A clerical blunder may cost San Mateo County and its schools and towns $20 million, which is what a judge says is owed to South San Francisco-based Genentech.
School funding accounts for approximately 40 percent of the $20 million due to Genentech, according to County Counsel Michael Murphy. The county’s share is about $3 million, he said.
The refund could mean a financial blow to school districts, cities and agencies in the county — or, under a proposal by Supervisor Jerry Hill, the county’s reserve fund could absorb the entire amount.
Essentially, Genentech won a lower assessment of some of its property on a technicality. In 2005, a clerk accidentally omitted the parcel numbers on a legal notice of the assessment appeal filed by the bio-tech giant, said Mr. Murphy.
Lawyers for Genentech argued that this screw-up caused the county to miss the deadline to hear the company’s appeal. If the deadline is missed, the property value defaults to whatever the appellant — in this case, Genentech — claims the property is worth.
A Superior Court judge agreed with Genentech, and now county officials are reeling at the thought of paying back an estimated $20 million in property tax overcharges dating back to 1994.
Genentech’s massive campus accounts for nearly 1 percent of all property taxes collected in the county, said Mr. Murphy.
Supervisor Hill told The Almanac he hopes the county can negotiate a more favorable settlement with Genentech, but barring that, schools and cities should be shielded from paying back their share of the money. Cities and schools rely on the county to properly assess property taxes and distribute the tax money to them, he said.
“If we didn’t do that correctly, or a mistake was made in the process due to no fault of theirs, (cities and schools) shouldn’t be held responsible,” Mr. Hill said.
Mr. Hill said that, since the Genentech issue is an ongoing legal matter, he can’t say whether his idea was discussed by the Board of Supervisors in last week’s closed session meeting about the judge’s decision.
San Mateo County’s budget has a structural deficit projected to last for several years, Mr. Hill said, but there is a healthy reserve fund.
“The county is in a rough situation in the long run,” he said. “But we do have a comfortable level of reserves. We’ve been very fiscally responsible.”
In a recently adopted budget, reserves were projected to remain healthy at almost $210 million, or 21 percent of spending.
School districts
The idea of the county absorbing the financial blow sounds good to Tim Hanretty, the acting superintendent of Woodside Elementary School and the assistant superintendent of the Portola Valley School District.
“I think that’s a wonderful idea. The worst-case scenario is that it has to be all paid back in one year, and the best case is what Supervisor Hill is proposing,” Mr. Hanretty told The Almanac. “This comes two weeks after we’ve all adopted our budgets, so the timing couldn’t be worse.”
Portola Valley has some experience with painful property tax reassessments. The district expects to lose about $300,000 this year, its share of a $3 million hit to the county when Larry Ellison successfully challenged the valuation of his Woodside estate this spring.
If schools do end up chipping in to pay back Genentech, “basic aid” districts such as Portola Valley, Woodside Elementary, Las Lomitas and Menlo Park will have to take the hit, said county Supervisor Rich Gordon. Poorer school districts — so-called revenue limit districts that receive per-pupil funding from the state — can apply to the state for reimbursement, Mr. Gordon said.
“Revenue-limit districts would have to have funds back-filled by the state. They have to be made whole,” he said.
Mr. Gordon said he’s still waiting to see a breakdown of exactly where the $20 million would come from, but it wasn’t available as of The Almanac’s press deadline on Monday.
