I believe you have the authority to sign the agreement as it does not impose any
costs upon the city. However, should you wi;~h to have the council approve this matter,
please let me know and I will be happy to prepare a staff report for city council action.
Very~triiPy yours,
HYNES
2
10300 Torre Avenue
Cupertino, CA 95 0 1 4-3202
Telephone: (408) 777-3189
Fax: (408) 777-3109
DEPARTMENT OF ADMINISTRATIVE SERVICES
MEMORANDUM
To: David Knapp
Cc: Carol Atwood
From: David Woo ~v ~
Subject: Waiver and Tolling Agreement -Property Tax Administration Fees
Date: March 6, 2009
I do advise signing off on the agreement.
• It renews and extends our ability to file a court action on the admin fee refund claim that I
filed with the County last April 2008, along with some of the other cities. Currently the
window to file such an action has expired.
• This ability will continue for either 3 years or until the current suit in Los Angeles County
is decided upon whichever happens first.
• I along with the fiscal officers group in Santa Clara County had decided, after filing the
claims and talking with the County, to hold off on further action because the possible
negative impact on supplemental property taxes would exceed any gain from a fee
reduction. However according to Marc's letter, it appears that the current argumentative
position would remove or minimize the threat.
• The County is trying to prevent subsequent city suits after a L.A. decision.
• Taking the position of signing this waiver and going with the L.A. decision would seem
to be the best bet for now.
1
WAIVER AND TOILING AGREEMENT
THIS WAIVER AND TOLLING AGF:EEMENT ("Agreement") is entered into by and
between the County of Santa Clara (the "County") and the Cities of Campbell, Cupertino,
Gilroy,. Los Altos, Milpitas, Monte Sereno, Morgan Hill, Moutain View, Palo Alto, Santa Clara,
Saratoga and Sunnyvale and the Towns of Los Altos Hills and Los Gatos (the "Cities"), with
respect to the following facts:
A. A dispute has arisen between the Cities and the County regarding the amount of
property tax administration fees ("PTAF") charged by the County to Cities beginning in fiscal
year 2004/2005 and subsequent fiscal years, pursuant to Revenue and Taxation Code sections
95.3 and 97.75, in light of the provisions of Revenue and Taxation Code sections 97.68 and
97.70 (the "PTAF Dispute")_
B. Conflicting legal opinions as to the PTAF Dispute have been rendered by various
state and local agencies and their counsel.
D. Some of the Cities have filed claims against the County seeking reimbursement
for alleged overcharges of property tax administration fees, and litigation between cities and
counties over the PTAF Fees Dispute has been threatened.
E. The Cities and the County wish to preserve all of their respective rights and
remedies concerning the PTAF Dispute, but want to avoid duplicative and potentially wasteful
litigation of issues that may be resolved through other means.
THEF:EFOF:E, the Cities and the County hereby agree as follows:
1. All statutes of limitations applicable to the PTAF Dispute, or any other time limit
within which a party may file an action against another party related to the PTAF Dispute, for
fiscal years 2004/2005 and beyond or within which a party must take any action that is a
condition precedent to the filing of any such action, shall be and hereby are waived, tolled and
extended until the earlier of (a) three years from the date the last party executes this Agreement
("the Effective Date"); or (b) a final judgment is rendered by a California court of competent
jurisdiction adjudicating a PTAF dispute. between any other California county and city. Upon
termination of the Agreement, all applicable s~.atutory time periods and deadlines shall apply
once again as though no time has passed since: the Effective Date; provided, however, that a
party shall have at least 180 days following the termination of this Agreement to file an action
against any other party related to the PTAF Dispute for fiscal years 2004/2005 and beyond.
2. The term of this Agreement may be extended by the mutual written consent of all
parties.
3. Each party represents and warrants that the individuals executing this Agreement
on each party's behalf possess full authority to execute this Agreement.
4. This Agreement contains the entire agreement of the parties and supersedes any
and all prior or contemporaneous understandinl~s, negotiations, representations, promises, and
agreements, oral or written, by or between the p~irties with respect to the matters set forth in this
Agreement. This Agreement shall not be amended, modified, or otherwise changed, except by a
writing duly signed by authorized representatives of all parties.
