Legislation swapping a portion of Orange County’s share of vehicle license fees for property taxes was approved unanimously Thursday by the Assembly.
Assembly Bill 701 as amended by Assemblywoman Sharon Quirk-Silva remedies the situation created when county supervisors inadvertently terminated a key legislative authorization stemming from the 1994 bankruptcy. The county was refinancing the $1-billion debt early in 2005 in order to pay it off early.
Termed “bankruptcy light” because the refinancing left a large portion of vehicle license fees permanently unprotected, the situation could have cost Orange County up to $73 million each year indefinitely. In comparison, payments on the 1994 bankruptcy totaled about $90 million a year but would have ended in the next decade.
Quirk-Silva’s amended bill allows the county to pay back the revenue by 2019, thereby avoiding severe budget cuts that could have included layoffs. The county has been holding back the revenue during the past two years in response to a tax grab by Gov. Jerry Brown.
The origin of the dispute dates from last decade when county officials left unprotected a stream of vehicle license fee revenue that flowed from the state to the county. County officials failed to deal with the problem for five years.
In 2004, the state stopped giving counties a share of the state’s vehicle license fees. Instead, it increased each county’s share of property tax funds, saying that was a more equitable and less volatile source of revenue.
Orange County, however, continued to receive its vehicle fees under special state legislation passed to cope with the county's 1994 bankruptcy. When Orange County supervisors refinanced the bankruptcy debt package in 2005, they terminated their special access to vehicle license fees. They and their lobbyists never attempted to fix the problem despite news reports on the issue.
During the state budget crisis of 2011, Brown's staff discovered the glitch and took $48 million of this money to help balance the state budget. The county responded by redirecting $73 million in property taxes from local schools and community colleges to the county government.
For the better part of two years, county officials unsuccessfully tried to resolve the dispute, which resulted a lawsuit.
General terms of the agreement on resolving the issue were reported Aug. 30 by Voice of OC.
According to a copy of the amended bill posted by the Legislature online, besides restoring money to Orange County government, the bill would require that the state Finance Department and community college executives confer with the county to reach a “complete resolution” of legal issues and that “all parties agree not to seek appellate review.”
Under the bill, “an appropriate resolution would be for the County of Orange to repay specified amounts over a specified period.” The amount listed in the bill is $150 million spread over six years.