Tax Roll Declines Gut Cities’ Efforts


While thousands of homeowners and businesses have successfully secured lower property tax assessments during a sluggish real estate market the past few years, redevelopment agencies from Brea to Santa Ana have been left with less money for downtown revitalization efforts and other economic improvements.

“These kinds of significant declines have a major impact,” said John Reekstin, administrative services manager for the Santa Ana Redevelopment Agency. “When you have assessments dropping 15%, 20%, you don’t have the discretionary revenues for major projects.”

Declining tax rolls forced the city to eliminate a program that provided grants to downtown merchants who improved their storefronts. In Brea, officials have put off construction of a fire station and slowed their acquisition of properties for new housing developments.

The situation is also causing delays for an ambitious Anaheim redevelopment project aimed at reviving a blighted commercial strip along Brookhurst Street.


While all branches of government are affected by the real estate doldrums, redevelopment agencies have been hit hardest because they depend on rising property tax collections to fund their activities.

When an agency is formed, property tax collections that go to state and local governments are “frozen” at their current levels. Any additional taxes generated above that base go directly to the redevelopment agency.

The system provides a steady source of funding during robust financial times but can cause serious problems when assessments fall.

Some agencies are so desperate that they are offering to assist the assessor’s office in defending property values by hiring independent auditors to appraise major parcels.


Other cities have begun monitoring assessment appeals hearings and occasionally provide the assessor’s office with information they hope will persuade the appeals board not to drop the property values.

Redevelopment agencies are being hurt most by assessment appeals involving major retailers, banks, office towers and industrial buildings.

The agencies receive about 1% of a property’s total assessed value. So a 20% decline on a building worth $10 million would cost a city about $20,000.

In Santa Ana, redevelopment revenues dropped from $28 million in 1992 to $23 million this year, largely because of downward assessments for dozens of office towers and big commercial properties.

The agency responded by cutting the store facade program and slashing its staff by about 20%, Reekstin said.

Mike Macres, president of the Downtown Small Business Assn., said the program significantly improved the look of Santa Ana’s Fourth Street shopping district and Fiesta Marketplace. “A lot of these small business owners used it. We were making a lot of progress and all of a sudden--boom--it was gone,” said Macres, owner of a downtown florist shop. “Many of these shops can’t afford to make the improvements on their own.”

Anaheim’s largest redevelopment zone has experienced a $3-million loss. Officials blame the decline in part on assessment challenges from defense contractors who have cut back operations at plants in the city.

“We have been hurt by the peace dividend and aerospace downsizing,” said Robert Zur Schmiede, the city’s redevelopment manager. “When a plant closes, the equipment inside is removed. What’s left is an empty building. That means a lower assessment.”


Anaheim’s downtown redevelopment district hasn’t experienced major cutbacks. But a newer redevelopment zone established in 1993 to improve Brookhurst Street has been placed in limbo by the declining values.


The city eventually plans to build traffic medians, plant trees, place utility lines underground and replace old pole signs in an effort to improve the appearance of the commercial strip.

But before the city can embark on most of the public improvements, property assessments must begin to rise again, Zur Schmiede said. Right now, tax revenues are actually running below the “base year” cap established in 1993.

“To really start moving ahead with this, we need tax increment,” Zur Schmiede said.

Some officials fault the assessor’s office and the appeals boards with sometimes lowering property values too much.

Susan M. Georgino, director of the Brea Redevelopment Agency, said the assessor has based reductions of some commercial properties on countywide market conditions rather than by looking at conditions in Brea.

“We haven’t seen that kind of dip in the real estate market,” she said. “We aren’t experiencing the heavy vacancies in retail space. But at the same time, the assessor is reducing these appeals based on the general marketplace.”


Officials at the assessor’s office defended the accuracy of their work, saying that all appeals are studied individually.

“We take as much time as necessary to determine the correct value,” said Webster Guillory, a project manager at the assessor’s office. “We do not generalize.”

Guillory said his office gladly accepts any information redevelopment agencies provide about individual properties. But state law prohibits cities from presenting their own appraised values for a property during an assessment appeals hearing, he added.