Orange County’s Fight With Cable Firms Escalates

In the first of what promises to be a long series of high-stakes legal proceedings, the Orange County assessment appeals board Wednesday heard opening testimony in the rancorous dispute between the county’s cable television companies and county Tax Assessor Bradley Jacobs.

The controversy centers on radically higher property tax assessments that Jacobs imposed on 10 county cable-TV operators last year. The cable companies say the new assessments, which in some cases have increased property tax bills nearly 400%, are discriminatory and illegal.

Jacobs and his deputies maintain they are simply responding to the rapid appreciation in the value of cable TV franchises and meeting their Constitutional obligation to assess all property at fair market value.

Cable companies and county tax assessors in several other areas of the state are embroiled in a similar controversy.

Until Wednesday, the dispute in Orange County had been played out largely in a series of newspapers advertisements, press releases and cable-TV bill inserts put out by the cable companies. The cable operators say the new tax assessments will require a $1 to $2 per month increase in basic cable rates. Several companies have already added the charges to consumers’ bills.

The three-person assessment appeals board, a quasi-judicial body appointed by the county Board of Supervisors, will ultimately decide whether to uphold or reduce Jacobs’ assessments on individual companies.

The board’s decisions can be challenged in state court, and they often are in important cases. In addition, 10 cable companies have also sued the county, Jacobs and other officials, alleging that the new assessments violate their Constitutional rights.

Wednesday’s hearing, inauspiciously convened in a dilapidated Civic Center hearing room, involved American Television & Communications Corp., a subsidiary of Time Warner Inc. that operates the Cablevision system in the city of Orange.

ATC’s property tax increase, from $122,607 in 1988 (based on an assessed value of $11.8 million) to $189,359 in 1989 (on a value of $18.3 million), was actually much less than for many of the other companies because the ATC system has not been sold in recent years.

Proposition 13 places a 2% cap on the amount that an assessment can be increased in one year unless there’s a change in ownership. The ATC increase, however, also reflects an assessment for new construction, which is not shielded by Prop. 13. ATC and the other companies are also disputing retroactive “escape” assessments that require additional tax payments for 1985-1988.

In arguments that will be repeated again as the nine other firms move through the appeals process later this year, cable company attorney Paul Gordon said his client’s property consists of “fairly sophisticated electronic equipment, several hundred miles of cables and a large number of converter boxes.” He said the property tax assessment should be based on the replacement cost of that equipment, minus depreciation.

“The assessor,” Gordon maintained, “is taking the business value and saying all the value of our business is in the property.” That methodology, he said, results in an assessment that is “off the chart,” a property value far higher than any buyer would reasonably pay.

Gordon also asserted that the assessor had decided that “we should be treated differently from all other businesses because we are a monopoly.” Cable-TV companies, he argued, are not in fact monopolies.

The assessor’s representatives--two county attorneys and three deputy assessors led by Ron Cooper--declined to present an opening argument. But in a brief filed with the board, the assessor notes that three methods--replacement cost, income and comparable sales data--can legitimately be used in computing property values.