National City and a former business improvement district are heading to court over the use of funds collected from a tax.
In 2005 National City created Morgan Square, a business district in downtown National City that expands from Second to 12th Street, where business owners voluntarily taxed themselves on top of their property taxes to improve their neighborhoods, said Morgan Square Secretary Ditas Yamane.
The city contends that Morgan Square should stop using the remaining $275,000 in district funds and refund money back to property and business owners.
“We are asking the court to stop Morgan Square from spending any of its funds because it is not rightfully theirs,” said City Attorney Claudia Silva. “The city now seeks compliance with state law that it refund the money after the expiration of the district to those business property owners that put money into the district.”
Yamane said the city is withholding the assessment funds from property owners that are supposed to be used for street cleaning, promotion and neighborhood improvements.
The five-year tax expired in 2010. National City Mayor Ron Morrison said Morgan Square opted to not renew their legal status as a business improvement district, therefore the tax expired after the initial five year period.
However, Yamane said it was the city that elected to not renew the tax, not Morgan Square.
“The city says the tax expired, but we didn’t expire it,” said Yamane. “They did not want to renew us, they wanted us to desist.”
She said the city of National City wants to give the money back to the business owners but she said that’s not what was agreed to.
Morrison said an agreement was made in court of what to do with the money but Morgan Square backed out of the agreement.
‘This has been before an administrative judge and things came out that would settle the situation but Morgan Square pulled out of the agreement,” he said.
The mayor did not elaborate on the agreement, citing pending litigation.
Morrison also said City Council has asked Morgan Square to provide their financial statements to be sure that the money from the taxes throughout the years was being spent appropriately, the mayor said. Morgan Square has failed to provide this information on numerous occasions.
“There are questions about the money that was collected and what happened to it,” he said. Court records filed by the city of National City state that Morgan Square will not provide accounting records to the city: “Furthermore, plaintiffs seek accounting data to determine whether monies from the district fund have been properly spent,” court records read. “Defendants will not be turning the funds over to the plaintiffs as they had previously agreed to, necessitating this Ex Parte Application.”
Morrison said he wants to hold Morgan Square accountable for its use of funds and make sure the business district used the funds legally as described in their Property and Business Improvement District.
Yamane said the city has ordered a stop to the services that should be provided and now the business district looks dirty.
She said National City shouldn’t be at odds with its business owners.
“They are supposed to help us, not fight us, let alone sue us,” she said. “They forget they are the servants of the people.”
The judge is scheduled to hear the case for an injunction on Friday, Nov. 15.