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July 3, 2008


By Will Oremus / Daily News Staff Writer



Error to cost county $20 million
Judgment in Genentech lawsuit could hammer schools, cities



A procedural error by San Mateo County will end up taking a big bite out of revenues for schools and other agencies countywide.

County Counsel Michael Murphy said Wednesday that an April judgment by the San Mateo County Superior Court means the county will have to refund $20 million in back property taxes to Genentech, one of its biggest businesses.

That will be a blow for local agencies already low on cash. The San Mateo Union High School District, for instance, estimates it stands to lose as much as $1.2 million.

"I'm dumbfounded and speechless at the verdict," said County Supervisor Jerry Hill, who learned about it Wednesday from an e-mail by Murphy. "But I can understand the verdict if in fact the county made the mistake of not hearing the appeal in a timely manner. The law is the law."

If that's the case, Hill said, the county should bear the brunt of the judgment, rather than passing it along to the schools and cities. According to the county
controller's formula, schools typically get 45 percent of property taxes, cities 24 percent, the county 21 percent and special districts 9 percent.

"I think the county should make them whole," Hill said. "It wasn't their fault."

The Superior Court's decision stems from a years-old appeal by Genentech of its property tax assessments dating back to 1994. The court ruled that the county's assessment appeals board failed to hear and decide certain portions of the case in a timely fashion.

As a result, the court ordered the county to refund Genentech the full amount it requested for those portions. Other parts of Genentech's appeal have yet to be finalized, meaning the county could eventually owe the company even more, Murphy said.

Already, the amount dwarfs a recent, highly publicized $3 million refund to Oracle executive Larry Ellison, who won an appeal to reappraise his personal estate.

Murphy declined to say who was responsible for the procedural mistake, which happened before he became county counsel.

"I think it just unfortunately got lost in the system," he said. "There are a lot of different players here. You look back on it and, frankly, it shouldn't have happened. I don't think it's appropriate to point fingers."

He added that there have since been "changes to the system to ensure nothing like that will happen again."

Elizabeth McManus, chief business official for the 10,000-student San Mateo Union High School District, said the refund is a serious threat to local schools.

"I hope that whoever is negotiating this can feather this in" over many financial years, she said. "To impact our educational budget to this extent is a little bit difficult to swallow."

Murphy said the county counsel's office is working with the appeals board on the timing of the refund.

"Obviously, to have the impact all at one time is significant," he said. "We're just looking at all the options, and that includes possibly talking with Genentech to come up with something" workable.

News of the refund comes just after County Assessor Warren Slocum announced that property taxes rose 8.17 percent this year, thanks largely to gains in the first half of 2007. In theory, that would mean an extra $100 million to be divided among school districts, the county, cities and special districts.

"Unfortunately, a recent court ruling on the multiyear Genentech assessment appeal may nullify much of this gain," Slocum said in a written statement.

The 8 percent increase was in line with recent years despite the housing market's downturn at the end of 2007. Deputy Assessor Angelina Hunter said there has been a recent spike in property owners claiming that their properties have declined in value, but that hasn't yet impacted the overall rolls.

Hill said he expects the county board of supervisors will examine how to handle the Genentech refund at an upcoming meeting.

E-mail Will Oremus at