County supervisors want backup plan on tax sharing with city of Merced

The Merced County Board of Supervisors directed staff on Tuesday to move forward in drafting a revenue-sharing agreement with the city of Merced, as long as a back-up plan is included.

The board discussed a potential agreement with Merced that would be crafted differently than a traditional revenue-sharing deal.

A revenue-sharing agreement is necessary for the city to annex land for development in the Bellevue corridor near UC Merced.

Using the proposed method, the city would get all of the fire fund and general fund property taxes. Money required to go to the state for education then would be deducted before the city would reimburse the county for its services. The method would provide more property taxes to the city and county, said Jim Brown, the county’s CEO.

Overall, the agreement divvies up 53 percent of the revenue to the city and about 47 percent to the county.

Brown said the concept with Merced poses risks to the county. “There’s nothing in statute or regulations that we are aware of that would prevent this,” he said. “But, if the state didn’t like it, there could be potential risk for an audit or future county funding sources.”

The city has agreed to share a portion of any possible penalties should they arise, Brown said.

Because of the risks, supervisors asked staff to include a “backstop” in the agreement that would revert the deal to a traditional concept, which splits the revenue before the state education money is deducted.

Supervisors John Pedrozo and Daron McDaniel said the county and city of Merced are headed in the right direction on the deal.

Jerry O’Banion, however, said the agreement must include a back-up plan to earn his support.

“I’m leery of getting into an agreement like this,” he said. “I don’t think it’s worth the risk. ... Without the backstop, I’m not interested in the agreement.”

Brown said even if land near Bellevue is annexed within a year, he doesn’t believe development in the next three to five years would progress so quickly that it would greatly increase the risk factor.

Supervisors approved the Los Banos agreement 4-1 with District 4 Supervisor Deidre Kelsey voting against the agreement. Kelsey said she hoped for dates to be set in the agreement to discuss agriculture mitigation.

The Los Banos City Council on Monday approved the agreement, which splits revenue so that 53 percent would go to the city and about 46 percent goes to the county.

The Board of Supervisors on Tuesday also briefly discussed sales tax sharing with the cities of Livingston and Atwater, though no action was taken.

Brianna Calix: 209-385-2477