Merced wants mediation to decide tax sharing with county

The city of Merced took its first step Monday toward calling in a third party to help hammer out a tax-sharing deal with Merced County.

The council unanimously agreed to give City Manager Steve Carrigan the leeway to meet with county leaders and pick a mediator in the hopes that the city can move forward with development, particularly on land near UC Merced.

Under “binding mediation,” the city and county would pitch their cases to an outside mediator and give that person the power to decide what agreement would be fair and equitable.

City leaders pointed to land along the Bellevue Corridor that has developers interested and that would exponentially grow tax revenue if it were developed, saying the lack of an agreement hurts job growth and economic development.

“If we don’t get anywhere, it just stays dirt,” Mayor Stan Thurston said.

Without an agreement, the city cannot annex new land parcels into the city limits. Developers typically want their land annexed because the city can provide water, sewer, police and other services nearby.

City employees estimate the roughly 640 acres on Bellevue Corridor, which would be the closest developments to UC Merced, are worth about $10.6 million in property taxes. That same land, after development, would be worth about $420 million in tax revenue, according to staff.

The dispute over the agreement lies in how each governing board does the math. The city’s leaders say Merced should get all the tax money generated for fire services and then split the rest down the middle.

“Since the city takes over the fire (services), we think that we ought to get 100 percent,” Merced Chief Financial Officer Brad Grant said.

The county’s proposal would essentially lump the fire service dollars together with the other revenue before splitting them down the middle, according to city staff.

The county has not taken an official stance on mediation and needs time to go over its options, according to spokesman Mike North. County leaders have said they believe their agreement offer to be fair.

North stressed that Merced provides the largest caseload for county services, such as public health and law enforcement services. “We need to ensure that we can cover those costs,” he said.

Carrigan said he’s “disappointed” the absence of an agreement has dragged on this long, so the mediation is necessary to get the city and county out of its negotiation rut.

“We’re talking about apples and tennis rackets here,” he said. “We see things differently.”

Carrigan stressed that development in town will bring more than just tax revenue – it will bring jobs to a city with an unemployment rate that is regularly twice the state average.

The council also agreed that the agreement should be worked out within 90 days. In the meantime, the council also told its legal staff to research how a ballot measure on tax-sharing could be taken to voters in the case that the city and county can’t agree on a mediator.

This story was originally published May 2, 2016 at 9:58 PM with the headline "Merced wants mediation to decide tax sharing with county."