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CA Prop 13: State Appeals court overturns ruling in Orange County property tax lawsuit
AP via Sarasota Herald-Tribune, Fl ^ | March 27, 2004 | Associated Press

Posted on 03/28/2004 12:12:47 AM PST by heleny

SANTA ANA, Calif. -- An appeals court Friday overturned a Superior Court judge's ruling in a property tax lawsuit that could have cost Orange County hundreds of millions of dollars in tax refunds.

The county assessor's office may increase property taxes by more than 2 percent in a year following a period when home values dipped or remained flat, justices with the 4th District Court of Appeal ruled.

The case involved a lawsuit against the county assessor by Seal Beach resident Robert Pool. Pool, a property tax attorney, alleged the assessor violated Proposition 13 by increasing the taxable property value beyond 2 percent.

Proposition 13, passed in 1978, limits annual property assessments to a 2 percent increase per year, except in the case of new construction or a sale.

Local governments argue that the provision doesn't apply when property values remain flat or drop during a recession, then surge as real estate values rebound. In those cases, counties routinely hike the taxable property value beyond 2 percent.

The three 4th District justices sided with the county in Friday's 17-page ruling, saying Pool's interpretation was "fundamentally inconsistent with the system Proposition 13 put in place."

Superior Court Judge John Watson ruled in favor of Pool three years ago, and in 2002 approved class-action status for the lawsuit, which caused the county to fear it could be forced to pay hundreds of millions of dollars in property tax refunds.

County Supervisor Tom Wilson said he was relieved by Friday's ruling.

"It provides the county with a comfort level with all our financial challenges," he said.

Neither Pool nor David Gangloff, a partner in his law firm who also argued in the case, returned calls placed Friday after business hours.

The case arose after Pool bought his Seal Beach home for $330,000 in November 1995. The home's taxable value was flat for two years, but the assessor raised the assessed value more than $13,000 in 1998, saying the jump was justified. The assessor's hike prompted Pool to sue.


(Excerpt) Read more at heraldtribune.com ...


TOPICS: US: California
KEYWORDS: prop13; propertytaxes; proposition13
A related article appears in the March 27, 2004, Los Angeles Times, by staff writer Jean O. Pasco:

CA: Prop. 13 Ruling Means No Tax Refund

Judges reverse a decision that could have made counties return $10 billion collected under their reading of the law

...

The 4th District Court of Appeal said the technique used by Orange County in assessing taxes, called recapturing... is constitutional under Proposition 13, the landmark property tax limit approved by voters in 1978.

...

"The temporary nature of any reassessment for a decline in value cannot be overstressed," Presiding Justice David G. Sills wrote for the court.

The ruling overturns an earlier decision by Orange County Superior Court Judge John M. Watson that invalidated the commonly accepted practice.

...

... Seal Beach homeowner Rob Pool ... vowed to ask the state Supreme Court to review the unanimous decision released Friday.

The appellate justices were intimidated by the possibility of a flood of refund requests, he said, which representatives for state [$5.3 billion] and local [$4.7 billion] government argued in court briefs that they could not afford.

"I still think it's all about the money," Pool said. "They're not dealing with the pure language of the [law]."

...
The appellate court's 17-page decision sided with [Orange County Assessor Webster J.] Guillory's argument. The 2% annual limit on property assessment increases, they said, was tied to the original purchase price, not to the previous year's assessment.


For anyone unfamiliar with this case, Robert Pool's home was reassessed in 1998 at a value 4% higher than the 1997 assessed value.

His home's assessed value had not increased in the mid-90's because of the depressed real estate market (and could have even declined due to Proposition 8, which allows for temporary lower assessments when properties are damaged in disasters or if they decline in value).

The Orange County Assessor's logic, used by all counties across the state, was that Proposition 13 allowed a 2% increase every year from the purchase price even if the value had not actually increased every year.

So, by this "recapture" method, the assessed value of a property that did not increase in value in nine years but whose value doubled in the tenth year would increase 22% that tenth year.

In Mr. Pool's case, the assessor said the property increased 4% in the third year.

1 posted on 03/28/2004 12:12:49 AM PST by heleny
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My mistake, the AP article is complete (not excerpted), so clicking the link will reach the same article.
2 posted on 03/28/2004 12:15:20 AM PST by heleny
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To: heleny
what does all that mean? That the law doesn't matter?
3 posted on 03/28/2004 12:17:20 AM PST by GeronL (gobble, gobble, gobble.)
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To: GeronL
what does all that mean? That the law doesn't matter?

