Council to discuss tax money lawsuit

The Newport Beach City Council will meet in closed session Tuesday to discuss joining other cities in a lawsuit against the state of California to recover tax money it says was unfairly distributed.

Newport Beach could be owed as much as $3 million in tax money city officials believe the state did not correctly allocate over the past eight to 10 years, Newport Beach City Manager Homer Bludau said.

“We believe there have been substantial dollars that have gone to the county as a whole when it should have been allocated to the city,” Bludau said.

About 12 to 15 other California cities are considering joining a lawsuit to recover money the cities claim the state has distributed unfairly, he said.

Newport Beach gets back all of the sales tax revenues from the state for purchases made in the city, but the state considers the tax revenue only a use tax if the goods are delivered out of state after the sale, said Newport Beach City Atty. David Hunt.

“Use taxes go into a county pool, so we don’t get the whole tax,” Hunt said.

BRIANNA BAILEY may be reached at (714) 966-4625 or at brianna.bailey@latimes.com.