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HomeMy WebLinkAboutMINUTES - 09121995 - C165 C. 165, C. 166, and C. 167 THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA Adopted this Order on September 12, 1995 by the following vote: AYES: Supervisors Smith, DeSaulnier, Torlakson and Bishop NOES: None ABSENT: Supervisor Rogers ABSTAIN: None SUBJECT: Correspondence C. 165 CLAIM from John D. Cahill, Attorney, Rodi-Pollock, 801 South Grand Avenue, Suite 400, Los Angeles, CA 90017, dated August 14, 1995, for Pacific Refining Company/PRC Joint Venture for refund of property taxes in the amount of $344,035 for fiscal year 1991-1992. **** REFERRED TO ASSESSOR, COUNTY COUNSEL AND TREASURER-TAX COLLECTOR C. 166 Deleted from consideration. C. 167 LETTER from Annie Laurie Gaylor, Staff Investigator, Freedom From Religion Foundation, Inc., Post Office Box 750, Madison, WI 53701, dated June 15, 1995, commenting on contracts for chaplaincy services. **** ACKNOWLEDGED RECEIPT IT IS BY THE BOARD ORDERED that the recommendations as noted (****) are APPROVED. I heret.,certify that this is a true and correctcopy of an action taken and entered on the minutes of the Board of Sup wso on the d e shown. ATTESTED:� � f L• 19 9� PHIL BATCHELOR Clerk of the Board of Supervisors and Lourtty Administr&W By oefwh cc: Correspondents Treasurer-Tax Collector County Counsel Assessor JOHN D.CAHILL RODI, POLLOCK, PETTKER, GALBRAITH & PHILLIPS KARL B.RODI[1908-1982] JOHN D.PETTKER A LAW CORPORATION DANIEL C.BOND[1 942-1 9771 THOMAS P.PHILLIPS PAUL E.SCHWAB[1896-1973] CHRISTOPHER ROLIN WILLIAM R.CHRISTIAN OF COUNSEL HENRY P.PRAMOV,JR. 801 SOUTH GRAND AVENUE JOHN P.POLLOCK ROBERT A.YAHIRO SUITE 400 JAMES M.GALBRAITH ELIZABETH B.BLAKELY LOS ANGELES,CALIFORNIA 90017 M.GLENN GILBERT ROBERT C.NORTON TEL:(2131895-4900 MARGARET ROSENTHAL JOHN F.CERMAK,JR. TIMOTHY G.CEPERLEY TELECOPIERS CORALIE KUPFER [21 3]895-4921 SONJA A.INGLIN August 14, 1995 [213]895-4922 CRIS K.O'NEALL [2131895-4750 JOHN S.CHA /�SCOTT E.ADAMSON ��■ EIV;EDg OUR FILE NUMBER ROBYN K.JOHNSON 66EE V 3833-E1 THOMAS J.Y00 AUG 15 BY FEDERAL EXPRESSCLERK BOARD OF SCONTRA CO HONORABLE BOARD OF SUPERVISORS COUNTY OF CONTRA COSTA County Administration Building 651 Pine Street, Room 106 Martinez, California 94553 RE: CLAIM FOR REFUND OF PROPERTY TAXES by Pacific Refining Company/PRC Joint Venture for Taxes Erroneously and Illegally Assessed and Collected for the 1992 Tax Year Members of the Board: Pacific Refining Company/PRC Joint Venture (hereinafter "Pacific Refining") hereby claims a refund of taxes pursuant to Division 1, Part 9, Chapter 5, Article 1 of the California Revenue and Taxation Code (Sections 5096 and 5097, et seq. ) erroneously and illegally assessed against Pacific Refining by the County Assessor of the County of Contra Costa, California (hereinafter the "Assessor") for the 1992 tax year, and , erroneously and illegally collected from Pacific Refining by the County Tax Collector for those years. 1. Assessment Reference Numbers. The taxes which were erroneously and illegally assessed and collected, the recovery for which this claim is being filed, were assessed and collected under the following Assessor's Parcel Numbers: 404-030-024-8 404-030-025-5 404-030-026-3 2 . Amount of Tax Levied. The property taxes levied under the aforementioned assessment references for which Pacific Refining claims a refund for the year 1992 total $344, 034 .84 . 