A taxing time for all
By Paul Oster
Q: The bio on your blog site says you are member of the Mono County Assessment Appeals Board. What’s that all about?
A: Despite being a licensed real estate broker for a couple of decades before joining the Assessment Appeals Board (AAB), the whole process was foreign to me. And from what I can tell, it is off the radar of most of the real estate industry and property owners alike. The roller coaster of real estate acquisitions and values in the past few years has shifted the process from the rather mundane to the contentious. And while the process is quite serious, I can’t help but to see the humor and irony in it.
The Appeals process all centers around the law and the art of appraisal. Property tax law in the State of California is voluminous. I am told that attorneys who specialize in it only specialize in sections of it. Through the Appeals hearings I’m just beginning to get an understanding of the Rules and Sections of the law. The appraisal side is what I am much more familiar with. While I am not an appraiser, valuing real property is a big part of my business. And it is not an exact science, especially here in Mono County. The meeting of the law and appraisal is where I find most of the humor. I’ve concluded that attorneys and appraisers would not be good at judging a beauty pageant. The hearings become arguments of the law versus the ambiguity of real estate appraisal all in the vein of the State needing to protect its tax revenue. Witnessing attorneys and appraisers argue and posture over appraisals can be enlightening at first, but ultimately becomes rather monotonous. I find myself asking, “How did I get here?”
It all started with a vacancy on the Board. Apparently, positions on three-member Board aren’t highly sought after by Mono County citizens (it doesn’t pay anything other than mileage). But two of our local County Supervisors thought I was the man for the job. I had served on the Mammoth Lakes Planning Commission with one of them. They convinced me my background was a good fit for this specialized position. One of the Board members assured me the time involvement was minimal since so few people appeal their property tax assessments (so much for real estate “always going up”). I liked the obscurity of it while soothing my guilt over not being volunteered at something.
The next thing I know I went through training and they gave me a huge pile of books, most of it legal oriented. What I learned is that AABs have Constitutional and Statutory authority in the State of California and are governed by the Property Tax Rules. Here in Mono County, this quasi-judicial, three-member board falls under the scrutiny of the Fair Political Practices Commission and conflict-of-interest rules (including making public filings) and are also required to complete an Ethics class every two years. (I remember one of my former associates at RE/MAX saying, “You can’t teach ethics.”).
For the layman, common citizen and property owner, the Board’s function is the checks-and-balances that the public can opt to use to challenge the local Tax Assessor’s valuation of their property. In California and under “Prop. 13” those new valuations basically come when there is a change of ownership or new construction at the property. That is when the Assessor’s office performs an appraisal of the property to establish a base value.
A typical Appeals hearing includes: the Assessor and the County’s staff of appraisers, in particular appraiser(s) who worked on the appraisal of the property that is subject to the appeal, a specialized property tax attorney representing the Assessor’s office, a member of the County Counsel’s office (to ensure the administrative process is correct), the County Clerk’s office taking the record, and the applicant who could simply be the property owner and/or their representative who is likely and attorney and/or appraiser. Sometimes, when the stakes are high, the applicant has a court reporter to record the transcript of the hearing. And of course the three of us who comprise the AAB. (The most fun for me is all of this occurs in the lovely historic courthouse in Bridgeport.)
The hearing itself can range in temperament from rather casual to almost a courtroom shootout. Many of the formal rules of a trial are relaxed especially the rules of evidence. But there are still plenty of formal rules. Any applicant not represented by counsel should be very clear about what is required of them, from beginning to end. My observation is that the Assessor’s office bends over backwards to help. For property owners appealing valuations of owner-occupied properties, the burden of proof is on the Assessor’s office. The evidence is by-and-large appraisal work, and that’s where things get messy. Any appraisal can be torn apart. Adjustments are a key element to any appraisal report and they are subjective by nature. (Banks will rely on a minimum of three opinions before pricing an REO.) That’s where it becomes a beauty pageant and the debate could go on endlessly, and sometimes it goes on way too long.
Ultimately, after all of the evidence is heard, and the witnesses/appraisers are allowed to be questioned and cross-examined, and the applicant and Assessor’s office are allowed summarize their cases, the Board has to make a decision. And usually it is all taken into submission and a formal decision is made at a later time. Sometimes the applicant is unsuccessful simply because they didn’t follow the rules. Other times they just didn’t present a good case, and basic whining doesn’t work in this forum. Sometimes the paid experts and consultants don’t present anything compelling either, but it probably makes their clients feel good that they fought the fight. For the common man a hearing is not a pleasant experience, he is simply out-gunned by the County and overwhelmed with legal lingo and formalities. The better tack is making a timely appeal and then sitting down with members of the Assessor’s office and working out a reasonable valuation. Getting to a hearing is expensive for the County, so once it happens they take it very seriously.
All of this has become rather critical for many property owners because of the recent decline in property values. People who bought in the 2003-07 timeframe are sitting on valuations that may be up to twice the current value. Many owners want their assessed values to be instantly dropped to a distressed sale that occurred last week. The reality is assessed valuations and appraisals are historical in nature. Owners with high valuations can only expect a stair-step down in valuations. And most values have now flattened so the downward trend is over, at least for now. As expected, the volume of appeals has risen dramatically in the past couple of years. The Assessor’s office has handled a huge volume of work to review (and reduce) these valuations (known as “Prop. 8” reductions”). They have also met, communicated with, and educated many property owners including those with appeals filed. Most never make it to hearings. Again, the process is burdened with administration and paperwork, and filing your appeal too early or too late will certainly get it tossed out. The latest trend seems to be appeals on very expensive homes, with the homeowners (their attorneys) arguing for substantially less assessed values while their local Realtor® is marketing the property and justifying a price for substantially more. Imagine that.
While I have only been on this Board for the past six years I have had the unique experience of three different Assessors. The Assessor is a publicly elected position and here in Mono County we have had a recent and quite interesting but positive transition. The first was the long-standing Assessor who was a local boy. The next an outsider with years of experience who came in to take over and did get elected but eventually retired. And now we have Jody Henning who brought loads of experience and progressive management as well as local knowledge. The Office of the Assessor in Mono County has arrived in the 21st century.
Kudos go out to my fellow Board members Mammoth real estate attorney Rick Liebersbach and north county Walker River real estate broker Rose Murray. Both are incredibly competent in their roles, I’ve learned plenty from both and nobody can fill their shoes. I’ve had to fine-tune my impartiality. I can also emphasize the value of volunteering in the community. Most people don’t realize that when business is slower that is the perfect time to volunteer. In the 90’s I was volunteered for all kinds of things. All of that volunteering really paid off, especially the invaluable real estate related knowledge that I gained and about the workings and economics of the community, and the people I met and learned from.
Paul Oster is Broker/ Owner of RE/MAX of Mammoth. A recent archive of his past Q&A columns and other writings, as well as the ability to make comments, can be found at www.Mammoth-Real-Estate-Blog.com. For legal, accounting, construction, etc., advice, seek out the appropriate professional.