Prop 8 passed after Prop 13, so when Prop 13 passed in 1978 there was no provision for a decline in property values. Still, even without Prop 8, property values will not always increase every year.

The problem is in the interpretation of Prop 13 (or the application of the 2% increase). Is an increase in assessment value limited to
2% from last year,
2% from the highest assessed value (in the event of an intermediate temporary decline), or
2% compounded by the number of years you've owned your property?

4 posted on 03/28/2004 12:43:01 AM PST by heleny
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So, the next step is to appeal this to the state Supreme Court.
5 posted on 03/28/2004 12:44:03 AM PST by heleny
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To: heleny
PING
6 posted on 03/28/2004 12:47:03 AM PST by AnimalLover
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To: heleny
"The appellate court's 17-page decision sided with [Orange County Assessor Webster J.] Guillory's argument. The 2% annual limit on property assessment increases, they said, was tied to the original purchase price, not to the previous year's assessment."

I understand this situation fairly well. I'm a Real Estate Broker in Orange County, and must often explain Prop. 13 to clients.

When prices/values declined in the early/mid 90s this homeowner benefited from Prop. 8 which allowed a reduction in taxable value.

The issue is whether Prop. 13 ALWAYS limits the annual increase in taxable value to 2 percent?

According to this appelate court, it doesn't in the case of a property which enjoyed the benefit of the reduction in value. They are allowing the taxable value to be increased by more than 2 percent, presumably until it catches up to the original purchase price basis.

Both sides can be argued (and have been). The original decision gave the homeowner a "windfall."

As much as I hate taxes, I see the logic of this court decision. The original intent of Prop. 13 was to make property taxes predictable, tied to purchase price.

Prop. 8 allowed downward reduction, if prices decline. I doubt the authors of Prop. 8 intended a permanent "windfall" benefit, when values TEMPORARILY declined.

The appelate court decision meets the "equity" measure, if the legal sense. This is what courts must do, when vagueness exists, between conflicting laws.
7 posted on 03/28/2004 12:49:41 AM PST by truth_seeker
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To: heleny
sorry I asked. =o)
8 posted on 03/28/2004 12:51:19 AM PST by GeronL (www.armorforcongress.com..... put a FReeper in Congress)
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To: heleny
The law is pretty clear. The assessed value can't increase more than 2% over the previous year with the same owner and property. That was a maximum increase, not a minimum increase.
9 posted on 03/28/2004 12:56:41 AM PST by DB ()
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To: truth_seeker; heleny; DB
The appelate court decision meets the "equity" measure, if the legal sense. This is what courts must do, when vagueness exists, between conflicting laws.

So then what was the basis for the original (Superior Court Judge John M. Watson) decision? Watson is no dummy, either. He reached his decision for a reason.
In any event....

Seal Beach homeowner Rob Pool ... vowed to ask the state Supreme Court to review the unanimous decision released Friday.

Assuming the Supreme Court is in the pocket of the money-grubbing scumbag political elite, the appellate court decision will be upheld. I haven't recently read the language of Prop 13 but it is apparently very unclear. Surprisingly so.

10 posted on 03/28/2004 1:15:52 AM PST by Lancey Howard
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To: Lancey Howard
it wasn't unclear to jarvis.
it took the state armed robbers a few years to figure out how to reinterpret it, os as to benefit the tax assessors.

if it said two percent max per year, it couldn't mean four.
if it meant that accumilated values could be recovered by using a higher percentage than 2 in a given year, it would have said four or eight or ten as a yearly cap.

typical bureaucrats feathering their beds.
what a rotten state. they have davisitis... taxaddiction.
11 posted on 03/28/2004 1:27:08 AM PST by Robert_Paulson2 (the madridification of our election is now officially underway.)
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To: truth_seeker
Prop. 8 allowed downward reduction, if prices decline. I doubt the authors of Prop. 8 intended a permanent "windfall" benefit, when values TEMPORARILY declined.

I would argue that since Prop 13 allows property valuation to be increased, any gain from Prop 8, which Pool did not realize, is offset with time.

A property tax reduction under Prop 8 is offset by later increases under Prop 13.

The original intent of Prop. 13 was to make property taxes predictable, tied to purchase price.

This was clearly not the primary intention of Prop 13.

Prop 13 was designed to primarily accomplish two things.

1)Protect retired homeowners from confiscatory tax increases in their lifetime, allowing them to remain in their homes,
2)Protect agricultural property, adjacent to urban development, from tax increases that made agricultural pursuits fall victim to urban sprawl.

