Officials from the Arizona League of Cities and Towns protest the former South Tucson finance director’s use of their letterhead in defending a secondary property tax imposed without voter approval.

Ruben Villa has cited a 1990 letter penned by the league and sent to the city of Mesa as one of two legal opinions he relied on in deciding not to recommend a public vote.

“That is totally apples and oranges,” league Executive Director Ken Strobeck said Monday. “It’s a red herring.”

Among the reasons Strobeck and Deputy Director Tom Belshe cite:

  • The letter is more than 20 years old and was addressed to another city on another subject. The question was whether to refer a budget to a referendum.
  • The league provides general guidance, not legal advice. Cities should seek multiple opinions and include consultation with specialized bond attorneys.
  • One of the assumptions in the letter is that the tax was lawfully imposed, which would include voter approval prior to the city taking on a debt for capital infrastructure. In South Tucson, none of those conditions existed: There was no public vote at any point, and the debt was not for capital infrastructure.

The South Tucson City Council included the secondary property tax — which was advertised as a way to pay off a previously financed bond backed by excise taxes — in its fiscal year 2011 budget, the league said.

The tax brought in about $600,000 each fiscal year since, city officials say.

Former finance director Villa said the question he was seeking an answer to before recommending the tax was: “To pay for existing debt, can you use the city’s taxing authority?”

The league’s Belshe said, “The answer is definitely no.”

Debt financed under one financial instrument cannot be later transferred to another, he said, regardless of whether there is a public vote.

The secondary property tax is the one debt instrument that always requires voter approval, he said.

Neither Belshe nor Strobeck remember a conversation with Villa while South Tucson’s tax was being considered.

Villa provided the Star with an email requesting a copy of the Mesa letter in October 2011, which would have been after the tax was imposed. He couldn’t reconcile the time gap.

Villa followed up with an inquiry to Strobeck’s office manager, Sandra Morari, about whether there had been any other opinions on voter approval to adopt a secondary property tax. She replied that there was not.

Villa said Monday that the Mesa letter was on point and answered his question.

The manual the league distributes to finance directors did not address his situation, Villa said, as it did not explicitly distinguish between general-obligation bonds, which are used to finance capital infrastructure, and revenue bonds of the type South Tucson was looking to repay.

He did not know whether a public vote had authorized the original debt.

Villa said his eventual calculation was this: Will the effect of a secondary property tax on residents be less than doing away with the fire department or the police department?

“It was either that, default on the loan, water down services even more, cut public safety even more,” he said. “If we erred, we didn’t do it in an intentional way.”

Villa left the city in September due to exhaustion, he said. He currently works on the budget for the city of Tombstone.

The tax that was approved was improper, if not illegal, current South Tucson City Manager Luis Gonzales said.

Gonzales, who was hired about a year ago, has recommended that the City Council stop imposing the tax for the fiscal year that begins July 1 and consider a criminal investigation.