Government / Politics

City, county officials meet to discuss tax-sharing agreement on new developments

A joint meeting of city and county representatives attempted to set a path that would lead to rewriting the tax-sharing agreement on new developments

In a joint meeting involving the Hollister City Council and San Benito County Board of Supervisors June 30 at the San Juan Oaks Golf Club, members from each governing body discussed future goals, objectives and policies regarding cost recovery from the Financial Neutrality of New Development and the Master Tax Agreement. Michael G. Colantuono, who is representing the county in two separate lawsuits, acted as arbitrator and sometime referee between the two groups that, while cordial, did not always see issues in the same light.

Brad Sullivan, Hollister's city attorney, kicked off the night’s discussion by explaining that the group would be talking about a comprehensive solution to a problem with the tax-sharing agreement that deals with properties that may or may not be annexed. He said both entities needed to be comfortable with the concept and assumptions in order to come up with the solutions.

Colantuono said the topic for discussion was new development, which, he explained, means people investing in the county to build new things, whether it’s new houses or businesses. He said the group would talk about the relationship between the city and county around that topic.

“Where can be the best development within this community; what services are going to be required of the city; what services are going to be required of the county; what facilities are going to be required and how are we going to pay for it?” he asked, and then invited members of the public to speak before opening up the meeting to those seated around the table.

Hollister resident Keith Snow said the city council should focus on city matters and not county matters. Then, as he often does at council meetings, he went on to claim the city is continually losing money because it outsources its 911 service. And, as he usually does, Hollister Mayor Ignacio Velazquez told Snow that the 911 service was not the topic under discussion, and that the city is not losing money. Then, resident Marty Richman told the group that the crux of the matter was not how things would be paid for, but who would pay for them. He said the county board of supervisors has its own budget and way of doing things, as does Hollister and San Juan Bautista.

“As a resident of Hollister who pays his taxes and has people who live right next door who are basically in the city and get the exact same services, but are considered to be in the county and don’t pay the taxes, I have to pay $300 to $400 extra than someone who lives next door because a philosophy is different on who should pay,” Richman said. “I’m sure you’ll come up with a number to pay for a library, the fire department, the police department. The problem is, who’s paying what.”

Another resident reminded the group that while they’re trying to make up their minds on solving the tax-sharing agreement issue, the county is made up of two towns where most of the people live and the city and county governments are, in fact, representing the same people.

Local entrepreneur and resident Kristina Chavez Wyatt said she was looking forward to progress and a resolution by the city and county, and instilling confidence for investment, first for sustaining and growing businesses and residents in the county, and to support economic development in the private sector.

Wyatt recommended that a task force from the San Benito County Business Council, of which she is executive director, be founded in order to come up with ideas for incentives that it would present to the city and county to ease the burden of new impact fees. It would also work with the Economic Development Corporation, under the support of the county, to develop a comprehensive economic development strategy that she said would be delivered to the county at the end of July.

Then Colantuono, who is a managing shareholder with the Grass Valley law firm of Colantuono Highsmith & Watley, PC, told those who weren’t familiar with him that he has worked as a city attorney for a number of years and was presently serving in that capacity for both Auburn and Grass Valley, Calif. He said at the meeting he was serving as a lawyer for the county but would attempt to be “…an honest broker and do my best to be a neutral facilitator of dialogue.”

After a lengthy description of his involvement with various communities, he described himself as a problem solver and said he was present to help the two groups have a conversation and to come up with a common strategy in development financing that would allow both to thrive.

He went on to describe the relationship between the county and city as a marriage, and asked rhetorically, “How do you improve a relationship?” He answered, “In my experience, you don’t.”

Colantuono recommended, going forward, that they try to avoid looking back and rehashing things they disagree on and look forward to see how they might construct the future in order to be successful. He also said they should avoid telling each other what the other “should do,” which he said is an attempt to impose one’s views on another. He said they would be better off letting them speak for themselves—who they are, what they want to accomplish, and how they want to accomplish it.

“This is a free country, and we all have the same First Amendment rights, and we’re all familiar with one another,” he said. “My advice to you is if you try to speak to yourself and not the other person, you’re more likely to be successful.”

He said each team has the power to frustrate the other and together they could, “destroy a nice place to live.” He advised them to work together to determine where development should happen and how it would impact the institutions.

“It’s easy to reach an agreement on broad principles,” Colantuono said, and then cautioned, “Until you get to the numbers and then you say, ‘I’ve got to charge him that in order to make sure you get this. Then it gets difficult. If you jump to the bottom line, it’s difficult to have an agreement; but if you start with a genuine agreement, then we can get the numbers and work with a consultant and say, ‘here’s what we’re trying to do.’ That’s worth the analysis to make sure we’re not hurting the city or the county.”

Supervisor Robert Rivas spoke up first, stating that the economy has taken a turn and investments are coming into the county. He said the first thing people want to be clear about is the tax-sharing agreement. He said the supervisors want to be as cooperative as possible with developers and having a tax-sharing agreement in place is something that needs to be done.

