The 2008 acquisition of Anheuser-Busch Cos. by Belgium’s InBev, a deal worth $52 billion, created the largest beer company in the world.
It also created a potential boon for cash-strapped local governments in California — allowing them a rare chance to reassess the 1,022 acres owned by Anheuser-Busch in California and tax its 14 parcels at current market value.
It was a botched opportunity, records and interviews show. County governments took three years to reassess most of the parcels and still haven’t finished the job, according to Times research and an analysis by the California Tax Reform Assn., a nonprofit based in Sacramento.
The landmark Budweiser brewery in Van Nuys, for instance, sits on land still being taxed at yesteryear’s rates. The company pays about $18,000 in annual taxes for the 3 million square feet of land, or less than a penny a square foot.
If the property were assessed at current market value — 44 cents a square foot for the land — the tax bill for the land alone would top $1.3 million, said Lenny Goldberg, executive director of the California Tax Reform Assn., basing that estimate on values of comparable properties. (He could not estimate the tax for the brewery itself.)
When asked why the property had not been reassessed, Los Angeles County Assessor John Noguez at first blamed the company for not notifying officials of the change in ownership.
“You and I pay our fair share of taxes. They should pay their fair share too,” he said.
After doing more research, Noguez said the problem originated with the state Board of Equalization, which didn’t notify the county of the ownership change until last year. Anheuser-Busch said corporate parent InBev gave tax authorities proper notification when the ownership change took place in 2008.
The county assessor’s office could not confirm Goldberg’s estimate of the property’s current market value, saying staffers were still working on a new assessment. Noguez said it was a time-consuming process, citing the complexity of the beer-making facility and the changing value of real estate.
“Real estate of that nature takes us a bit longer to review,” Noguez said.
The delay might seem inexplicable to tax-paying homeowners, who know from experience that residential property is reassessed as soon as the deed changes hands. But at the Van Nuys brewery, no deed changed hands because the property was still being managed by Anheuser-Busch, despite the fact that it had a new corporate parent in Belgium.
State and county tax officials concede that the Anheuser-Busch example is by no means unique and that the chance to reassess commercial properties can often fall through the cracks because authorities are not aware that an ownership change has occurred.
State Board of Equalization officials concede that there is a delay in reassessing commercial property once it changes hands, but a board spokesman said it would be impossible to accurately calculate this figure.
Board of Equalization spokeswoman Anita Gore said the problem will eventually be solved under legislation that was passed in 2009 and went into effect last year. The law imposes penalties on companies that don’t notify the Board of Equalization whenever there’s a change in control or ownership.
However, reporting delays continued because the department’s computer system was only recently updated to reflect the new law, Gore said.
When commercial properties are reassessed at a higher value, the owner must pay the higher tax retroactive to the acquisition date. But no interest is added — in effect giving corporations the equivalent of an interest-free loan and depriving local governments of tax revenues they are owed.
“Counties are losing millions of dollars on these loopholes, there’s no question,” San Francisco County Assessor-Recorder Phil Ting said.
Under 1978’s Proposition 13, property can be reassessed for tax purposes only when it is sold or when new construction is completed on it, though the assessed value can rise up to 2% a year. Because commercial property changes hands less frequently than homes, that has led to a gradual shifting of the property tax burden in California — with 69% of it now shouldered by homeowners, up from about 53% in 1975.
To Ting and others, that makes it even more crucial to reassess commercial property when the opportunity arises.
Goldberg said the state needs new laws to ensure that commercial property is assessed correctly and to close loopholes. For example, if two parties each buy exactly half of a company, no reassessment takes place because no single entity has purchased a majority of the property. And if a company is sold but its properties are held by a separate entity, no reassessment occurs.
The California Tax Reform Assn. wants a cumulative 50% change in ownership to trigger a reassessment, which Goldberg estimates would raise about $2 billion in additional revenue — although the Board of Equalization says that number is closer to $100 million. Goldberg’s group also wants to require companies to report directly to the assessor when buyouts and mergers occur that involve real property.
“The whole system makes so little sense, but if you’re going to actually have the system right, you have to have extensive paperwork and reporting requirements,” he said. “It’s an absurd way to run a tax system.”
Meanwhile, tax authorities are forced to find out about commercial property transfers any way they can.
In Los Angeles County, assessor Noguez said one of his employees was checking the newspaper every day for corporate acquisitions that might affect property taxes.
He conceded that “we might need someone monitoring the TV news as well as the Internet.”