State owes counties $22 million in taxes, refuses to pay

April 16, 2013

By Dave Roberts

If you decide not to pay your taxes, you could face stiff penalties, seizure of your property and jail time. But when California’s government is the tax deadbeat, state officials thumb their noses at the tax man.

The California Department of Fish and Wildlife owes more than $22 million to 36 counties, having failed to make its annual payments for more than 10 years for use of county property. Year after year county officials bill and plead for payment, and year after year they get snubbed.

“If the state was a private taxpayer, several pieces of state property would have been seized and sold a long time ago for failure to pay property taxes,” said the California Taxpayers Association in its April 5 newsletter.

The association reported that a representative of the Rural County Representatives of California spoke at the April 3 meeting of Assembly Budget Subcommittee 3, asking the state to pay what it owes for the use of county properties acquired for wildlife preservation.

The DFW owns or administers 722 properties statewide, totaling 1,147,055 acres, according to the DFW Budget Fact Book. That includes 110 wildlife areas, 130 ecological reserves, 268 undesignated lands, 154 public access areas, 20 fish hatcheries and 40 miscellaneous lands.

On March 15 the RCRC and the California State Association of Counties wrote to the Assembly and Senate budget committees seeking the monies owed under the category of Payment In Lieu of Taxes to counties.

Decades of nonpayment

The letter reads:

“[T]he law specifies that when income is derived directly from real property acquired and operated by the State as wildlife management areas, the Department of Fish and Wildlife shall pay annually to the county in which the property is located an amount equal to the county taxes levied upon the property at the time title was transferred to the State. These PILT payments are intended to offset adverse impacts to county property tax revenues that result when the State acquires private property for wildlife management areas.

“[T]his very serious problem goes back in time over two decades to 1990-1991. From 1990 to 2002 some counties received their full PILT payment, while others received partial or no payment of monies owed, accounting for a past due total of $8,838,509. In total, the Department is in arrears $22,755,965 through the 2011-2012 fiscal year.

“RCRC and CSAC again respectfully urges your support for payment of these past due monies owed to counties in the 2013-2014 Budget Year. Additionally, we request the addition in the 2013-2014 State Budget of a specific line item for this purpose to help ensure future payments are made in a timely manner.”

In a press release, RCRC adds that including the PILT payments to the counties as a line item in the budget “is consistent with the principles outlined by the Governor in his [2013] State of the State address that the State needs to pay down debt with the new revenues created by Proposition 30.”

In that Jan. 24 address, Brown declared that it “would be folly … to not pay down our wall of debt. That is how we plunged into a decade of deficits.” After recounting the Biblical story of the lean cows that ate the fat cows, he said, “Let us follow the wisdom of Joseph, pay down our debts and store up reserves against the leaner times that will surely come.”

But since taking office two years ago, Brown has continued the state’s stiffing of the counties. And nearly three months after his State of the State pledge, nothing has changed.

State pleads poverty

DFW spokesman Mike Taugher said that his department hasn’t responded to the counties’ letter, but it intends to do so.

“The reason we haven’t paid PILT in recent years is because our funding to make those payments was specifically cut from our budget beginning in 2002,” he said. “We cannot make payments for items that were specifically removed from our budget.”

But the California Fish and Wildlife Code, which DFW pledges to administer and enforce, does not allow DFW to skip out on its payments to counties if it has money in its budget. “Payments provided by this section shall be from funds available to the department,” states code 1504(c).

And there is plenty of money available to the department — more than $366 million has been allocated in the DFW operations support budget for FY 2013-14. More than $45 million is spent on administration alone. But not a penny is being made available to abide by code 1504(a) which requires the DFW to annually reimburse the counties for property used by the state for wildlife management.

Lawsuit filed

That discrepancy was noted by Glenn County when it filed a lawsuit against the state in Sacramento Superior Court in January 2010. The complaint states that, prior to FY 2002-03, the DFW (then known as the Department of Fish and Game) had been making its annual in-lieu fee payments. But since then the payments have stopped.

The annual tax owed to Glenn County is a little over $58,000. But with the 10 percent penalty and interest, the 10 years of unpaid taxes totaled $1,066,192 through FY 2011-12. The state’s tab has increased to about $1.2 million today.

The lawsuit says the state has:

“taken the same position in each fiscal year commencing with 2002/2003 to the present that notwithstanding the plain mandatory language set forth in Fish and Game Code section 1504(a), the lack of appropriated funds in the budget of the Department of Fish and Game as a result of budgetary decisions made during tough economic times precludes the payment of ‘in lieu fees’ to the County of Glenn as required by the afore-mentioned code section.” 

But, rather than simply paying what it owes, the state has spent the past three years tying up the legal system. After first trying to get the suit dismissed, much of last year was consumed by the state’s attempt to get a summary judgment in its favor, avoiding a trial.

Its two arguments are: 1) in 2002 the state cut DFW funding for payment to the counties, so the department no longer has to make those payments; and 2) Glenn County failed to file claims for nonpayment with the state Victim Compensation and Government Claims Board.

However, that board’s focus is on individual complaints, not tax payment disputes between governmental agencies. It typically resolves claims against the state by people who are considering suing, usually because a state agency or employee is responsible for a death, physical injury or property damage.

Catch 22

Glenn County attorney Huston Carlyle’s sarcasm was palpable in his response to the state’s motion for summary judgment:

“[It’s] an attempt to create the legal equivalent of a classic Catch-22 situation. Let me see if I understand this correctly: The Governor does not propose and/or the Legislature does not appropriate funds to pay a statutory obligation under Fish and Game Code section 1504 by the state to Glenn County going on 10+ fiscal years.

“Nonetheless, Defendants would have Glenn County submit a claim to the Board, which will then (presumably) recommend to the Legislature that it now appropriate funds that it has refused to do for a decade. Of course, a bill will be introduced to do just that and of course it will pass the Legislature and of course the Governor, who supported the 10-year ‘non-appropriation,’ is now going to sign the bill containing the funding? Good luck waiting for that scenario to materialize.”

Carlyle argued that the state’s request for summary judgment should be denied because it does not meet the legal standard “that the party moving for summary judgment bears the burden of persuasion that there is no [genuine] triable issue of material fact and that it is entitled to judgment as a matter of law.”

Judge David Brown sided with the county, denying the state’s motion for summary judgment “because the State has failed to produce admissible evidence demonstrating the absence of a triable issue of material fact…. Evidence that the Legislature did not appropriate funds to the Department is not evidence that the Legislature did not appropriate funds to settle claims. This is a critical difference.”

If Glenn County prevails in its lawsuit, it could open up the floodgates for other counties to sue, perhaps in a class action suit. In the meantime, RCRC is asking county representatives to contact their state representatives. How they phrase it is up to them, but they might ask the legislators to follow the wisdom of Joseph and pay down the state’s debts before the Department of Fish and Wildlife has to step in to stop the lean cows from eating the fat cows.