Introduction to Property Tax Reductions
Disclaimer: The information contained herein is provided as the opinion of the author and as a general purpose guide without warranty or guarantee of any kind. The information contained herein is not endorsed by the County of San Diego. Readers are encouraged to seek competent legal and professional advise particular to specific circumstances.
Market value can be defined as "the price at which property would change hands between a willing buyer and a willing seller, when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both having reasonable knowledge of relevant facts (Estate Tax Regulation 20.2031-1 (b); Revenue Ruling 59-60, 1959-1 Culmative Bulletin 237)."
Once you file an assessment appeal with the Clerk of the Assessment Appeals Board, (there is no fee to file) your application will route to a county government appraiser who will review your application and determine if there is reasonable basis to reduce the assessed or "roll" value of the property. If possible request an "exchange of information" on the application itself (if necessary write in the margin) or send letter to the Assessor requesting an exchange of information. Both written and oral evidence can be exchanged to assist you and the appraiser in discussing the value of your property. If you and the Assessor are able to reach an agreement, the assessed value will be reduced accordingly and you need not appear before the Assessment Appeals Board. If you are unable to reach an agreement the application will route back to the Assessment Appeals department to be scheduled for a hearing with the Assessment Appeals Board. This process could take several months.
The assessment appeal hearing is the process where the property owner, or authorized agent, can appear before a board of three citizen appointees (Board Members) who will determine the value of the property in question based on sworn testimony and evidence submitted during the hearing. It is important to understand the process, what to expect and know how to proceed.
The following property tax information is provided courtesy of Steve Thomas, CPM® ARM® who has served three terms (1986 to 2000) as a member of the San Diego County Assessment Appeals Board. Mr. Thomas served on all four San Diego boards including twelve years as Chairman of Board 3, and has determined the value of real property and possessor interests in aggregate of one billion dollars.
Should You Appeal Your Property Taxes?
It may be possible to reduce the property taxes for California real property if the current property tax ASSESSMENT (shown on the property tax bill) indicates a combined value for land and improvements that exceeds the MARKET VALUE of the property as of the lien date (usually January 1st of each year). Since the amount of property tax paid is typically calculated as a percentage of the "assessed value" of the property, an over-assessed property results in excessive property tax payments. The concepts following are not absolute or necessarily technically correct, but will assist in a general understanding of the subject matter.
The Assessment Appeals Board can determine two primary issues: 1. the market value of the property in question as of lien date (usually January 1st of each year) 2. and if the property is being reassessed by the County Assessor, is the reassessment correct and based on a bonafied partial or total change in the ownership of the property.
The Assessment Appeals Board cannot reduce or adjust the property tax rate (the County Board of Supervisors can), or in any way make or change property tax law or challenge the Assessors right to assess any property or determine the constitutionality of the any imposed tax, fee or bond.
Is the ASSESSED VALUE greater than the market value as of lien date? The issue is not weather the property has declined in value, but has the market value dropped below the assessed value. If not an assessment appeal may be pointless.
The price that is paid for a property is not necessarily the market value of the property, although the purchase price is a very strong indicator of value, it is not conclusive.
Occasionally a property is purchased for a price that exceeds the "fair market value", as the property may have special value only to the particular purchaser, but no recognized value to the general public. Properties in this category could be candidates for property tax reduction.
Declines in investment property income may justify a temporary reduction in assessed value and a reduction in property taxes until such time as the income stream rebounds.
The assessed value of other property is NOT ADMISSIBLE evidence to the Assessor or an Assessment Appeals Board and cannot be considered a basis for an assessed value reduction. Sales data of comparable properties is admissible and should be used.
For properties which are owner occupied the burden to justify the assessed value rests with the Assessor. For investment and all other property types, the burden is, by law, with the applicant to prove to the Appeals Board that the market value is less than the assessed value. If the investor owner has no market data to refute the assessed value, the Appeals Board is obligated by law to determine that the Assessors opinion of value is correct and no reduction will be given.
The Assessment Appeal Process
In San Diego County the Assessment Appeals Clerk has available a free booklet entitled "Assessment Appeals Boards Information Booklet". This booklet provides the basic process of an assessment appeal and provides information regarding admissible evidence and property tax rules. For a free copy or a free copy of the assessment appeals application, contact the Clerk of the Assessment Appeals Board at (619) 531-5777.
The Assessment Appeals Hearing
All hearings are noticed well in advance and are open to the public. When your appeal is scheduled you will know which appeals board will decide your application. There are 4 assessment appeal boards in San Diego County. Consider attending as an observer, a public hearing of the board who will decide your appeal. Observing a hearing anonymously de mystifies the process and will help you prepare for you hearing.
Appealed taxes must be paid timely until after the outcome of your hearing. Hearings are recorded on cassette tape by the county and can be purchased later for a nominal fee, usually less than $10 per tape. The hearing is court-like and proceeds with similarities to Roberts Rules of Order. Relax and speak up while presenting your testimony and avoid redundancy. Belaboring one point can shift attention away from other important points in your presentation. Listen carefully to the questions asked, and provide straightforward, succinct answers. Board decisions can be oral at the time of hearing or provided in writhing at a later date for a nominal fee based on the type of property appealed. Most information to properly prepare for a hearing is public and available at the county administration center or on the San Diego County web site. The keys to success at a hearing are adequate preparation, practice and a logical reasoned delivery.
Commercial Tenants Beware!
If you are a commercial tenant, or broker, (shopping centers, office buildings etc.) and are negotiating a lease beware! Many leases are referred to as 'Tipple-Net" meaning the expenses, such as property taxes, are passed from the property owner to the tenant(s). Many brokers and tenants negotiate the lease expecting that the property tax pass through will be limited to a 2% increases each year. This assumption is based on the tax indexing limitations of Proposition 13 as passed by the voters in the mid 1970's. Here's the problem: From 1990 to say 1997, many property owners applied and were granted a "Proposition 8" Revenue and Taxation Section 51, temporary reduction in the property's assessed value, thereby lowering the actual property taxes paid. Now that property values are bouncing back, the Assessor can, and will, reinstate the prior value and apply the indexing that was held in abeyance for several years. Now as the commercial tenant, you, or your broker, examine the property tax bill as you negotiate the lease. You may even do a several year proforma based on the 2% property tax indexing. However, if the property in question was granted a Prop 8 reduction, it's possible the tax bill can drastically change from your proforma, possibly even double as the Assessor reverses the temporary reduction. It was not unusual for the County Assessor to reduce the assessed value up to 50% in many cases. As an example, say the share of property taxes you expect to pay is $3,000 per year plus the 2% increase. You could find your share of the tax bill to be $6,000 or more! You can avoid being caught by surprise by contacting the County Assessor and asking if the property in question is subject to a temporary, Proposition 8, reduction. As yet the property tax bills available to the public have no obvious code to indicate if the property in question is subject to this temporary reduction. Obviously not inquiring about the Proposition 8 circumstance, could cost you, in the above example $3,000 per year or $15,000 on a 5 year lease.
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