What began as a clerical error that cost the school district $6
million in uncollected property taxes mushroomed into a legal
quagmire that puts a $5.3 million GUSD bond payment due in
September on unsteady ground.
GILROY
What began as a clerical error that cost the school district $6 million in uncollected property taxes mushroomed into a legal quagmire that puts a $5.3 million GUSD bond payment due in September on unsteady ground.
Two weeks ago, Gilroy Unified School District trustees passed a resolution asking the Santa Clara County Board of Supervisors to issue a corrected tax bill in order to collect approximately $6 million that should have been on the last bills.
But after a series of meetings and exchanges between legal counsel that culminated in a Thursday night closed session, the GUSD Board of Education has decided not to pursue a corrected tax bill due to legal issues and substantial costs.
“Our preference would have been to move forward with the corrected tax bill,” said board Vice President Francisco Dominguez. “We felt that option would be in the best interests of the taxpayers and the school district, but in order to make that happen, the county supervisors needed to agree and that’s not happening.”
According to the official statement, the Board of Supervisors will not place the tax levy on their agenda unless the school district provides a court order demanding so. Absent a court order, the county asked the district to pay the approximately $100,000 it would cost to issue a corrected bill and to “indemnify the county against all claims that could conceivably occur if they (the county) issue a corrected tax bill.”
The district was not willing to do either of those things, said Superintendent Deborah Flores. Instead, the district will double up on the Measure J tax in the final two years of the measure’s life span to recoup the money.
Collecting this year’s tax in future years could mean a tax rate of about $109 per $100,000 of assessed value in 2009/10 and about $74 per $100,000 in 2010/11, according to district documents.
The dispute arose after a detail-oriented resident alerted the district to a mistake on a property tax bill. Measure J, passed by the voters back in 1974, taxes property owners $70.50 per $100,000 of assessed value.
Though the closed session item fell under the term “initiation of litigation,” Dominguez said the district will not be filing any lawsuits and is not facing any lawsuits. The term was used to cover the legal option to obtain a court order, had the board moved in that direction, he said.
Based on the district’s statement, it was unclear how they will make their fall payment of $5.3 million but Flores said they are looking into several different options. Earlier this month, she said the district has an informal agreement with the county to borrow the money from the county if it’s not collected in time. Meanwhile, the county has expressed its support for loaning the district money to pay their debts.
“They’re going to be made whole one way or another,” County Supervisor Don Gage said.
County Supervisor Dave Cortese agreed that the error needs to be rectified swiftly.
“The problem needs to be corrected,” he said. “Leaving the school district in the lurch is not a good idea.”
Gage met with Flores, other district staff and officials, the district’s attorney, the county’s attorney, and County Finance Director John Guthrie last week to discuss the district’s options.
“You can do whatever you want but the problem is which one will end you up with a lawsuit,” Gage said. “The bottom line is that they have options to consider. None of the options that are being suggested are illegal, but some have a greater risk than others.”
With other options available to the school board, Gage said he hoped school officials would take the county’s feedback and craft a new solution.
“We can’t hang the county out to dry on this,” Gage said. “There are better options out there. The (school) board moved very quickly on a resolution which may have been a mistake.”
County officials and staff said they believe doubling up on the Measure J tax in the coming years is the best option.
“Honestly, it would be my preference for them to pick up the missing amount on next year’s tax bill,” Guthrie said. “It would be cheaper and easier.”
As a county employee, board President Javier Aguirre recused himself from the discussion.
Though Flores wouldn’t cite the source of the error, “We know where the error occurred and we’re dealing with it,” she said, adding that the omission of Measure J on the last tax roll resulted from a “breakdown at all three levels” – the school district, the Santa Clara County Office of Education and Santa Clara County.
