City Council to conisder payment methods for 30-year-old redevelopment valuation error

The city of Watsonville owes Santa Cruz County $1.2 million for tax overpayments it received as a result of errors made by the Santa Cruz County Auditor-Controllers Office.

At Tuesday's meeting, the Watsonville City Council will consider repaying the county with money from the city's Public Utilities Water Fund.

The complicated error was discovered during an audit of county financing of Watsonville redevelopment projects. Although the overpayment was the fault of county accounting, Redevelopment Director Jan Davison and Administrative Services Director Linda Downing are advising the council to quickly repay the money to maintain a good credit rating as it prepares to finance the $43 million 200 Block project.

Watsonville officials are working with the county to complete the project that would include a new library, city council chambers, a superior courthouse, private business space and 455-space parking lot.

Auditor Diane Hadland of DHA Consulting first discovered the overpayment. Hadland found that a 1973 valuation of one of the city's redevelopment sub-areas had been drastically understated, as much as 75 percent lower than its original value. This resulted in an overstatement of actual tax revenue in later years since revenue is based on the growth in assessed value in the project area above base-year value.

County auditors ultimately determined that the mistake was made during reprogramming of its computer systems in anticipation of Y2K.

City officials plan to appropriate a 20-year loan from the PUW fund to repay the county, though the loan could be repaid more quickly if it gains more tax revenue than anticipated in future years.

Zwire

-- Anonymous, May 25, 2004