Call Kurtis Investigates: Fire District, Under Fire, Agrees to Work Toward Refund 'Solution'

Connect with this story on Twitter with hashtag #MetroFireTax. There is an update to this story.

SACRAMENTO (CBS13) -- Sacramento Metro Fire is working to refund more than $1 million it wrongly collected from property owners it previously said it would not, a Call Kurtis continuing investigation has learned.

Metro Fire officials said the agency was working with a state Assembly member to ensure every taxpayer will be refunded.

The revelation comes two days after a Call Kurtis investigation uncovered the agency planned not to return the money, citing a tax code section legal experts and lawmakers claimed didn't apply.

"In order to make homeowners whole, Metro Fire is working with Assemblyman Ken Cooley to find a solution," read Metro Fire's written statement from board president Randy Orzalli, "including a possible change to state law, which will enable us to provide refunds for each and every year that these assessments were collected."

Cooley, who criticized the agency Wednesday for not refunding the full amount taxed in error, assured constituents he was on the case.

"What's your confidence level that these folks will get all their money back?" Ming asked.

"I would say it's a very high confidence level," Cooley said. "I'm doing my job."

The news thrilled Andy Payne, a homeowner in Rancho Cordova who believes she's owed $800 for the taxes she paid in error.

"The wrong is being righted," she told Call Kurtis.

Payne said she feels like the little guy fighting big government -- but is happy she's finally been heard.

"It's nice to know that the little man has a voice," she said.

Metro Fire declined to go on camera, but reiterated its rationale in a written statement.

"When this mistake was discovered last year, Metro Fire took immediate action to correct the error and provide homeowners the maximum refund possible," the statement began.

"We readily acknowledge that not being able to refund tax payments beyond the four-year timeframe is a terrible result," the statement said. "We wanted to provide homeowners a refund for every year in which they were incorrectly charged this fee, but were advised the law does not permit refunds beyond the four-year limit."

"As we have said since we took corrective action, Metro Fire believes homeowners, as a matter of fairness, should be provided refunds for every year they were incorrectly charged," he said.

Assemblyman Don Wagner said the agency's situation is part of the reason clearer wording is necessary. He's written a bill that would authorize refunds for any illegal or unauthorized taxes, regardless of any statute of limitations.

He told Call Kurtis it was clear the agency should pay out full refunds anyway, even if it believed it didn't have to.

"It turns out they got caught," Assemblyman Wagner said. "Not your money, give it back."

He was one in a chorus of state elected officials who criticized the Metro Fire's handling of the situation.

On Wednesday, state Sen. Jerry Hill said the agency was hiding behind the statute of limitations.

"If you're government, you represent the people," Sen. Hill told CBS13 consumer investigator Kurtis Ming.

Senate Pro Tem Darryl Steinberg also told Call Kurtis he was looking into Metro Fire refunding taxpayers.

The agency announced it would offer tax refunds Jan. 10, after an audit discovered 3,841 Rancho Cordova properties had been wrongly charged an annual $100 fire tax.

An agency letter sent to homeowners explained it had collected a "Special Fire Tax" by mistake for tax years 2009-13. Homeowners were also sent a refund application for those four years.

But Metro Fire's letter didn't mention the agency's erroneous tax actually began in 2005, four years earlier. The agency said it will not return the $1.3 million it wrongly collected during those earlier years.

In total, the agency collected a total of $3.01 million from taxpayers it never should have taxed, a Call Kurtis investigation learned.

"A $400 check in your mailbox is awesome," said homeowner Andy Payne of Rancho Cordova, who received her refund check in mid-February for tax years 2009-13. But she found her tax records prove she paid the fire tax since she moved in to the Anatolia neighborhood in 2005.

Michael Darrett, who moved into the Kavala Ranch neighborhood in 2008, said he paid the $100 "Sloughhouse Fire Protection" tax for five years, costing him $500. He said he'll only get back $400.

"They told me that legally they only have to pay me for four years," he said.

Metro Fire spokesman Deputy Chief Chris Holbrook told consumer investigator Kurtis Ming the agency would like to return the $1.3 million it wrongly collected, but claims its hands are tied.

"Why are you only going back four years?" Ming said.

"Per legal counsel, the limitations on that was four years that we could refund," Holbook said.

The agency cited its legal counsel's interpretation of CA Revenue and Taxation Code 5097(a).

Ming asked for further clarification.

"You're telling me you can't legally return money that you never should've taken in the first place?" he said.

"Yes," Holbrook said, "according to legal counsel, the statute of limitation is four years."

"I don't think that's quite true," said professor John Sims of Pacific McGeorge School of Law.
Sims said that specific code section actually means courts cannot force a public agency to pay back taxes collected beyond four years.

"That's not the same thing as saying they're not allowed to pay," Sims said.

"So, legally they can hide behind this statute, but morally they have every opportuntiy to pay this back?" Ming asked.

"I believe so," said Sims. "They just apparently don't want to."

Taxpayer advocate Jon Coupal didn't think that was right.

"In any situation where a tax has been collected illegally, that money should go back to the taxpayers," he said.

But Metro Fire stood by the amount its refunding -- about 56 percent of what the agency wrongly collected.

"We absolutely feel we did that within the confines of the California tax code," Holbrook said.

"Conveniently, that means some money is going to be kept that never should have been collected to begin with?" Ming asked.

"I don't necessarily buy into 'conveniently,'" Holbrook said. "I think it's unfortunate."

Sims again disagreed.

"It's not really 'unfortunate' for them if it's their choice not to make the payments back," he said.

Homeowners owed money must apply with Metro Fire to receive a refund. We've posted the refund form (PDF) as well as the letter sent to homeowners (PDF). The agency said it has received about 1,400 claims as of Feb. 19. Property owners are urged to contact Metro Fire at 800-676-7516 with any questions they may have.

Taxpayer advocate Jon Coupal thinks Metro Fire should at least provide some sort of tax credits to anyone who won't get their full refund.

The original audit that discovered the mistake is available here (PDF).

The agency said the person who made the original clerical error has since retired.