O.C. Property Owners Fight for Tax Relief

Recession-battered homeowners and businesses, fighting to keep their property taxes down, are flooding county officials with what appears to be the biggest batch of assessment appeals since voters enacted Proposition 13 in 1978.

The deadline for property owners to file appeals of their 1992-93 tax assessments is Tuesday. But officials are already predicting that the number of appeals will match or surpass the total of last year, when appeals began to escalate and the owners of 12,000 properties contested their assessments.

There were 724,166 individual real estate parcels on the county’s tax roll this year, plus 146,952 business assessments.

The number of appeals “will be equal to last year, or it could exceed it,” said Howard Whitcomb, an administrator in the county assessor’s office. With a backlog of more than 17,000 appeals still pending as of July, he added: “This means a lot of work for us. There’s a limit as to how much we can do.”

As a result of the enormous increase, the Assessment Appeals Board, which convenes Mondays, Wednesdays and Fridays, has doubled the number of hearing officers assigned to determine whether tax assessments should be changed.

Even before the current onslaught of appeals, the assessor’s office noted declining sales prices in some areas of the county in 1991 and rolled back the values of 9,836 properties. It also decided not increase by the 2% allowed under Proposition 13 the tax assessments for another 10,144 parcels.

The reductions occurred after the office reviewed about 195,000 single family homes and 5,000 commercial, industrial and multifamily residential properties that had either sold or transferred ownership between 1988 and early 1991.

According to an internal memorandum, the office wanted to make sure that property values did not exceed the market values of the property as required by state tax law. The review began on May 17, 1991, was completed two months later, and the reductions were reflected in the current tax roll.

The all-time record of appeals, however, is not in danger.

This year’s number of appeals will not even approach the peak reached in 1978-79 in the wake of Proposition 13, which limited the rate of property tax increases. Questions and confusion over the impact of that landmark ballot measure resulted in more 30,000 appeals that year alone, Whitcomb said.

But in the years since, appeals have averaged between 6,500 and 7,000, Whitcomb said. Officials blame the sharp rise over the last two years on tough economic times.

“It’s because of the recession,” said Thomas Childress, manager of real property in the assessor’s office. “Some property values have dropped, and so we are seeing more appeals because of it.”

The assessment notices went out in July, with the first half of the property taxes due to be paid in December. In general, the taxes that are levied on any particular property amount to 1% of the assessed value, plus smaller amounts to retire bonded indebtedness incurred by certain taxing districts within the county. Barring a sale or new construction, most homeowners will see an annual tax increase of about 2%.

Assessor’s officials said the majority of the property owners contesting their assessments will likely be recent buyers who don’t understand why the appraised values of their homes have gone up even as market values decline.

Jon Krueger and James Cavanaugh appear typical in their appeals.

“This is the first time I’ve ever done this,” said Krueger, who is contesting the county’s $392,646 appraisal of his two-bedroom home in Dana Point.

“It’s the principle of the matter. It’s only a difference of a few hundred dollars (in property taxes), but it’s worth it to me.”

Krueger said he bought his home three years ago for about $375,000 and, based on a recent independent appraisal he got while refinancing the home, believes it is worth $370,000 now.

Similarly, Cavanaugh believes his three-bedroom townhome in the Turtle Rock area of Irvine has depreciated since he bought it two years ago for $478,000. “That was at the height of the market. . . . I never knew that it would go down the way it has,” he said.

“The way they’re selling the new homes around here now, it’s worth much less than the value I bought it at,” Cavanaugh said.

The county assessed his home at $481,000, but Cavanaugh is contending in his appeal that a fairer market value is $389,000. “I just couldn’t see paying that kind of rate,” he said.

The county’s own figures bear out concerns about the declining market. The assessor’s office reported six weeks ago that Orange County’s property value this year grew by the smallest annual amount in a decade. This year’s growth rate of 5%, bringing the county’s property valuation to $173 billion, was less than half its usual pace, assessor’s officials reported.

Childress of the assessor’s office said that if property owners such as Cavanaugh and Krueger document their cases, they can win a rate reduction.

“If they can get us some evidence to support what they’re saying, we will recommend a decrease in the value,” Childress said.

What people don’t generally recognize, said Whitcomb, is that the tax restraints imposed under Proposition 13 mean that many homes are consistently undervalued.

In the last several years, Whitcomb said, Southern California property owners have been inundated with news about plummeting sales prices, “so then when they receive a notice in their mailbox that their property tax is going up 2%, the two seem inconsistent.

“Unfortunately, (the assessment process) is too technical for a lot of people to understand,” Whitcomb said. “And a lot of people’s opinions on the value of their property are based on anecdotal evidence.”

Appeals forms can be picked up at the county assessor’s office at room 142, 630 N. Broadway, Santa Ana. The forms must be postmarked or handed in by Sept. 15. Appeals can take up to two years to process, officials say.