THROUGH MY EYES -- RON DAVIS

Back in 1978, Huntington Beach voters approved a charter amendment

allowing us, through our city, to tax ourselves, to pay for certain

employee retirement benefits. Over the next 30 years, these employee

benefits have changed.

Today, these benefits are much more costly and much different from

what they were in 1978. So the city’s (our) ability to collect the tax

for these benefits was challenged in court, and the city lost. The court

determined that our collection of property taxes after 1978 to pay for

any new and improved employee benefits was not permitted under that

charter amendment, and therefore, unlawful.

You’ve probably heard people claim that the city has been “illegally”

collecting this tax. Understand that “illegally” does not always mean

willful and intentional misconduct. There is no suggestion that the city

took this tax money to Vegas and blew it on the crap tables. In fact, to

the contrary, they used the money for our benefit -- paying benefits to

our employees that we had contractually obligated ourselves to pay.

The court ruling doesn’t eliminate the city’s obligation to pay for

these employee benefits, but merely means that in the future, the $7

million or $8 million cost cannot be charged directly to the taxpayers,

but will have to be paid from the general fund. Which in turn means that

every year we’ll have $7 million or $8 million less to pay for public

safety, libraries, infrastructure repair and so forth.

In addition, this ruling may also expose us to paying ourselves the

money previously paid. The judge has issued his final ruling on the

subject, but that ruling may still be subject to various motions in the

trial court. Further, the judgment is subject to appeal. So “final

judgment” does not really mean “final” and the fat lady has yet to sing.

But, we all have to consider what should happen if the trial court’s

ruling is ultimately affirmed by an appellate court. If affirmed, the

city ought to commit to return all of the taxes collected to pay this

benefit from December 2000, without the need for claim forms and legal

hassles, since they knew the claim was pending and should not have spent

the money.

With regard to the taxes paid prior to December 2000, it is still

unclear whether the city (that’s us, folks) owes us for those taxes, and

if so, for what period. The worst case scenario for us seems to be that

we might owe ourselves back-taxes from December 1995.

This will amount to millions and millions of dollars. But the glitch

is that we’ve already spent the money and spent it paying for employee

benefits. And, we’re legally not entitled to get them back from the

employees, so any refund of those taxes must come from us -- you and me.

That means we either have to tax ourselves an amount equal to the

refund and then put it in the general fund, and then pay ourselves back

out of the same general fund; or the general fund will take a $15 million

or $20 million hit. That’ll probably be OK with some of you, but that

means in order to make the refund payments, government services (public

safety, infrastructure repair, library services, park maintenance, street

and sidewalk repair) will all have to be cut to fund the refund. Is that

what any of us really want?

We pay taxes to get these much-needed local services. It seems like we

might be shooting ourselves in the foot by insisting on refunds, which

diminishes the level of these services. On the other hand, forcing the

city to make the refunds sends a strong message to our City Council about

spending priorities. Huntington Beach simply cannot afford to indulge its

champagne taste on a beer budget.

In the few words I have to write this column, I cannot hope to do

justice to all sides of this very complex and difficult issue. My sense

is that the issue of what should happen relative to refunds should the

city lose the appeal, should be placed on the March 2002 ballot. That

will give us plenty of time to debate these very complicated issues and

understand the full consequences of our action. We’ll either agree to pay

a little more to get a little more, or pay less and receive less. And

that should be the collective citizens’ informed choice.

* RON DAVIS is a private attorney who lives in Huntington Beach. He

can be reached by e-mail at o7 [email protected]