County residents will see a small reduction in their sales tax after Jan. 1, 2022. The judgement bonds have been paid off, and, with the passage of a resolution by the Board of Supervisors at their Nov. 1 meeting, the sales tax set to pay for them will end at the start of the new year.
“This is great news for the county,” County Administrator Megan Spielman told the Supervisors.
In an e-mail to the Pioneer, Spielman said the bond trustee, the U.S. National Bank Association, had enough funds from the County’s Judgement Fund Bond Excise Tax to pay off and retire the remaining bonds. She was this was being done earlier than projected when the bonds were initially issued. She credited this to the strong performance of the tax as well as the county’s annual early redemptions.
The bonds were used to pay off a judgement in the case of La Paz County v. Yakima, which stemmed from an agreement from the mid-2000s where Yakima operated a municipal sludge-drying facility next to the county landfill. The relationship turned sour, with both sides claiming the other broke the contract.
In a trial in La Paz County Superior Court that ended in September 2007, a jury found in Yakima’s favor and awarded them $9.2 million in damages. The county’s appeals were denied by the state appeals court and the Arizona Supreme Court.
By 2011, penalties and interest had increased the judgement to more than $15 million. Facing legal pressure, the county pushed for the passage of SB 1178, which would allow them to issue bonds to pay off the court judgement. With the passing of the legislation, the bonds were issued and the county instituted a 1 percent excise tax to pay them off.
At the time, county official said an excise sales tax was the fairest way to pay off the judgement as everyone in the county would be paying for it, including visitors. The revenue was collected by the state and sent to a trustee to pay off the bonds.
Spielman said the cash held by U.S. National Bank Association exceeded the outstanding principal on the bonds by over $900,000, and will likely be closer to $1.1 million once all the payments are made. She said the excess funds will be wired to the county’s general fund.
Spielman said the Supervisors needed to approve a resolution in order to end the tax. She said she’d been in contact with the county’s bond counsel, the State Treasurer’s Office and the Department of Revenue on how to end the tax.
“I’m told the Department would like to stop the tax after Dec. 31,” Spielman said in her email to the Pioneer. “The DOR has a couple mechanisms for taxpayer notification of the impending change, but it will be necessary to do what we can locally with press releases / advertising / etc. to minimize the amount and length of trailing collections.”
The Supervisors said they were happy to hear the sales tax for the judgement bonds will be ending.
“It’s been a long time coming,” said District 3 Supervisor Holly Irwin. “I’m glad it’s done.”