I am familiar with the motivation behind Prop 13 because I was privy to many of the early planning discussions that lead to its creation. Those discussions occured in my father's home.

12 posted on 03/28/2004 6:56:11 AM PST by Amerigomag
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To: Amerigomag
I am familiar with the motivation behind Prop 13 because I was privy to many of the early planning discussions that lead to its creation. Those discussions occured in my father's home.

You had a most fortunate education.

13 posted on 03/28/2004 8:15:18 AM PST by Carry_Okie (Environmental deregulation is critical national defense.)
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To: Carry_Okie
This same group (ag interests + estate planners + tax attorneys) had worked earlier to protect ag. One of the fruits of their labor was the California Land Conservation Act which proceeded Prop 13 by over a decade.

The "Williamson" Act was a compromise and ten years later it became obvious that Fresno County was opposed to granting new agricultural tax sanctuaries on the immediate margins of their larger urban centers. Both pressue from cities to increase their tax base and the double* loss of tax revenue to counties who enrolled more land into these sanctuaries was the driving motivation. Ag felt a second layer of protection was needed.

During this same period retirees and middle income folks were feeling the bite from county assessors who were given the green light to fund government excesses through free wielding property valuation increases. Retirees and the middle class were being taxed out of their home/lifestyle.

In this atmosphere of a general tax revolt these ag protectionists coalesced through ag associations and shopped around for public support. They found a willing accomplice in Howard Garvis who was approaching the same problem from a standpoint of the protection of retirees.

* Not only did counties lose the immediate benefit of the tax increases but ultimately they were forced to surrender some of their existing tax revenues to subsidize the cost of the program (offset the tax loss to the state).

14 posted on 03/28/2004 9:20:00 AM PST by Amerigomag
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To: GeronL
what does all that mean? That the law doesn't matter?

It means that the judges are space aliens.
I notice that there is no mention of reductions, ever. The tax assesment can only go up. This has to be the most Kafkaesque reasoning I have seen in a very long time.
Their reasoning is, that since reductions are not mentioned in the law, they can never exist.

Time for a new amendment!

15 posted on 03/28/2004 9:29:42 AM PST by Publius6961 (50.3% of Californians are as dumb as a sack of rocks (subject to a final count).)
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To: truth_seeker
The appelate court decision meets the "equity" measure, if the legal sense. This is what courts must do, when vagueness exists, between conflicting laws.

BS!
If values stay flat has the increase ever not been applied? Give me a break!

16 posted on 03/28/2004 9:32:38 AM PST by Publius6961 (50.3% of Californians are as dumb as a sack of rocks (subject to a final count).)
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To: Amerigomag
An interesting take on the situation. The real problem is that the attributes that would otherwise contribute to high prices for agricultural land have been socialized while land for residences have been maintained as artificially scarce. That depresses the price of ag land and raises the price of residential land, a recipe ripe for controlled conversion requiring a payoff to political gatekeepers.

It's a stupid and corrupt model, one that is bad for land and bad for people. The economic causes and environmental consequences are well documented in my book, although it uses the timber industry instead of ag. The economics are entirely analogous.
17 posted on 03/28/2004 9:39:35 AM PST by Carry_Okie (Environmental deregulation is critical national defense.)
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To: Carry_Okie
An interesting take on the situation.

I'll admit I'm having problems understanding your offering of insight.

I understand you to mean that since land values are manipulated for societal/economic purposes, as opposed to a free market model, the practice lends itself to corruption of public officials and their personal enrichment at a rate greater than that created by tax codes prior to 1968.

I also understand you to suggest that there are other models available which achieve the same ends (preservation of an agricutural base and gentification of higher density habitation areas) without the documented negative consequences.

Am I understanding you correctly?

18 posted on 03/28/2004 10:50:16 AM PST by Amerigomag
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To: Amerigomag
I understand you to mean that since land values are manipulated for societal/economic purposes, as opposed to a free market model, the practice lends itself to corruption of public officials and their personal enrichment at a rate greater than that created by tax codes prior to 1968.

More than public officials, they are simply agents. The current model enriches select developers, ag corporations, banks, insurance comapanies, offshore interests... much of it at the expense of the resource landowner.

Am I understanding you correctly?

In part it would so appear. My book not only offers an alternative model, but the beginnings of a way to get there.

19 posted on 03/28/2004 11:06:07 AM PST by Carry_Okie (Environmental deregulation is critical national defense.)
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To: Carry_Okie
My book not only offers an alternative model, but the beginnings of a way to get there.

