Property owners who got a free ride on their 2008-’09 Measure J
taxes are off the hook for now, but they’ll pay the uncollected tax
over the next two years.
Property owners who got a free ride on their 2008-’09 Measure J taxes are off the hook for now, but they’ll pay the uncollected tax over the next two years.
The Gilroy Unified School District board of trustees voted unanimously Thursday to recoup about $6 million in property taxes – which was left off this year’s levy due to a paperwork error – by taxing residents at a higher rate for the remaining two years of the measure’s lifespan. However, trustees still need to decide how they will cover a $5.3 million bond payment, which is due in September and which was supposed to have been covered by the collected tax.
When district staff first learned in February that this payment could be in jeopardy, they sprang into action, contacted county officials and requested that the school board pass a resolution calling upon the Santa Clara County Board of Supervisors to issue a corrected bill pronto. One month to the day after trustees learned of the multimillion-dollar mistake – which Superintendent Deborah Flores attributed to a “breakdown at all three levels,” meaning the school district, the Santa Clara County Office of Education and Santa Clara County – they passed a resolution demanding the county Board of Supervisors to issue a corrected tax statement no later than May 1, a resolution dubbed “premature” by Gilroy’s county representative, Supervisor Don Gage.
To the chagrin of trustees and district staff, the Board of Supervisors refused to place the item calling for a corrected tax on their agenda absent a court order, according to a district-issued statement. In response to the school board’s original resolution, the county presented the district with two unsavory options – pursuing a writ of mandate directing the county to issue the tax or indemnifying the county against potential claims – that could have cost the district in excess of $100,000 in potential legal fees and the hard and soft costs associated with issuing a corrected tax bill.
The district’s final option was to increase the tax in the remaining two years of its lifetime to recoup the levy that should have been issued this year.
“Basically, we were forced into option three by the other two being so unpleasant,” Flores said.
The way trustee Mark Good summarized the situation, the county preferred to increase the tax on a future tax roll while the school district preferred to issued a corrected bill as soon as possible – a disagreement that could have sparked a legal battle.
“That option, to me, didn’t make any sense at all,” Good said. “Why would we spend education dollars on a lawsuit.”
Trustees voted to increase the Measure J tax – which voters approved in 1974 at a rate of $102 per $100,000 of assessed value – from its current rate of $70.50 per $100,000 to an amount not to exceed $105.70 per $100,000 in the next two years.
However, taxpayers probably won’t have to pay that much and, on average, will be looking at rates closer to about $90 per $100,000 even if assessed values go down, Deputy Superintendent of Business Services Enrique Palacios told trustees at the board meeting. But after hearing news of the recent 11 percent decrease in Gilroy property values, Flores said the decline could push the tax closer to the maximum rate of $105.70 per $100,000. Once Measure J expires in 2011, the newly approved Measure P, a $150 million facilities bond that will complete Christopher High School and various other district projects, will kick in at an estimated rate of $60 per $100,000 of assessed value.
“I’m very disappointed that the county didn’t honor our first resolution,” said trustee Rhoda Bress. “I thought it was the simplest and best way to get this matter attended to.”
But Gage and county staff disagreed, saying that increasing Measure J in the coming years, as opposed to issuing a corrected bill this year, was the best option.
As for paying the $5.3 million bond payment due in less than five months, Palacios said the district has options: it can either borrow money from the county or internally from its own budget, “something school districts do regularly in order to deal with cash flow issues,” he said. With about $2.5 million currently sitting in its Measure J fund, the district needs about $3 million to complete the September payment, Palacios said. The next step is to plan for this September payment, Palacios told concerned trustees who asked for monthly updates on the status of the payment and advocated for a prompt public information campaign explaining to taxpayers why their rates will increase next year.
“The public outreach should start now,” Board President Javier Aguirre said.
When faced with questions like who will pay the 2008 tax if a property is sold and other issues that could arise from an increased tax in the 2009-’10 and 2010-’11 fiscal years, Palacios said “That’s something the county has to explain to the public – how to cure the levy that didn’t take place … it’s truly in the hands of the county to explain, because we cannot. We don’t manage that.”
