California Seizes $10.8 Million In Sales Tax Revenue From Cerritos

California Board of Equalization seizes $10.8 in sales tax funds from City of Cerritos.

Wednesday December 3, 2013, 12:58 p.m.

By Brian Hews and Brian Hews

Other local Municipalities slapped with payment demands include Lakewood, Montebello, Santa Fe Springs, Compton and Lynwood.

SACRAMENTO – The California Department of Finance has sent a final letter authorizing the Board of Equalization to seize more than $10.8 million in sales and use tax revenue from the City of Cerritos and five other local cities within the next two weeks, Hews Media Group-Community News can confirm.

Cerritos City Manager Art Gallucci told HMG-CN today that the state will seize $2 million each month for six months.

In a letter to the state BOE, Finance Director Ana Matosantos stated, “pursuant to the authority provided, the Department of Finance hereby orders the California State Board of Equalization to withhold $10,843,380 in sales and use tax revenues from the city of Cerritos. Despite numerous orders by finance, the city has refused to remit to the Los Angeles County Auditor-Controller the $10.8 million in unencumbered other funds and assets of its former redevelopment agency that are in the city’s possession.

Other local cities that received similar letters from state officials include Lakewood, Santa Fe Springs, Lynwood, Montebello, and Compton.

The demand withholding amounts are $9.332 million for Lakewood, $9.8 million for Santa Fe Springs, $2.08 million for Lynwood,  $4.298 million for Montebello, and $5.516 million for Compton.

HD Palmer, a spokesperson with the DOF with the State of California told HMG-CN in a phone interview late Tuesday afternoon that state officials were “forced to take this action against the City of Cerritos as a last resort.” Palmer said that Cerritos city officials have not followed through on “numerous state orders.”

“This was absolutely a letter of last resort. We tried many things such as the meet and confer process, we always try to strive to resolve any differences in a cooperative manner,” he said.

Palmer went over the timeline that got them to this point.

The DOF sent a letter October 9 to Cerritos City Manager Art Gallucci and the Successor Agency asking that they transfer the money, or the DOF “will take further steps.”

Official seal of City of Cerritos (Photo credit: Wikipedia)

A second demand letter was sent out November 8, giving the city two days to transfer the funds.

The final letter went out November 15 ordering the BOE to withhold the funds.

“We did not take the step lightly. It was not a first resort it was a last resort to order a withholding of the funds,” he said.

Asked if city lawyers could file an injunction, Palmer said the authorization to withhold was written into the dissolution law for a purpose.  The dissolution of redevelopment was designed to take these property taxes to assist in financing local school services and city core services.

Palmer said they would work with cities and set up installment plans if necessary.

But it does not look good for the cities.

In Santa Ana, more than $33 million in former redevelopment money is in dispute, but the state’s letter to the BOE ordered it to transfer only $2.6 million in sales-tax money.

A Sacramento County judge rejected Santa Ana’s attempt to get an injunction blocking the garnishment in August saying, “Santa Ana has adequate budget reserves to absorb the hit while it continues its lawsuit against the state over the larger amount.”

Cerritos City Manager Art Gallucci was indignant about the entire process. In an interview with HMG-CN, Gallucci said, “the City Council had directed me not to pay, and to continue litigation.”

“The city is saying it is unconstitutional. Proposition 22 was passed two years ago by the voters and it prohibits the state from taking money from the city,” Gallucci claimed

Gallucci indicated he received another letter today from the BOE and he confirmed that the state has taken the $10.8 million.

Gallucci told HMG-CN that sales tax in Cerritos is 8.35% and that one-penny goes to the city of Cerritos.  “What is disturbing to me is that 5% (5 cents) of that 8.35% goes to the state already. Every time Cerritos is successful, the state profits,” he said.

Gallucci also said that currently there are over 150 lawsuits in the state challenging this process.
“Cerritos is not the only one fighting this,” he said.

“It’s really not fair they make the money off the sales tax and now they want the property. Where does it end,” he concluded.