Here's my offer.

I'll cough up the 30 bucks to find out if you'll promise to answer my online queries, after I've finished the book, as how your observations correlate to the topic under discussion on this thread.

Deal?

20 posted on 03/28/2004 11:20:36 AM PST by Amerigomag
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To: Amerigomag
I'll cough up the 30 bucks to find out if you'll promise to answer my online queries, after I've finished the book, as how your observations correlate to the topic under discussion on this thread.

Absolutely, but you don't have to commit to that yet. You can start with the online chapters. There is an email addy if you have questions. If I can't deal with it online you'll get a phone number. If you still have questions after that, I offer guided tours. The $30 is about covering costs. If you read the whole thing and still don't get it after making a sincere effort to resolve any questions, I refund the money. Frankly, so far, I have not had to pay a claim, but still have lost a bundle on the whole venture.

If you are serious about mastering these principles, I will do everything within my power to make certain you master them. They are transformational. I regard imparting them as a God-given responsibility attendant to what has been revealed to me and thus take all questions sincerely. We have been so brainwashed in our understanding of economics and government that I have real compassion for the effort necessary to break out of those perceptions. When it hits, there is one monstrous "oh, duh," moment, and you'll wonder why the hell it had to be so hard. You'll never see things quite the same way after that. BTW, by the time you are less than half done with it, you will understand why the tenth commandment comes in the second most important place in the list.

21 posted on 03/28/2004 11:39:47 AM PST by Carry_Okie (Environmental deregulation is critical national defense.)
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To: Carry_Okie
Done and thanks.
22 posted on 03/28/2004 11:49:22 AM PST by Amerigomag
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To: truth_seeker
Prop. 8 allowed downward reduction, if prices decline. I doubt the authors of Prop. 8 intended a permanent "windfall" benefit, when values TEMPORARILY declined.

I agree with you about Prop 8 being temporary. I would understand if the property assessment were allowed back to 102% of the previous high assessment (before a temporary decline because of Prop 8), but that wasn't the decision of either court.

Robert Pool's case is a very straightforward example, since his home price was flat for at least two years before suddenly increasing 4% (so it should not not involve any Prop 8 temporary decline). Should the new assessment be limited to 102% of the previous year's assessment, or should it be limited to 104% of the assessment two years earlier? I thought the intent of the 2% limit in Prop 13 was so that the owner's tax burden would not increase a large amount in one year. If in the intermediate years the property value was not increasing, why should the assessor get to apply 2% for those years?

It almost seems the assessor is assuming the value always increases 2% per year and he's giving you a (Prop 8 temporary) tax discount every year the true value increased less than 2%. I just can't agree with the appeals court decision.


CALIFORNIA CONSTITUTION
ARTICLE 13A (TAX LIMITATION)
SEC. 2. (b) The full cash value base may reflect from year to year the inflationary rate not to exceed 2 percent for any given year or reduction as shown in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced to reflect substantial damage, destruction or other factors causing a decline in value.

23 posted on 03/28/2004 8:02:38 PM PST by heleny
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To: Amerigomag
A 2% average annual increase in propertry value cannot be considered confiscatory. The law was not designed to protect landowners from all risk or obligation. Absent any increase in taxes a landowner would still lose his land if business or other reverses rendered him unable to pay his taxes.

There's a balance to be struck between the needs of individuals and their obligations to society. Government costs money.

Keep in mind also the force driving these changes and stresses - population growth. People want to live somewhere. If land costs are too high housing construction dies, the economy dies, and people must live nowhere. They don't like that.

Our economy exists on growth. Without it we have chaos. There's a contradiction of course. Growth cannot continue exponentially and indefinitely in a world of finite resources. No one has a solution to that problem. Most people refuse to recognize its existance.

24 posted on 03/29/2004 7:24:11 AM PST by liberallarry
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To: Amerigomag
Well... I finally got off the dime and ordered up this book (I printed out the order form last December! lol). After reading this thread earlier, I was hoping I could just lurk and read your conversation with C.O. and learn something. But now... I'm hopin' maybe we can make it a discussion group... maybe in a month or two when I have time to start/finish the book. Any interest?
25 posted on 05/05/2004 10:55:31 PM PDT by calcowgirl
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To: heleny
The three 4th District justices sided with the county

Hahaha.... Surprise, surprise!
Like these corrupt scumbags were going to side with tax-paying citizens and rule against the government whose trough they have their snouts in? I don't think so....

26 posted on 05/05/2004 11:02:19 PM PDT by Lancey Howard
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