The Gilroy Unified School District will likely send taxpayers a
corrected property tax bill in the coming months to recoup $6
million in uncollected property taxes, according to district
staff.
The Gilroy Unified School District will likely send taxpayers a corrected property tax bill in the coming months to recoup $6 million in uncollected property taxes, according to district staff.
“The option is clear,” said Deputy Superintendent of Business Services Enrique Palacios. “The approach we’ve been taking since the get-go is that the county has to issue a corrected tax and it needs to be done fairly quickly.”
Neither the school district nor the county knew what costs will be associated with sending out a corrected tax bill.
An accounting error sparked the omission of the Measure J tax from the two most recent tax bills, Superintendent Deborah Flores said, giving Gilroy property owners an inadvertent break on their December 2008 and April 2009 bills. The district collects up to $70.50 per $100,000 of assessed value for Measure J. But the district still hasn’t identified the source of the error and is instead focusing on correcting the mistake in time to gather the funds needed to pay a $5.3 million bond payment due this September. There is also a $450,000 payment due in March, but the district will have no trouble covering this payment, district staff said.
“The issue is not even about who made the mistake, it’s about the corrective action,” Flores said.
Since district staff and trustees first became aware of the blunder, just before the last school board meeting Feb. 5, the district has approached Santa Clara County to help sort out the issue.
Gilroy’s representative, County Supervisor Don Gage, said he thought the best course of action would be to loan the district the money to pay their bills and double up on the Measure J tax next year, instead of sending out a corrected tax that would only create confusion.
“I would vote for it,” Gage said of a temporary loan, adding that he was confident his colleagues would do the same. “We’re not going to let the school district die out there.”
Miguel Marquez, assistant county counsel, confirmed that a temporary transfer was legal if appropriately authorized by the Board of Supervisors. The legality of sending out a corrected bill has yet to be determined but the county is looking into it, he said, emphasizing the unprecedented nature of the error.
But Palacios said he was not willing to speculate about the possibility of borrowing money from the county to make the fall payment.
“It will be of no service to mislead the general public,” he said, adding that he thought the district might be able to collect the tax quickly enough to make the scheduled payments.
Though they have not solidified a course of action, Palacios and Flores said they are working as quickly as they can and did work over the long holiday weekend to correct the error and find a solution.
Among trustee and district staff worries is that a late payment could affect the district’s bond rating.
Last Thursday, Standard & Poor’s assigned an AA- rating to $8.55 million worth of Measure J bonds issued in 2004, according to its Web site. The rating included a caveat that it could fall one tier to an A rating, which is “somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions” than the superior AA rating. Yet, a the single-letter grade would mean GUSD’s “capacity to meet its financial commitment on the obligation is still strong,” according to S&P’s Web site.
The day before, on Wednesday, S&P assigned the same AA- rating and forewarning to an additional $31.25 million worth of Measure J bonds issued in 2001. The bond is set to be fully repaid by 2012.
Despite the school district’s problem, the AA- rating is up from the A rating that a batch of Measure J obligations earned in 2007. As for the $150 million in Measure P bonds that will finish off the new high school, S&P gave the first $50 million of them an A+ rating on Feb. 13. An S&P analyst who compiled the Measure P rating declined to comment, as per company policy, and referred calls to media representatives who did not return messages Monday.
Trustees first found out about the error during a closed session nearly three weeks ago, according to trustees, but district staff would not confirm that. As a result, district staff would not give a reason as to why such a matter would be discussed in close session.
The closed session was of questionable legality according to First Amendment advocates.
Flores plans to announce the error to the public at a board meeting Thursday evening during her regular superintendent’s report, but the issue was not also scheduled as an official agenda item for trustees to discuss.
Trustees Denise Apuzzo and Francisco Dominguez said they were looking forward to more details at the meeting. The five other trustees did not return phone calls Monday.
Mark Zappa, a member of the Silicon Valley Taxpayers’ Association, is also looking forward to hearing more from the district about the error and the options for correcting it.
“I would like to know as a taxpayer advocate how this happened,” Zappa said. “How do we know who we can trust to manage these humongous bonds. I too think it’s important to fix the problem, but it’s more important to show responsibility. I want to know who’s responsible.”
Reporter Chris Bone contributed to this story.
