Ruled Tardy on Tax Appeal, O.C. May Cough Up Millions

A state appeals court has ruled in favor of an Orange County taxpayer who was denied a property tax reduction in 1994, a decision that could cost the county millions of dollars in refunds involving 1,500 property owners.

The homeowners and businesses said the county owed them the tax cuts because officials failed to consider their appeals within two years. Under state law, appeals must be heard within two years. If they are heard any later, the county must accept the taxpayer’s proposed value for the property.

The appellate justices for the 4th District ruled Wednesday that the county didn’t follow the law. In the intervening years, the judges said, the county also has failed to notify those taxpayers that they could be due refunds for overpayment.

The original case was filed by William Bunker, a San Juan Capistrano homeowner. It later became a class-action case because plaintiff attorneys produced evidence that Bunker was one of 1,500 property owners whose appeals were not heard within the two-year deadline.

“The court of appeal is saying Orange County has no excuse for not informing 1,500 taxpayers that it missed the two-year deadline and should have adopted the lower [property] value,” said Robert Julian of San Francisco, one of the plaintiff attorneys. “These taxpayers don’t even know their rights were violated.”

County Counsel Benjamin de Mayo said he hadn’t had a chance to brief the Board of Supervisors on the ruling and couldn’t say whether it would be appealed to the state Supreme Court. He said he wouldn’t comment on the ruling before speaking to the board. He said he would meet next week with Assessor Webster J. Guillory to discuss the situation.

It is the second court decision in a year faulting the county for its property tax procedures. A Superior Court judge ruled in December that the county’s method for assessing property was unconstitutional because some assessments exceed the 2% limit established by voters in 1978. That case is pending.

The Bunker case stems from efforts by taxpayers to have their property values lowered during the early 1990s, when land values in Orange County were dropping because of a sagging economy.

The assessor’s office had set the value of Bunker’s home at $940,221 for the 1992-93 tax year. On Sept. 6, 1992, Bunker filed an appeal, saying the property had lost equity and should have been valued at $770,000. Such a change would have reduced his property tax bill.

His appeal wasn’t heard until November 1994 -- 26 months later. A county appeals board rejected his claim and affirmed the assessor’s higher value.

A month later, the county plunged into its historic bankruptcy, and a federal judge froze all property tax appeals.

Bunker filed suit in state court in 1998. The county denied it had erred, and a judge threw Bunker’s case out. The appeals court, however, ruled that Bunker has a legitimate claim and sent the case back to Orange County Superior Court.

County officials would not say how much money it could be forced to refund. Estimates calculated in 1994 put the total at about $10 million. The plaintiff lawyers said the taxpayers are due $15 million for each of the years covered in the lawsuit.

“The Board of Supervisors ... should do the right thing instead of prolonging this litigation unnecessarily,” Julian said.

About 4,000 appeals weren’t heard by the two-year deadline, the lawsuit said. Of those, about half eventually were heard with the appeals favoring taxpayers. An additional 500 were resolved without hearings.

That left 1,500 cases in which taxpayers did not get a property tax reduction, the suit said.

The county has improved its procedure for dealing with tax appeals and has a much more effective system for tracking when the two-year deadline is approaching.