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Court Ruling on Property Taxes Raises Reimbursement Questions

Sept. 16, 2008 — Fiscal year 2006 property-tax bills have been recalled, but government officials are not sure whether they also have to reimburse residents who have already made their payments, according to a Justice Department spokeswoman.
In a memorandum opinion that came down late last week, V.I. District Court Judge Curtis Gomez said the government knowingly violated a 2003 court order
when it decided last month to issue property-tax bills reflecting newly assessed property values and a property-tax rate structure recently signed into law by the governor. The 2003 order prohibits the government from issuing bills at anything other than the 1998 tax levels.
Gomez ordered the government to pay $5,000 a day — and rescind all recently issued fiscal year 2006 property-tax bills — until it comes back into compliance with the settlement agreement. Meanwhile, some residents have expressed concern about what the government is going to do with individuals who have already paid the bills.
"The judge's order did not specify what would happen to those residents," said Sara Lezama, DOJ spokeswoman, when contacted Tuesday. "But the government is making all efforts to comply with the order."
The government has also recently appealed Gomez's decision.
In 2000, a group of commercial-property owners took the V.I. government to court, alleging that it was assessing commercial properties based on replacement rather than actual property value — a method, they said, that resulted in inflated assessments. Thomas Moore, then the sitting U.S. District Court judge, agreed, and in 2003 ordered the government to conduct a thorough revaluation of commercial and residential properties.
Meanwhile, property-tax values were frozen at 1998 levels until the project was complete and a new assessment system — which had to be certified by a court-appointed special master — was established. The court case and revaluation process prevented the government from issuing property-tax bills for 2006 and 2007, government officials have said.
Though the injunction is still in place, bills for fiscal year 2006 still went out last month, prompting attorneys for the commercial-property owners to file a motion to find the government in contempt of the court's 2003 order. In his opinion, Gomez granted the motion and also ordered the government to pay the property owners' attorney fees, along with other costs racked up during the "litigation of the contempt issue."
In a show-cause hearing held earlier this month, attorney Jim Derr — representing Berne Corp., one of the original plaintiffs in the case — also suggested that the government refund all FY 2006 property-tax payments already made by residents. Gomez's order does not include that provision, but rather calls for up to $100,000 in "property-tax revenues" — the judge does not specify from which tax year — to be deposited into a new Property Tax Contempt Expense Fund that will be used to cover various costs the government has to pay as a result of the contempt order.
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