“I don’t think it would surprise anyone here that relationships between the county and the city are horrendous,” Rivas said. “I hope this is the first step in the process of mending those relationships because this is an extremely important issue. It’s important to work together for not only current residents, but future residents as well.”

Seated next to Rivas, Velazquez said he doesn’t view the relationship between the city and county as good or bad, but one that is strained and fluctuates through the year. He repeated a reoccurring theme he has often stated: “Our bigger problem is understanding who we want to be. Are we trying to become a suburb of San Jose, and just build houses? Are we trying to become a community that’s inviting more tourism and providing more quality-of-life facilities so they can be proud of the community, and rather than leave to go shopping they stay around here and spend their dollars here.”

He said that over the past year or so there have been a number of projects discussed, but the city and county need to decide how to get them completed together because neither can do it alone. He said the school districts also need to be on board and that all three have a common vision.

“It’s important that we do have respect for each other and make sure that neither one of us is leaving here underfunded,” he said. “How does that partnership cover those costs?”

Velazquez said there are some services the city is better equipped to handle, as is the county. He said it simply comes down to how much something costs and how to perform the tasks each does best. He said there needs to be a better understanding of the impact of development. He said as one with a development background he is concerned when people think if more houses are built everything will be OK.

“I see it as a danger zone,” he said, “if we’re not planning correctly and those houses aren’t paying for themselves in the next 20 to 50 years. I want to make sure if we’re enforcing something on our side of the street, the county’s side has the same rule. We see a lot of that in the community, where one side is looking good and the other we can’t do anything about.”

When Colantuono asked if anyone had any reaction to Rivas’ or Velazquez’ statements, Supervisor Anthony Botelho said he thought the city and county had worked well together on a variety of issues. He said as long as he has been a supervisor the relationship has been good and that the issue of tax-sharing only became a problem after developers became interested in the area.

“Our tax-sharing agreement is flawed,” he said. “We have to improve how we split the money and I think we are here to develop a better revenue stream so we can provide those services that our new residents, and our current residents, expect. I’m sure we’re going to leave this meeting on a path going in that direction.”

Supervisor Margie Barrios said she felt like the two agencies were going through marriage counseling, adding, “Divorce is not an option.” She said that together the two have accomplished a lot and that they needed to look forward and not to the past. She said if they remember the things they’ve done successfully together, it will give them a foundation to move forward. She said there shouldn’t be any issue about what the needs are, but there has to be a consensus on a planned path to accomplish those needs.

“Those are the principles we’re talking about, the planned path, without the numbers, without the details, that’s the key,” she said. “We can accomplish that today.”

Councilman Raymond Friend said the real issue was that as homes were built next to the city, the owners were not paying their fair share to the city and those who live in the city have to pick up the difference.

“When you look at how those dollars are split so when they’re no longer in the county and in the city it’s not a fair shake,” he said. “If that can’t happen the divorce needs to happen. The city cannot afford to keep adding housing and they don’t pay their fair share.”

Colantuono kept track of the various concerns tossed out by the participants on two whiteboards that ranged from fire services to gang abatement, libraries, recreation centers and water treatment. Some were switched from one board to the other after being scrutinized. Some good-natured jabbing took place and then he wrapped up the meeting by telling them that the process had only just begun and that they were on the right path, which would now involve hiring a consultant to come up with the numbers.

At the mention of hiring a consultant, Friend fairly bristled in his low-key fashion: “We’ve heard concerns that there are developments that are going somewhere else because we’re dragging our feet and we’re not doing anything. We’ve had a big meeting and we’re going to go out and say 'OK, we’re going to hire another consultant to do another study to come up with a set of numbers.'“

Colantuono interrupted him: “That’s my next topic. You’re not going to reach this agreement in six weeks. You might not reach it in six months. There is a lot to do and the consequence of your decision is going to live with you a long time. So you have to be comfortable with where you’re going. So, what do you do in the meantime? You don’t want to ask the development community to miss this housing market. They want to build houses now when they can sell them and finance them.”

He said the way to do that was to have an interim set of understandings of how to process developments in the short term.

“One framework is to say to the development community ‘sign an agreement with the city and the county, and perhaps LAFCO (Local Agency Formation Commission), get your building permits now, you pay—perhaps under protest—the existing tax agreements and existing tax-sharing agreement, and you get the benefit of whatever deal you strike,’” Colantuono recommended. “Something like that says, ‘we’re working on an agreement and we won’t hold you up, but you need to be subject to it.’ I think the development community will say, ‘yes,’ provided that two things are true: that they have reasonable certainty about their arranged development rights and there's a ceiling in what you’re asking them to pay.”

John Chadwell

John Chadwell is a BenitoLink reporter and an author. He has many years experience as a freelance photojournalist, copywriter, ghostwriter, scriptwriter and novelist. He is a former U.S. Navy Combat Photojournalist and is an award-winning writer who has worked for magazine, newspapers, radio and television. He has a BA in Journalism and Mass Communications from Chapman University and underwent graduate studies at USC Cinema School. John has worked as a script doctor and his own script, God's Club, was released as a motion picture in 2016. He has also written eight novels, ranging from science fiction to true crime that are sold on Amazon. To contact John Chadwell, send an email to: