An Orange County grand jury report’s allegations of illegality and conflicts of interest surrounding the setup of a controversial downtown property tax are false, Santa Ana city officials assert in their official response.

Officials with Downtown Inc., the downtown booster organization financed by the tax, hailed the city’s response as a “victory” for the beleaguered nonprofit, which has found itself center stage in a bitter fight between property owners who pay the tax.

The organization has also been criticized as being a tool for gentrification forces intending to erase Latino culture from downtown.

“Downtown, Inc. is pleased to have the question the legality of the assessment of downtown property fully behind it now and looks forward to continued success in revitalizing Santa Ana’s newly vibrant downtown for the benefit of all users and the City as a whole,” Downtown Inc. Board Chairman Ryan Chase declared in Downtown Inc. news release.

The grand jury issued a stinging report about the tax district in June, finding that the district was illegally formed, that revenue from the district was spent only to benefit a handful of property owners and that a politically connected developer’s close relationships with city officials and Downtown Inc. are conflicts of interest.

While city officials in the 22-page response adamantly defend their position that the tax district was set up properly, a cover letter from Mayor Miguel Pulido, who recently came out against the tax, acknowledges a breakdown in communication between the city and property owners that likely fueled the conflict.

“With the advantage of hindsight, the City would generally agree that all would have benefited from better communication with and between property owners during and after the formation of the district,” the letter reads.

Many property owners said they weren’t aware of the original election to form the district until after it passed. Only 25 percent of property owners within the district cast votes.

The district faced resistance from a group of property owners who argued that the tax was overly burdensome — it more than doubled property tax bills in many cases — and produced little benefit. Proponents have argued that the Downtown Inc. services are necessary to revitalizing downtown.

The tax won’t be levied this year because a divided City Council couldn’t muster enough votes to pass it again. Downtown Inc. Executive Director Vicky Baxter said that the organization has enough cash to continue operating through the end of January, although services have been reduced to only the security and cleanup programs.

Downtown Inc.’s board of directors will be meeting this month to find other ways to fund the organization and have no plans to shut down, Baxter said.


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