City to repay with bonds

Jenny Marder

The City Council decided after heated debate Monday night to pay back

the money it collected illegally from taxpayers by issuing bonds,

unless the council members opposed to that plan come up with an

alternative in the meantime.

“I think that it’s important that we act decisively and quickly,”

said Mayor Connie Boardman, who directed staff to begin preparing

documents for a bond issuance immediately.

The debate comes after an appellate court last month upheld a

ruling that a tax the city had collected to pay for employee pensions

violated state law.

The Howard Jarvis Taxpayers Assn. sued the city in 1999 claiming

that it violated Proposition 13, a 1978 voter initiative that capped

the amount of property taxes cities could levy at 1% of the

property’s assessed value. The Superior Court ruled in 2001 that a

portion of the tax override the city collected after Proposition 13

was illegal.

Now the city could be forced to pay as much as $27 million in

refunds to homeowners.

“We’ve been looking at this for a number of months,” Asst. City

Administrator Bill Workman said. “The option that makes the most

sense is a bill commonly called option bonds. ... In the last couple

weeks, the decision came down that this is the option with the most

viability.”

City Councilman Dave Sullivan vehemently opposed the resolution

and accused the council of “a rush to judgment.”

Such a large, costly decision should warrant a closer look, he

said, urging the city to examine other options, such as selling city

property or even bankruptcy.

But Councilwoman Debbie Cook countered that the city would not

qualify for bankruptcy because it’s not insolvent.

“We have more assets than liabilities,” she said. “I don’t

understand why you would think that a federal court would let a

solvent city like Huntington Beach go into bankruptcy.”

Residents opposed to the bond argue that it shifts the burden of

the refund from the city back to the property owners and serves the

best interest of the city administration, not the citizens.

“The [proposal to use bonds to pay off the debt] assumes the

issuance of bonds is the only way to solve the problem,” said

resident Ed Kerins, president of the activist group Huntington Beach

Tomorrow. “This 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 -- once for the

principal amount and again for the interest. This is entirely

unacceptable.”

Instead, Kerins said, staff should provide the City Council with a

report detailing options.

Sullivan also met with council resistance when he suggested

informing property owners about the refund.

His proposal to put advertisements in the Huntington Beach Wave

and the Huntington Beach Independent newspapers failed, but the

council did vote to put a notice in the city’s water bill, which will

be sent out to all Huntington Beach residents.

“I think we should do everything possible to let our citizens who

are entitled to a refund know about it,” Sullivan said. “Personally,

I’d like to just write a check to everyone.”

Cook and Councilwoman Pam Julien Houchen encouraged residents to

forgo the refund altogether for the good of the financially strapped

city.

After $11.1 million in budget cuts to the 2002-03 budget, about

$2.5 million less from the state in 2003-04, and now the $27 million

in refunds the city is already struggling financially.

“I am proud of the fact that I didn’t file a claim.” Cook said at

the meeting.

Property owners will have until December to file a refund claim.

The city will collect the requests and review them to ensure that

they are valid. Only people who owned a house in Huntington Beach

between 1997 and 2001 are eligible, and refunds will be for taxes

collected in those four years. Claim forms will be available at the

city clerk’s office or on the city Web site at www.surfcity-hb.org.

* JENNY MARDER covers City Hall. She can be reached at (714)

965-7173 or by e-mail at jenny.marder@latimes.com.