OCA/StafP/David/Agreements/PTAF Tolling Agreement-FINAL 1
5. In entering into this Agreement, each party has had the opportunity to consult
with and rely upon the advice of the attorney(s) of its own choice. Each party represents and
warrants that the terms of this Agreement have been completely read by it and explained to it by
its attorney(s), and that those terms are fu ly 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 Agreement against the party that has drafted it,
are of no application and are expressly waived.
6. This Agreement shall be construed and interpreted in accordance with the laws of
the State of California.
7. This 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 a~Zd the same document-
8. In addition to the termination mechanisms in paragraph 1 of this Agreement,
beginning one year after the Effective Date of this Agreement, any party may terminate this
Agreement by providing written notice to all other parties at least ninety (90) days before the
date of termination. Upon termination of the .Agreement, all applicable statutory time periods
and deadlines shall apply once again as though no time has passed since the Effective Date;
provided, however, that any party shall have at least 180 days following the termination of this
Agreement to file an action against any other party related to the PTAF Dispute for fiscal years
2004/2005 and beyond.
9. The parties to this Agreement recognize that under limited circumstances, certain
statutes of limitations enacted for the benefit of the public cannot be waived by agreement. The
parties to this Agreement agree that no such statute of limitations is involved in or implicated by
this Agreement and that they will not raise any defense based upon such ground.
10. This Agreement may not be modified, amended, altered or supplemented except
by a writing executed by all of the parties to the .Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
2009.
"COUNTY"
COUNTY OF SANTA CLAItA Attest:
By
Gary Graves, Acting County Executive
Maria Marinos
Clerk of the Board of Supervisors
Approved as to form:
By
Ann Miller Ravel, County Cowisel
OCA/S[afF/t)avid/Agreemenis/PTAF Tolling Agreement-FINAL 2
"CITIES"
CITY OF CAMPBELL
sy
Daniel Rich, City Manager
Attest:
Anne Bybee, City Clerk
Approved as to form:
By
William R_ Seligmann, City Attorney
CITY OF CUPERTINO Attest:
By (~ 3. fo, o
avid Knapp, City ager Kim Smith, City C
CITY OF GILROY
By
Tom Haglund, City Administrator
Linda A. Callon, City Attorney
CITY OF LOS ALTOS
By
Approvend arse to(~fo~rm~:
By_ \ Vu Ix~dJ__~`-~~~
Carol A_ ~orade City Attorney
Attest:
Shawna Freels, City Clerk
Approved as to form:
Doug Schmitz, City Manager
BY.
Attest:
Susan Kitchens, City Clerk
Approved as to form:
By.
Jolie Houston, City Attorney
OCA/Staft%Oavid/Agreemcnts/PTAF Tolling Agreement-FINAL 3
TOWN OF LOS ALTOS HILLS
By
Carl Cahill, Town Manager
TOWN OF LOS GATOS
By
Greg Larson, Town Manager
CITY OF MILPITAS
By
Thomas C. Williams, City Manager
CITY OF MONTE SERENO
By
Brian Lowenthal, City Manager
Attest:
Kazen Jost, City Clerk
Approved as to form:
By
Steven Mattas, City Attorney
Attest:
Jackie Rose, Clerk Administrator
Approved as to form:
By
Orry P. Korb, Town Attorney
Attest:
Mary Lavelle, City Clerk
Approved as to form:
By
Michael J_ Ogaz, City Attorney
Attest:
Andrea M. Chelemengos, City Clerk
Approved as to form:
By
Kirsten Powell, City Attorney
OCA/StafF/David/Agreements/PTAF Tolling Agreement-FINAL ~ ~}
CITY OF MORGAN HILL
By
J. Edward Tewes, City Manager
CITY OF MOUNTAIN VIEW
By
Kevin Duggan, City Manager
CITY OF PALO ALTO
By
Jim Keene, City Manager
CITY OF SANTA CLARA
By
Jennifer Sparacino, City Manager
Attest:
Irma Torrez, City Clerk
Approved as to form:
By
Danny Wan, City Attorney
Attest:
Angelita M. Salvador, City Clerk
Approved as to form:
By
Michael D. Martello, City Attorney
Attest:
Donna Grier, City Clerk
Approved as to form:
By
Gary Baum, City Attorney
Attest:
Rod Diridon, Jr., City Clerk
Approved as to form:
I3y
Helene Leichter, City Attorney
OCA/StafF/David/Agrcements/PTAF To11inS Agreement-FINAL 5