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Huntington Beach Considers Bond Sales

City would use money to cover refunds of property tax it illegally collected. Plan fuels long debate at Monday night council meeting.

August 19, 2003|Stanley Allison | Times Staff Writer

The Huntington Beach City Council on Monday began exploring the process of selling bonds to pay refunds to property owners for a tax the city collected illegally, ending a four-year court battle.

Debate over the bond plan -- which could wind up costing the city up to $27 million -- continued late into Monday night.

The bond amount will depend on how many claims for refunds are filed.

About 15,000 claims have been filed so far, officials said.

The tax helped fund city employment retirement benefits. But resident Chuck Scheid contended in a lawsuit filed by the Howard Jarvis Taxpayers Assn. that the increase violated provisions of Proposition 13, the 1978 voter initiative that limits the tax to 1% of a property's assessed value.

The city lost the case and was unsuccessful on appeal. The City Council voted recently not to continue the appeal, believing the city would not prevail before the state Supreme Court.

The city must now come up with the money to refund the property owners from 1997 to 2001.

The city stopped collecting the tax in 2001 because of the court case.

The refund is the latest in a series of financial setbacks for the city. Officials recently cut programs and services and laid off 37 employees to make up for an $11.5-million budget shortfall caused by a weak economy and revenue losses.

With the city swimming in red ink, the only way to repay the taxes is through a bond, city officials said. Councilman Dave Sullivan's proposal that the city consider filing for bankruptcy protection was rejected by City Administrator Ray Silver and Mayor Connie Boardman.

The interest on the bond would be paid from the city's general fund.

Boardman recommended that the refund claim form allow property owners to direct their refunds to such areas as the infrastructure fund, community services, library services, public safety, the art center and general fund.

Property owners will have 90 days to file a claim from the time an appellate court decision on the tax is returned to the trial court. Boardman said the deadline will probably begin in September.

Critics argue that the bond is yet another financial burden that the residents must bear to bail out the city.

A bond "is saying to the innocent property owner that to get back the money we illegally took from you, you must now pay double that amount back to the city over the next 20 years," said Ed Kerins of the activist group Huntington Beach Tomorrow.

Kerins said the city should seek alternatives such as the sale of surplus property and bankruptcy.

Sullivan recommended that the council appoint a committee to study alternatives.

"To just have one plan and say that's all that's possible is just poor planning," Sullivan said.

"I think we need to come to a decision on how we're going to handle this and do it quickly," Boardman said. "We don't have months of time to let a committee decide on what to do."

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