The recent decision to raise taxes to fund the Measure C bond debt of the Tahoe Forest Hospital District has left local homeowners confused, some saying they would not have voted to approve the $98.5 million expense if they had realized they were effectively giving the hospital board the unchecked ability to increase property taxes.

“I was blown away. Did I not understand what I was voting for, or did our community lead us astray when we voted?” said Truckee homeowner Mimi Vadasz. “I am going to look into every measure now before I vote.”

Vadasz is not alone.

Advertisement

“Seismic improvements and keeping the maternity ward open was the thrust of the campaign,” said Leisa Peterson, admitting that she, too, did not fully understand that the tax rate could triple, as it has. The hospital board members raised the rate to $30.67 per $100,000 of assessed property value at their July 31 board meeting.

Peterson supported the 2007 campaign to approve Measure C and later served on the Citizen’s Oversight Committee, which was charged with monitoring how the bond funds were spent.

Like many voters, Peterson believed that without the funds Tahoe Forest Hospital would be forced to close its maternity ward. Ballot arguments said as much: “Without Measure C, maternity will likely close, and women will have to travel at least 45 minutes for maternity care.”

In a town like Truckee, where snowstorms regularly close Interstate 80, that’s a scary proposition.

Peterson said she resigned from the Citizen’s Oversight Committee after 18 months because she felt powerless and sensed that her questioning of the board’s financial decisions was not welcome.

“When they got the estimate for an allocation of $33 million that was to go to the cancer center, I felt like it was a betrayal of what voters had approved,” she said. “Personally, I didn’t understand how a line item became such a huge part of the budget.”

“Enlarging” the cancer center was one of the hospital’s goals in 2007. The ballot measure also promised to expand and upgrade the emergency room, make critical seismic improvements, and guarantee the continuance of maternity and women’s health services. The cancer center, which had not been the primary thrust of the campaign, was the most costly project funded by Measure C, ultimately costing $32.6 million, with the lion’s share funded by the bonds.

Measure C, which was approved by 72 percent of district voters in both Nevada and Placer counties, was billed as a $98.5 million bond measure that would be financed by an estimated average tax rate of $9 per $100,000 of homeowners’ assessed property value over 30 years. General obligation bonds require at least a two-thirds majority vote.

The bonds were to be sold in three separate issues, each of which would be repaid over 30 years. Hospital consultants projected that property values within the district would continue to appreciate at a rate of 8 percent per year, and that this ever-increasing tax base would be more than adequate to meet annual debt service, which is the interest paid to bond holders.

But that’s not what came to pass. Property assessments within the hospital district began to fall below projections starting in 2009. In the fiscal years 2010-11 and 2011-12, things dramatically worsened; total property value within the district actually decreased more than 4.6 percent and 1.9 percent, respectively.

When that came to pass, the property taxes collected under Measure C were suddenly insufficient to meet debt service, which is projected to be just under $4.7 million for 2012-13, according to the board resolution approved in July.

To make up for falling property values, the district subsidized its annual debt service by nearly $1 million over the last two years. But at the July 31 board meeting, the board members decided to stop subsidizing its debt to bond holders, and instead raised the tax rate to the amount needed to meet the Measure C obligations in full.

“As you may know, debt service on bonds can only be estimated. The estimate was a conservative best estimate based on valuation history,” said Paige Thomason, director of marketing and communications for the hospital. “No one can predict how property values will fluctuate, just as no one can predict what will happen in the market place with interest rates.

“No one expected a recession, or the impact it had on property values everywhere. We had expectations about what it would cost homeowners, though there could be no guarantee.”    

The tax hike is perfectly legal. In fact, it contributed to the respectable Aa3 rating Moody’s assigned to last summer’s $26 million bond issue, the last of the series.

“The outlook incorporates our expectation that the district will continue to generate solid operating results and that the recent economic pressure on the tax base will not be sufficient enough to prompt a change in rating,” Moody’s reported in July. “The bonds are secured by the district’s unlimited property tax pledge.”

Nothing in the ballot language prohibits the hospital board from raising the tax rate, but the current confusion stems from the fact that voters weren’t clearly aware of that fact in 2007.

“Did I see it might go to a high of $17? Yes,” said Truckee resident Gaylan Larson. “I had no idea they could triple it. I never understood how bonds could do this.”

A modest rise in Measure C tax rates was not unforeseen. The official impartial analysis by then-Nevada County Counsel Robert Shulman that was included in the ballot in 2007 estimated it would peak at a tax rate of $17.42 in 2014-15.

The confusion is not atypical, said Jon Coupal, president of the Howard Jarvis Taxpayer’s Association. “These general obligation bonds, the way bond counsel structures them, is to make sure they’re always paid, irrespective of what was promised to the voters,” he said.

~ David Bunker contributed to this article.

Author

  • Jackie Ginley

    Jackie Ginley is a former journalist and Moonshine editor who shelved the pen in 2013 to pursue a career in real estate. With deep roots in Tahoe, she enjoys hiking, skiing, and après-everything with friends. Jackie lives in Truckee, and is currently building a home in Tahoe Donner.

Advertisement
Previous articleDear Editor: The Legacy of Ollie Henrikson
Next articleWhat Happy Hour Makes You Happy?