County to pay for overvaluing land

Biotech giant Genentech stands to receive a tax refund from the county to the tune of $20 million — and that amount could increase.

The company, which is the county’s second-highest property tax payer, has been disputing its property tax since at least 2003.

Genentech took the case to San Mateo County Superior Court, which on April 1 issued a ruling that the company had been overtaxed.

The court decision cut the value of the land in half, retroactive to the 1990s, according to Terry Flinn of the county’s Office of the Assessor.

The court then sent the case to the Assessment Appeals Board to hammer out what the current value of the land should be.

The board issued its ruling on that question last week, and determined the land was worth much less than the county had deemed.

The county is still calculating the exact amount of the tax refund, a process that could take weeks or months, appeals board Clerk Jack Yaco said. But early estimates peg the refund amount around $20 million, Flinn said.

The tax Genentech has been overpaying since the ’90s has been distributed across the county all along; now, every entity that has received any will have to give it back, Deputy Controller Kanchan Charan said.

About 20 percent of the refund will come from the county’s budget, but should be covered by the county’s reserves, County Manager John Maltbie said.

The fight about the property taxes is not over.

The decision made by the appeals board last week affects just eight of the parcels owned by the biotech company, and the company has disputed the tax on many other parcels as well. According to Yaco, Genentech has some 270 appeals before the county.

Genentech spokeswoman Caroline Pecquet said the company is simply trying to get its due.

“Like any other taxpayer, we simply want to pay the amount of tax that we believe is legally owed,” she said.

The news about the tax refund comes as local governments and school districts already are facing cuts due to the state’s budget crisis, and just three months after they were forced to pay a $3 million tax refund to Oracle CEO Larry Ellison, who successfully appealed his property tax as well.

Schools brace for hit from refund

Schools that are staggering from state cuts could be hit even harder by the tax refund to Genentech.

About 45 percent of property taxes go to county school and college districts, so if the county refunds $20 million to the biotech company, about $9 million will come from schools.

In the case of Sequoia High School District, which receives more than 5 percent of the property taxes collected by the county, this could mean coming up with more than $1 million to return to Genentech.

“This hit alone will eat up all of our reserve for tax refunds and more,” district Superintendent Pat Gemma said.

To make matters worse, the refund order is likely to come in the fall, after all decisions about staffing and programs already have been made.

“We’re going to have to get all the decision-makers in the district together and go into a crisis mode,” Gemma said. “We’ll have to compile a list of potential cuts as far away from the classroom as possible.”

When billionaire Larry Ellison was granted a $3 million tax refund earlier this year, the San Mateo Union High School District had to dole out about $200,000, district Deputy Superintendent Liz McManus said. She said the Genentech ruling will make a much larger dent in the district’s reserves.

“It’s been in the hopper for several years. You always want something like this goes away, and that’s what we’ve been hoping for,” she said.

— Katie Worth

By the numbers

Genentech could receive a tax rebate from San Mateo County

$20 million: Estimated refund

$9 million: Estimated funds to come from schools and colleges

$3 million: Refund Oracle CEO Larry Ellison received

8: Parcels of land refund is for

16: Genentech tax appeals settled with the refund

270: Tax appeals Genentech has pending

$1.6 billion: Value of Genentech’s property in San Mateo County in 2006

1.3: Percent of county’s total property owned by Genentech

Sources: San Mateo County Controller’s Office, San Mateo County Council, San Mateo County Assessment Appeals Board

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