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San Carlos ready to settle tax lawsuit with schools
September 21, 2012, 05:00 AM By Michelle Durand Daily Journal Staff

The San Carlos City Council, on behalf of its former redevelopment agency, is ready to resolve a long-standing legal battle with three school districts over years of tax payments with a $6.3 million settlement that includes an agreement for a payment schedule.

The proposed settlement coming before the council Monday night would pay $3.76 million to the Sequoia Union High School District, $1.85 million to the San Carlos Elementary School District and $689,455 to the San Mateo County Community College District. Attorneys are still hashing out the fine points of the future payment agreement but the big details are fairly set, said City Manager Jeff Maltbie.

As long as the pending matters are resolved, the City Council will discuss the proposal in its closed session Monday night and approve it during the regular meeting.

"I think the school districts and the city are happy to get this resolved. I don’t think any of us are comfortable being in a lawsuit together. We do a lot of business together,” Maltbie said.

The settlement would end litigation that began in 2009 when the districts sued the RDA for allegedly not honoring payments in a 1986 agreement. The RDAs used tax revenue for improvements and to pay other agencies in mutually beneficial agreements. The districts argued in the suit they were due larger payments including a fair share of the annual 2 percent inflationary increase in property tax assessments. The city argued payments were only due when requests were made, beginning in 2009.

In December 2011, Superior Court Judge Joseph Scott sided with the school districts and ordered the RDA to pay $4.3 million to cover money due annually since November 2006 plus interest. The RDA appealed in January, quickly followed days later by Sequoia Union High School District’s claim of breach of contract.

Months of intense negotiations ensued while meanwhile the state dismantled all RDAs and San Carlos was named successor to its agency. The timing made the lawsuit much more complicated and the change in state law made the economic value of the case different, Maltbie said.

With the city now the successor agency, it stood to lose about a half-million dollars from its general fund but, as part of the agreement, the school districts will repay that amount, Maltbie said.

Sequoia will pay $260,000, the college district will pay $65,000 and the San Carlos School District will pay $175,000. As a result, Maltbie said the settlement shouldn’t have any additional impact on the city’s finances.

The city already absorbed a $1.1 million hit in its June budget due to RDA elimination.

But while the council appears ready to put the litigation behind it, it is not yet a done deal for the other entities involved although they’re getting closer. Barbara Christensen, director of community/government relations for the community college district, said it does not yet have an agreement. James Lianides, superintendent of the Sequoia Union High School District, said they are still negotiating the final details of the settlement. Craig Baker, superintendent of the San Carlos School District, also said they were close.


The San Carlos City Council meets 7 p.m. Monday, Sept. 24 at City Hall, 600 Elm St., San Carlos.


Michelle Durand can be reached by email: michelle@smdailyjournal.com or by phone: (650) 344-5200 ext. 102.



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