Retiring Debt

TUSD just realized it owes money in a retirement-system lawsuit, and guess who pays?

Tucson Unified School District, already set to whack taxpayers with an 8.3-percent increase, now wants property owners to bail the school system out of a $1.5 million jam that its lawyers and lobbyists failed to see two years ago.

TUSD officials, including Superintendent Stan Paz, are scurrying for support from the Pima County Board of Supervisors for the tax and budget add-ons that will pay for costs resulting from a class-action lawsuit filed five years ago against the Arizona State Retirement System.

Supervisors on August 20 will formally adopt and set the levies of taxes for the county's five categories of property taxes as well as for municipalities and for TUSD and the 15 other school districts in Pima County, Pima Community College, 18 fire districts and 21 improvement districts.

While state law places tax rate adoption for jurisdictions within each county with Boards of Supervisors, no Pima County Board of Supervisors has even contemplated rejecting a tax rate forwarded by a school district.

But the Arizona Tax Research Association has won victories when the Maricopa County Board of Supervisors denied or chopped three straight tax increases sought by the Phoenix Unioni High School District. The association, which is supported by business and other taxpayers, also has protested TUSD's high property taxes, the district's tax increase and the district's $62.4 million (a 15-percent increase) desegregation budget for the 2001-02 fiscal year that began July 1.

Paz has met with supervisors to try to convince them that TUSD had nothing to do with the extra expense and no way to prevent it. He has strong backing from Raúl Grijalva, the Democratic chairman of the Board of Supervisors and a former three-term member, ending in 1986, of the TUSD board.

Throughout his 12 years on TUSD board and 13 years as a county supervisor, Grijalva has pushed for more spending and more taxes. Indeed, he and fellow supervisors refuse to repeal an 11-percent increase in property taxes imposed two years ago specifically to eliminate the debt at Kino Community Hospital and the county health system, once approaching $60 million. Pima County's property taxes--the highest of any Arizona county--and the windfall of higher property values and new construction enabled early payoff of the debt.

Paz and TUSD's attorneys from DeConcini McDonald Yetwin & Lacy won approval from the TUSD board in February to seek county permission for "excessive and unexpected legal expenses."

Parties in the retirement system lawsuit reached agreement in May 1999, and TUSD's share was put at $932,646. Judge Michael Alfred of Pima County Superior Court later set attorneys' fees at a total of $7.4 million, of which TUSD is to pay $610,747. The total settlement was more than $11.3 million.

"The burdensome nature of this expense is self evident from the mere size of the required payment," TUSD says in a petition to the county prepared by its lawyers and signed by board President Carolyn Kemmeries.

Property owners would have to cover this latest expense. But because county and TUSD property taxes are so high, homeowners have been exempted through state law from any additional taxes to pay for daily operations of schools or the county and city.

Business and all other non-residential property will suffer as they will under the tax increase already approved by Kemmeries, Mary Belle McCorkle, Joel Ireland and Judy Burns. That tax will hit the owner of a $250,000 business property with another $337, bringing the total TUSD tax bill for that business to nearly $6,000. To cover the costs in the retirement system lawsuit would be another $31.25 for that business property.

While Paz is lobbying supervisors, TUSD's lawyers and its own legislative lobbyist, Sam Polito, missed the action in May 1999 when the Legislature responded to the retirement system settlement by enacting a law that spread out payments to 54 governments and school districts. The state's liability, for example, is nearly $6.5 million. Pima County was forced to pay $40,733. Amphitheater Public Schools was forced to pay $159,242 while Sunnyside Unified School District's bill was $96,818.

In the petition Kemmeries signed for higher taxes, TUSD now complains that legislation was somehow cloaked. "Buried in an obscure section of an exhibit to the settlement agreement, however, was a provision that the Arizona State Retirement System would also seek to secure passage of legislation requiring the employers of [the plaintiffs] each to pay a proportionate share of the attorney fees."

Lawyers for the state are seeking court reconsideration of the attorneys' fees, and TUSD is paying its attorneys to intervene in that matter.

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