Second Judicial District Court Judge Scott Freeman ruled on Aug. 27 that Washoe County has the authority to hold onto tax dollars that would otherwise go to the Washoe County School District (WCSD). The ruling dismisses a lawsuit filed by the school district earlier this year.
Some $20 million may be withheld from the school district over the next three years to repay Incline Village and Crystal Bay residents who overpaid property taxes between 2003 and 2006.
These residents are entitled to $56 million in refunds. Nearly half of that amount is interest accrued during a more than 17-year legal battle between the county and the residents.
In April, WCSD’s board of trustees voted unanimously to file suit against Washoe County, its board of commissioners and the county treasurer to stop them from withholding what was deemed to be the school district’s share of the total settlement amount awarded to the residents.
The school district received about $10 million in overpaid taxes by property owners over the course of several years. District officials acknowledged this but said it was not WCSD’s mistake and that the district used the funds appropriately.
WCSD’s financial officer and budget director have both said paying that money back, plus the nearly $10 million in interest and legal fees racked up during the protracted litigation, will deal a devastating blow to the district.
In the suit, the district’s legal counsel, Neil Rombardo, argued the county does not have the legal authority to withhold tax revenue from WCSD to pay the settlement.
WCSD Board President Angie Taylor during an April meeting of the board said she thinks it’s unfair for the 62,000 students currently enrolled in Washoe County schools to be made to suffer for a mistake that was made before most of them were even born.
Rombardo has also argued that the school district was not party to the settlement agreement and was not allowed to intervene in the litigation.
County commissioners said their vote in February to take the $20 million from the school district was mandated by court decisions and pointed to the fact that the school district has been aware since the property owners’ lawsuit was initiated that the overpaid taxes might someday need to be returned.
A statement released Tuesday said the board of trustees will be encouraged to vote in favor of having district legal counsel appeal Freeman’s decision:
“The Washoe County School District is disappointed to learn of the recent decision regarding the County’s attempt to take nearly $20 million from WCSD to pay for the settlement between Washoe County and Incline Village,” the statement reads. “WCSD believes the case cited by the Court is flawed, and the District’s legal counsel will advocate to the Board of Trustees that this decision should be appealed. WCSD does not dispute that the residents of Incline Village should receive a refund for their overpayment.
“However, WCSD also believes the County is responsible for its negligent acts and the County Assessor’s error 15 years ago.”
The next school board meeting is Sept. 14.
In addition to paying its own $23 million share, Washoe County will withhold taxes from WCSD, the North Lake Tahoe Fire Protection District, the Incline Village General Improvement District and the State of Nevada. The money will begin being withheld from these entities this month.
Some $18 million of the $56 million settlement total must be paid by Dec. 31. The full amount must be paid back to the property owners by June 30, 2024.
