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City & County Encourage Good Land Use Through Tax Sharing

By agreeing to share a percentage of local sales taxes, the City of Modesto and Stanislaus County are working together to encourage good land use decisions and reduce fiscal disparities.

Organization

City of Modesto/Stanislaus County, CA Jurisdiction: Regional

  Setting: Urban/Suburban/Rural

  Population: 180,000

Year Initiated

1998

   

Description

A state constitutional amendment, Proposition 11, allows cities and counties in California to enter into sales tax sharing agreements with a super-majority vote of the city council and board of supervisors. When Proposition 11 was enacted, the Stanislaus County Board of Supervisors and Modesto City Council members had already been discussing the possibility of local sales tax sharing; the new legislation facilitated this process. In December of 1998, the city and county entered into an agreement that enabled them to share 1% of local sales taxes. The result, after several months of negotiations between the two parties, was a sales tax sharing revenue plan whereby the county would collect and distribute sales tax revenues to the city. The city and county have identified a specific area where sales tax revenues will be shared, based on the estimated sales tax that existing and future developments in this area are expected to generate. The sales tax sharing plan is intended to reduce the problem of “fiscalization of land use,” such as competition between city and county for big box retail development and the high tax revenues it can bring. Elimination of this competition will allow land use decisions to be based on larger public interest and community planning concerns.

Results:

  • A recent land use decision favored a business park development over a big box retail project, reflecting the new planning philosophy that such decisions should be based on what is best for both city and county, rather than on the sales tax value of the proposed project.
  • A long-lasting partnership between the city and county has been formed, resulting in a new adminis- tration building that will serve administrative functions of both jurisdictions.
  • The sales tax sharing plan has received widespread support from city and county residents.

Vital Statistics:

  • Early in the process, the city and county chose a test area to determine the feasibility of the tax sharing plan, with positive results.
  • An annual audit will assist in the management of sales tax revenues and documentation to ensure that accuracy and equality is maintained.
  • While tax sharing was allowed before passage of Proposition 11, a majority vote of citizens in the affected jurisdictions was required. Proposition 11 reduced the requirement to a super-majority of a city council and board of supervisors.

Key Player(s)

Charles Long, Interim Finance Director, City of Modesto

Contact Info

  • Phil Testa, City of Modesto Community Development Director, (209) 577-5218, FAX: (209) 491-5798
  • Charles Long, (775) 849-9095

References

http://www.the-signal.com/main/0299/021399c.html