TITLE
Recommendation to authorize City Manager to execute the sales tax allocation settlement agreement with Office Depot. (Citywide)
DISCUSSION
In 1998, the City filed a request with the State Board of Equalization (SBOE) for review of
sales tax allocations on sales made by Office Depot's Long Beach facility. Office Depot had
incorrectly allocated the sales tax revenues to the benefit of Signal Hill, although they had
agreed to start allocating them to Long Beach beginning in November 1997, in accordance
with a September 1996 revenue sharing agreement signed by Office Depot, Signal Hill and
Long Beach. However, the City did not begin receiving sales tax revenues from Office
Depot until 2000.
After a lengthy audit and review, in 2002, the SBOE determined that the City was owed
$1,033,750 in sales taxes erroneously distributed to Signal Hill. The City has carried this
amount due from SBOE as an accounts receivable in the General Fund for several years.
Since 2002, the SBOE reviewed other issues associated with Office Depot and confirmed
that the City of Long Beach was entitled to the monies allocated since 2000. On July 8,
2005, the SBOE sent the City a letter confirming that the City is owed the $1,033,750
improperly paid to Signal Hill.
The City's 1996 sales tax revenue sharing agreement with Office Depot states that in the
first year of operation, Office Depot was to receive the first $250,000, the City the next
$50,000, and the balance split equally between Office Depot and the City. In subsequent
years, Office Depot was to receive 50 percent of the sales tax over the first $50,000 per
year. Ofice Depot has not been paid as the City has been waiting for the tax allocation
issue to be resolved. Office Depot has agreed that their share of sales tax revenue due,
less expenses incurred by the City, is $1,550,000 through September 30, 2005. This
amount is included in the General Fund as accounts payable. The agreement calls for
payment by the City to occur in th...
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