San Francisco County Assessment Practices Survey March 1996 DOCUMENTS DEPT. DEC 2 1 2001 SAN FRANCISCO PUBLIC LIBRARY California State Board Of Equalization JOHANKLEHS, HaYWARD FirstDistrict DeanF. Andal, Stockton SecondDistrict ErnestJ. Dronenburg,Jr., SanDiego ThirdDistrict BradSherman, LosAngeles FourthDistrict KathleenConnell, Sacramento StateController BurtonW. Oliver,ExecutiveDirector REF 352.44 Sa52 SanFranciscoPublicLibrary GO. ATION CENTHl SAN FRANCISCO PUBLICLIBRARY REFERENCE BOOK Not to be takenfrom the Library SANFRANCISCOPUBLICLIBRARY 3 1223 05971 7141 FOREWORD The adoption of Article XIII A (Proposition 13 and later Proposition 8) by the voters in 1978 brought about significant changes in the way local government and public schools are funded. This Constitutional article drastically reduced property tax revenues by rolling back both the assessed value and the tax rate. In addition, it placed restrictions on the growth of assessed values and preventedlocal agencies fromincreasingthe property tax rate. Althoughthe property is a "local" tax, local governments have almost no control over the amount ofproperty taxestobecollectedorhow the taxesare allocated among thecounty,cities, special districts, and schools. The Article XIQ A assessment requirements significantly altered the county assessor's property valuation program. Instead of appraising all properties periodically in Xm accordance with acyclical plan, as was done prior to Article A, most kinds ofreal property are reappraised only ifthere has been a change in ownership, new construction, or a decline in value. The fairmarket value as ofthe date ofchange in ownership is the "base yearvalue," and subsequent assessments cannot be increased by more than 2 percent annually. If, on any subsequent lien date the adjusted base year value exceeds the current fair market value of the property, the market value must be enrolled as the taxable value for that year. Ifthere is new construction subsequent to the change in ownership, the value ofthe newly constructed property is determined and becomes an addition to the original base year value. This separate base year value is also subject to the maximum 2 percent annual increase in assessed value. Due to legislative definitionsofwhatconstitutes achangeinownership ornewconstruction forproperty tax purposes, many types ofownership transfers and several types ofconstruction are excluded from reassessment, although the assessor must nevertheless update the property ownership and physicalcharacteristicsrecords. What does this mean to the assessor's valuation program? Under a cyclical reappraisal system, the assessor plans the reappraisal workload years in advance. Under the Article XIII A system, the assessor can only estimate workloads. In addition to discovering all changes in ownership and new construction, the assessor's staff must also analyze each such eventtodetermine whetheritis orisnot subjecttoreassessment, asrequiredby acomplex setof constitutional and statutory requirements. Now, property tax appraisers must be both skilled in appraisaltechniquesandmoreknowledgeableofpropertytaxlaw. The recession ofthe early 1990's created additional complications for California counties and assessors. As a result of a weak real estate market, a large number of properties declined in value below the Article XHI A maximum, new construction and changes in ownershipslowedgreatly, andthechanges in ownershipthathave occurredresultin decreases or only modest increases in assessed value. Although the slowdown in new construction and changes in ownership decreased that portion of the assessor's workload, the decline in value problem has created an enormous increase in the workload for reappraisals and assessment appeals. Because ofproperty value declines, the rate ofproperty tax revenue increases that hadbeenexperiencedinthepast lessened. Atthe sametime,statebudgetproblems haveresulted in substantially reduced property tax allocations and other budgetary support for most counties. This has made it extremely difficult formost counties to provide adequate funding for assessors' officesaswellasformanyotherimportantprograms. All of the factors discussed above contribute to making the local property tax a more difficult tax to administer, and seemingly more difficult to fund. Yet, the property tax continues to be one of the most important sources ofrevenue for local government and public schools. Further, the property tax continues to be the most visible of all state and local taxes; visible tothose whopay the property tax andto all levelsofgovernmentthat aredependentupon it. This visibility andthe continued importance ofthe tax requirethat good assessmentpractices, efficient administration, and total conformity with the law be achieved by all agencies involved in theadministrationofthepropertytax. Althoughthe primaryresponsibilityforlocal propertytax assessmentisproperly a function of county government, the State Board of Equalization has a number of duties in the propertytaxfieldimposedbytheStateConstitution andtheLegislature. One ofthesedutiesisto conduct periodic surveys of local assessment