Nevada County settles underbilling issue with Grass Valley
Nevada County will forfeit about $65,000 per year in sales tax revenue following a settlement agreement with Grass Valley that stemmed from nearly a decade of underbilling by the county.
The two governments were in dispute over about $800,000 in sales tax revenue Nevada County underbilled Grass Valley over the course of around a decade, from 2007–2008 to 2015–2016.
In the settlement Grass Valley agreed to pay $500,000 of the underbilled $800,000, and the county agreed to treat an annexation process as complete, leaving out around 40 of the total 432 acres in the original agreement and leaving about $65,000 annually in potential tax revenue on the table.
The underbilling issue came from a master tax-sharing agreement the two governments made when the city annexed the Glenbrook Basin in 2001.
Full details of the settlement agreement were not made available Wednesday evening as the settlement won’t be made official and open to the public until signed by Grass Valley Mayor Lisa Swarthout.
As part of the original agreement, residents in the affected area would pay property taxes to the county, which would then calculate Grass Valley’s share. For sales tax, the state would remit the local portion of sales tax revenue to Grass Valley and Nevada County would then bill the city for its share.
“A contractor hired to calculate repayments to the county overlooked some addresses from which sales taxes were paid and the city therefore paid the county less than it was due,” a county press release stated.
According to city and county officials, the mistake was caught in 2017 by a contractor that was able to find the irregularity due to working for both governments. The contractor found sales tax irregularities in a “major business,” which prompted the review and triggered a second look from an independent contractor.
The parties have been negotiating how to resolve the issue since, including a one-day mediation session.
Nevada County Chief Financial Officer Martin Polt said part of the issue was keeping track of new businesses and street changes in the area.
“When these new businesses came in there was no mechanism to track changes,” Polt said.
While both sides were in agreement that Grass Valley had been underbilled by $800,000, they disagreed on whether the full amount should be repaid. According to Polt, the statute of limitations on these mistakes meant the county may have only been able to go back two quarters to collect what they underbilled had the sides went into litigation.
According to Polt, since finding the mistake the county has changed the way it collects the revenue. With the new method, Polt said Nevada County is using geographic area instead of addresses or zip codes to ensure any new businesses or changes are captured and used in its calculations.
To contact Staff Writer John Orona, email firstname.lastname@example.org or call 530-477-4229.
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