Taxpayers’ group may sue again

Jenny Marder

Having just won a four-year legal battle with Huntington Beach, the

Howard Jarvis Taxpayers Assn. is considering taking the city back to

court over a similar tax it passed last week.

The taxpayers’ group is exploring whether a property tax the City

Council approved Aug. 18 violates Proposition 218, a 1996 initiative

that requires a super majority for any new or increased tax.

“We will analyze this from a legal perspective,” said Jon Coupel,

president of the Howard Jarvis Taxpayers Assn. “Is the legislative

act of the City Council in this property tax override going to be

considered a new tax? We will argue that this needs to comply.”

This puts a new spin on an issue that has caused a deep split in

the council and triggered critical backlash from residents.

The City Council approved the property tax override at its last

meeting to help fund retirement benefits for public safety employees,

less than an hour after it discussed how to pay back as much as $27

million collected from taxpayers that a superior court and an

appellate court said violated Proposition 13. That initiative, passed

by voters in 1978, froze the property tax cities could levy at 1% of

the property’s assessed value. Under the terms of the initiative, a

city can levy a tax override for debts incurred before, but not

after, the passage of Proposition 13.

City Atty. Jennifer McGrath argues that the override passed last

week is not a new tax and therefore does not violate Proposition 218.

“This is not a new tax. It’s a tax that was voted upon by people

in 1978,” McGrath said.

A motion by Councilwoman Cathy Green at Monday night’s budget

workshop to reconsider the passage of the property tax failed on a

tie vote, with Green and Councilmen Gil Coerper and Dave Sullivan in

favor and Mayor Connie Boardman and Councilwomen Jill Hardy and Pam

Julien Houchen opposed. Councilwoman Debbie Cook was absent.

The tax will fund retirement benefits for public safety employees

approved by voters in 1966 and 1978 at a rate of $7 per $100,000 of

assessed value.

“The political argument is that they’ve already lost credibility

with the voters,” Coupel said. “They are building a reservoir of ill

will from the citizens of Huntington Beach. Even if they didn’t have

to get voter approval, wouldn’t it be wise to go back to citizens?”

Many are also asking if the tax would violate Proposition 13 as

the first tax did since, while the city was obligated to pay the

public employee pensions before the initiative was signed, the

payment process didn’t begin until after Proposition 13 passed.

Councilman Dave Sullivan fears that a court will rule the tax

illegal since the benefits didn’t go into effect until after

Proposition 13, when the city finalized a contract with the Public

Employee Retirement Service. He urged his fellow council members to

seek “an outside, qualified attorney” to ensure the legality of the

tax.

“In the past, we got bad, horrible, rotten advice, and it got us

in trouble,” Sullivan said. “Then we passed a tax that was ruled

illegal.”

Advocates of the override, including the mayor and city attorney,

say they are confident that it does not violate Proposition 13. The

city became responsible for the benefits when the contract was signed

in 1976 and the manner in which they were financed is irrelevant to

whether the city can levy a tax, McGrath said.

Assemblyman Tom Harman and Sullivan sat on the council four years

ago and voted against the former tax. Now they are joining forces

again.

“I have some serious legal concerns about whether the tax is

valid,” Harman said, adding that an issue of this magnitude warrants

more time and another legal opinion.

Harman, who felt that the city was not adequately informing

property owners about the refund for the former tax, took it upon

himself to send out 34,000 claim forms to Huntington Beach homes.

Huntington Beach resident Chuck Scheid, the driving force behind

the 1999 lawsuit, criticized the tax again at Monday’s meeting.

Scheid said he’ll pay his taxes, but will file a protest and request

a refund from the city -- just as he did four years ago.

“I urge the council to stay the 2003-04 rate at zero,” Scheid said

to the council on Monday. “I think it is time to start reminding the

council -- as I did repeatedly four years ago -- that the city’s need

for revenue does not justify illegal acts.”

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

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