City of Merced, county agree on tax-sharing approach

The city of Merced and Merced County have reached a tentative agreement on a potentially historic deal that would pave the way for $420 million in future construction projects near UC Merced, the Merced city manager confirmed Thursday.

The revenue-sharing deal, more than a decade in the making, was described by City Manager Steve Carrigan as “win-win” for the city and the county.

Reaching agreement on how the two bodies will divvy up tax revenue is crucial for the city of Merced to jump-start development in the Bellevue corridor near UC Merced. Much of the land around the campus is outside of city boundaries and the city cannot provide services such as police, fire and recreation until it annexes the area, a step that cannot win state approval without the revenue-sharing agreement in place.

The city has a developer waiting to build about 1,000 apartment units in the area and now is ready to greenlight the development as soon as the revenue-sharing agreement is approved, Carrigan said.

“The agreement will allow the city and county to bring jobs to the area,” Carrigan said. “It will allow the opportunity to lower the poverty rate and unemployment rate, which are things we all want. It will help make Merced County a better place to live, work and play.”

Under the tentative agreement, funding to support firefighting would be shifted to the city. All general fund taxes would go to the city, but after a required allotment of money is directed to a state education fund, the city would keep 37 percent of leftover tax revenue while sending 63 percent to the county.

Overall, the city stands to collect about 53 percent of taxes and the county will collect 47 percent, said Mike Conway, a spokesman for the city.

County CEO Jim Brown cautioned that elected officials for the city and county have the final say on whether to pursue the new approach to a deal.

The Merced County Board of Supervisors and Merced City Council will discuss the tentative deal at their respective meetings next week. Both sides still must vote to formally approve the agreement.

“At this point, it’s a good direction and we need to bring the concept to the board to see if it’s something they are interested in moving forward with,” Brown said.

Brown said the approach is new and will need to be approached cautiously. “There are some risks to the county,” he said, “We do need to make sure we minimize those risks through discussions on how to implement it and the language that is put together.”

The deal is the first new revenue-sharing agreement between the city and county in 10 years. In the middle of 2015, the two sides began more consistent, but frequently contentious, negotiations. Bargaining appeared to break down many times during the decade-long process. The Merced City Council in May sought a third-party mediator to break the gridlock, saying the critical deal had been stalled too long.

Two meetings this week and many conversations between Carrigan and Brown finally produced the tentative agreement, the city manager said.

“We have made significant progress the last couple days,” Brown said. “We have both compromised in trying to put something together that we think works overall for both the city and county.”

Carrigan said the city and county still are massaging language details.

“In most negotiations, when you get to the finish line and have a good deal, both parties compromised and walk away angry,” Carrigan said. “In this case, I think the county got what they wanted and the city got what we needed.”

This story was originally published June 2, 2016 at 10:53 AM with the headline "City of Merced, county agree on tax-sharing approach."