Council Accepts a Costly Tax Ruling

Huntington Beach officials have not decided how to refund as much as $27 million in taxes to homeowners, but one thing appears certain: Despite dire predictions from a councilman, bankruptcy is an unlikely option.

The City Council voted 5 to 2 in closed session Monday not to appeal a recent state appellate court decision that said homeowners are entitled to a refund for a city property tax, putting an end to the four-year legal battle.

“We will refund the money to anyone who has submitted a very, very simple claim form,” said Mayor Connie Boardman, who voted with the majority.

“And we’re going to do that without having to declare bankruptcy. That is out of the question. These claims of dire measures such as bankruptcy are just way overblown.”

Council members Gil Coerper and Cathy Green cast the dissenting votes.

The court decision came within weeks of a City Council vote to lay off 37 employees and cut programs to absorb a midyear budget shortfall of more than $11 million.

Now, the financially strapped city must find as much as $27 million to refund property taxes to at least 15,000 people who have filed claims.

The taxes have been helping fund city employee retirement benefits for decades -- ever since voters approved them as part of city charter elections in 1966 and 1978.

But with the legal case pending, the city had begun devising contingency plans. It stopped imposing the tax in June 2001 and now must refund payments back to June 1997, said City Atty. Jennifer McGrath.

“I think the reasonable and responsible thing to do is fund any costs over time through a bond issue,” City Administrator Ray Silver said.

Councilwoman Debbie Cook agreed: “The only way to pay for it is with bonds. Yes, there will be a debt service, but I don’t know any other way. We don’t have $27 million lying around.”

But Councilman Dave Sullivan, who initially raised the specter of bankruptcy, said Monday he still believes it is an option that city officials should consider.