Appeal ruling of Howard Jarvis win postponed

Jenny Marder

An appellate court postponed a decision on Tuesday on the city’s

appeal of a local taxpayer group’s 2001 victory that requires

Huntington Beach to return money to taxpayers.

“We’ve been waiting for a ruling for six months and we’ll wait

another three months,” Deputy City Atty. Scott Field said of the

delay.

In June of 2001, a superior court judge ruled in favor of the

Howard Jarvis Taxpayers Assn., which sued the city for exceeding the

1% cap on property taxes set by the landmark 1978 initiative

Proposition 13.

Proposition 13 capped the property tax that cities could levy at

1% of its assessed value.

The taxpayers group alleged that the city’s practice of charging

additional property taxes to fund employee benefits was illegal and

demanded that the residents get refunds.

“Proposition 13 tries to stabilize property taxes rather than have

them fluctuate with market,” said Tim Bittle, director of legal

affairs for the Howard Jarvis Taxpayers Assn. “It maintains a fairly

level and predictable pattern so you can budget your income with some

assurance.”

Under the terms of the initiative, cities could legally override

the cap to repay pre-existing debts that were incurred before

Proposition 13 became a law. Once debts were repaid, the 1% limit

would kick in and the city would have to drop property taxes to 1%,

Bittle said.

City attorneys argue that the retirement account met this criteria

and cite two citywide initiatives passed in 1966 and 1978 that give

the city the authority to collect additional property tax to fund the

benefits.

“The city was collecting this tax since at least 1966 to the

present,” Field said. “They continued to do so for many years after

it was adopted. Voters had always approved the tax.”

But the taxpayers group alleged that the tax override was illegal

since the city’s retirement account had built up to the point that it

was “super-funded.” In other words, there was enough money to pay all

of the city’s retirement debts and all of the city’s future debts,

Bittle said.

“The city didn’t need to contribute more money to [the Public

Employee Retirement System] to maintain its retirement fund,” Bittle

said. “At that point, the justification for exceeding Proposition 13

disappeared.

Field disagreed, saying that because of stock market bubble in the

late 1990s, the Public Employee Retirement System was making enough

money to pay for some, but not all of the debt.

The city no longer collects the excess tax.

If the city loses the appeal, residents will be able to claim

refunds on the excess property tax that they paid from 1997 to 2001.

The appellate court ruling has been rescheduled for July 28.