practices. The Board's Assessment Standards Divisionconductsthesesurveys. Assessment practices surveys are required by Sections 15640 through 15646 of the Government Code. These statutes require that a survey is to be repeated or supplemented at least once in every five years, which is the schedule for the current round of surveys. The surveys must include, at a minimum, a sampling of assessments of the local assessment roll followed by research in the assessor's office to determine the adequacy of the procedures and practices employed by the assessor in the valuation of taxable property; compliance with state law and regulations; the volume ofassessing workandotherduties tobedone; and the assessor's needs formaps,records,equipment, supplies,andpersonnel. Within 90 days after receiving a copy of the survey report, the county assessor may file a written response to the Board's findings and recommendations. The survey report, together with the county assessor's response and the Board's comments regarding the response, constitutes the final survey report which is distributed to the County Board of Supervisors, Assessment Appeals Board (ifthere is one), the GrandJury, the Governor, the Attorney General, the Senate, andtheAssembly. Fieldwork for this report was conducted by Assessment Standards Division staff during June through August of 1995. This report does not reflect changes implemented by the assessorafterthe fieldworkwascompleted. The Honorable Dr. Doris M. Ward, the San Francisco County Assessor, and her staffgave us their complete cooperation during the assessment practices survey. We gratefully acknowledgetheirpatienceandgoodspiritduringtheinterruptionoftheirnormalworkroutine. RichardC. Johnson,Chief AssessmentStandardsDivision DepartmentofPropertyTaxes CaliforniaState BoardofEqualization March 1996 3 1223 05971 7141 ASSESSMENTSTANDARDS DIVISION SURVEYGROUP San FranciscoCounty FieldSurvey ProgramDirector: J.ThomasMcClaskey PrincipalProperty Appraiser FieldSurveyTeamSupervisor: JohnBishop SupervisingPropertyAppraiser Field SurveyTeam: SacramentoFieldOffice Office SurveyTeamDirector: Charles Knudsen Principal Property Appraiser Office SurveyTeamSupervisor: DaroldL. Facchini SupervisingProperty Appraiser Office SurveyTeam: HadleyAlger AssociatePropertyAuditorAppraiser LynnBaker AssociateManagementAnalyst DavidBrown StaffServicesManagerI RosemaryClanton AssociateGovernmentalProgramAnalyst GordonFerguson AssociatePropertyAppraiser PeterGaffney SeniorSpecialistPropertyAppraiser ManuelGarcia AssociatePropertyAuditorAppraiser LarryGee AssociatePropertyAuditorAppraiser RonaldHayashi AssociatePropertyAppraiser PaulLane AssociatePropertyAppraiser JamesLovett AssociatePropertyAppraiser MichelleMeier AssociateManagementAnalyst DennisMiller AssociatePropertyAppraiser Mike Minter AssociateInformationSystemsAnalystSpecialist RodneyMiyatake AssociatePropertyAppraiser LesMorris Associate PropertyAppraiser RobertSherburne StaffServicesManagerI GeorgeSpeciale AssociatePropertyAppraiser GeraldTrueblood SupervisingPropertyAppraiser Digitized by the Internet Archive 2013 in http://archive.org/details/sanfranciscocoun1996cali TABLEOFCONTENTS Page INTRODUCTION,SUMMARY,RECOMMENDATIONS, I. ANDSUGGESTIONS 1 A. Introduction 1 B. ExecutiveSummary 3 C. Report Summary 5 D. RecommendationsandSuggestions 8 H. ADMINISTRATION 15 A. General 15 B. Management 15 1. WrittenProcedures 15 2. Standardsand QualityControlUnit 19 3. ComputerCapabilities andNeeds 20 4. WorkloadandStaffing 22 5. Time andProductionReporting 28 C. Personnel 30 1. Practices andProcedures 30 2. EmployeeTraining 33 D. AssessmentAppeals 35 E. Programs 40 1. PropertyTaxExemptions 40 a. Introduction 41 b. WrittenProcedures 41 c. Homeowners'Exemption 41 d. WelfareExemption 42 e. OtherPropertyTaxExemptions 46 2. DeclinesinValues (Proposition8) 47 3. Roll Changes 48 4. DisasterRelief 50 5. Public InformationTransferList 54 6. RecordsMaintenance 55 m. REALPROPERTYASSESSMENT 57 A. TheAppraisalProgram 57 1. Introduction 57 a. General 57 b. AppraisalProgramPolicies 58 2. ChangesinOwnership 62 a. ASDSamplingFindings 62 b. Program 63 1 TABLEOFCONTENTS (continued) Page c. ValuationandAssessment 65 d. LegalEntity OwnershipProgram(LEOP) 68 3. NewConstruction 71 a. ASDSamplingFindings 71 b. Program 71 c. ProcessingofBuildingPermits 76 d. AppraisalRecords 81 e. TenantImprovements 83 B. IndividualPropertyTypesandProcedures 87 1. ValuationofMajorProperties 87 2. PossessoryInterests 93 3. Section236oftheNational HousingAct 97 IV. BUSINESS PROPERTYASSESSMENT 100 A. Introduction 100 B. AuditProgram 101 1. MandatoryAuditProgram 101 a. StatuteofLimitations 103 b. AuditDocumentation 104 c. AuditSelectionCriteria 105 2. NonmandatoryAuditProgram 108 C. BusinessProperty StatementProcessing 109 1. Program 109 2. DirectBilling 11 3. DiscoveryofProperty 113 D. Valuation 115 1. ExemptionofLow-ValuedProperties 115 2. ApartmentPersonalty 115 3. Co-opHousingPersonalty 117 4. Service Stations 117 E. LeasedEquipment 118 F. AssessmentRoll 120 1. Roll Preparation Procedures 120 2. OwnerIdentification 123 G. DocumentControl 123 1. UseofState-PrescribedForms 123 2. Filing System 124