ALAMEDA -- At a sparsely attended school board meeting Tuesday night, trustees approved earmarking nearly $6 million of the district's reserve fund in case a court rules against the district in a lawsuit.

If that happens, the district may have to pay up to $7.4 million to owners of large commercial properties.

In 2008, voters approved Measure H, a parcel tax that levied higher rates to owners of commercial property with more than 2,000 square feet. The flat annual rate of $120 was applied to residential and small commercial properties, but those with more than 2,000 square feet of commercial property paid 15 cents per square foot. The tax, Measure H, expired in 2011, but a lawsuit filed by landowners challenging the legality of the measure is still wending its way through the courts.

The state Court of Appeals decided that a portion of the parcel tax should be invalidated. If that decision isn't overturned by the state Supreme Court, the district could be required to refund some of the taxes. In response, the district has designated up to $5.8 million from the reserve fund as a legal contingency.

The total reserve fund is about $8.8 million, $3 million of which is the district is legally required to maintain. The district issued a statement saying if the court orders refunds, it would put at risk revenues for educational programs and teachers. The district may appeal to the state Supreme Court, depending on its ruling.

Robert Shemwell, the district's business chief, said tagging the money from the reserve is a way of showing the state the district is prepared to handle the litigation without breaking its budget.

"We're just shoring these dollars up so they won't be used for something else," he said. "It's the beginning of an insurance policy for us."

As to the paying the remaining projected gap $1.6 million for the projected $7.4 possible refund, Shemwell said many questions remain about this issue, and there is no certainty it will even come to refunds. But, he said, if it did, the district would try to arrange options such as time payments.

In other business, the board also voted to ratify the teachers' contract. It includes a 2.5 percent retroactive ongoing raise for school year 2012-13, an additional 0.75 percent ongoing raise in 2013-14 and a 1.25 percent one-time increase for 2013-14.

A proposed additional 1.75 percent ongoing raise will be decided in January 2014, depending on the district's budget.

The agreement also includes a stipend for speech and language pathologists and moves career technical education teachers to the main teacher salary schedule.

Trustee Mike McMahon was the sole no vote on the contract.

"I find it fiscally irresponsible for the district to give permanent raises when there has been a 10 percent overall reduction in funding," he said. "It is being restored, but people have failed to realize we are still making up for that reduction."

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