3 . Payment of Taxes. The taxes originally assessed and levied were duly and timely paid by Pacific Refining. HONORABLE BOARD OF SUPERVISORS COUNTY OF CONTRA COSTA August 14, 1995 Page 2 4. Applications for Changed Assessments. Applications for Changed Assessments ("Applications") on the above-referenced Assessor's Parcel Numbers for the 1992 tax year were timely filed by Pacific Refining (Application Nos. 92-1906, 92-1907, and 92- 1908) . A hearing on the Applications was held before the Contra Costa County Assessment Appeals Board ("AAB" or "Board") on October 27 and 28, 1994 and January 5 and 6, 1995. On January 12, 1995, the Board, by a vote of two to one, ruled that the total taxable value of the subject property was $60, 220,281. Notice of the Board's ruling, in the form of a Decision After Hearing ("Decision") , was not sent to Pacific Refining until April 28, 1995. The AAB issued Findings of Fact ("Findings") on June 8, 1995 purporting to support their finding of the 1992 taxable value for Pacific Refining's property which value was broken down as follows: Parcel No. 404-030-024-8 PSI & Personal Property $ 32, 032 , 167 Improvements 21, 291, 753 Land 3 , 972 , 587 TOTAL $ 57, 296, 507 Parcel No. 404-030-025-5 PSI & Personal Property $ 0 Improvements 112 , 614 Land 267 , 378 TOTAL $ 379, 992 Parcel No. 404-030-026-3 PSI & Personal Property $ 391, 378 Improvements 1, 553, 145 Land 599 ,259 TOTAL $ 2, 543 , 782 The AAB-found value are identical to the value presented by the Assessor at the hearing. The taxable value found by the AAB was an increase over the 1992 roll value of $46, 889, 101. 5. Business of Pacific Refining. Pacific Refining owns and operates an oil refinery, including the land upon which such refinery is situated, in Hercules, California. HONORABLE BOARD OF SUPERVISORS COUNTY OF CONTRA COSTA August 14, 1995 Page 3 6. Grounds for Refund of Taxes. Pacific Refining contends that the methodology used by the Assessor and adopted by the AAB to determine the value of the subject property was arbitrary, in excess of discretion, and in violation of the standards prescribed by law. In addition, the value recommended by the Assessor and adopted by the AAB is not supported by substantial evidence in the record of the proceedings before the AAB. Specifically, Pacific Refining contends that the value found was derived in a manner which was either contrary to applicable and controlling law or rule, or arbitrary and without any rational basis or evidentiary support for the following reasons: (a) During the hearing, the AAB properly refused to admit into evidence any information from the Assessor to support an income approach valuation of the subject property because the Assessor failed to comply with the exchange of information provisions set forth in Revenue and Taxation Code Section 1606 and State Board of Equalization Rule 305. 1. Pages 3 through 5 of the AAB's Findings (which were prepared by counsel for the Assessor who was not in attendance at the Board hearing) set forth information supporting an income valuation of the property which information was taken from the income approach analysis presented by the Assessor at the hearing and excluded from evidence by the Board. To the extent the AAB's Findings are founded upon the income approach information presented by the Assessor, the Findings are based upon evidence outside of the record and the value found by the Board is void and invalid.' 1 The Board relied upon Assessor's Exhibit 11 (Bowen E. Cecil -.appraisal report) , among other things, to support an income approach value, even though the AAB specifically refused to consider Exhibit 11 and testimony relating to Exhibit 11 (reliance on Exhibit 11 is shown by the references to Exhibit 11 in Exhibit B to the AAB's Findings) . Reliance upon evidence which was excluded from the record makes The Board's Findings void and any equalization based thereon invalid because the AAB "may act only upon the basis of evidence properly admitted into the record. " State Board of Equalization Rule 313 (g) . Rule 313 (g) finds support in California Supreme Court opinions going back over a century. People v. Reynolds (1865) 28 Cal. 107 , 112 ("The Board have no more right to add to the assessed valuation of property without evidence authorizing them to do so, than a Court or (continued. . . ) HONORABLE BOARD OF SUPERVISORS COUNTY OF CONTRA COSTA August 14, 1995 Page 4 (b) The income approach contained in the AAB's Findings is also not supported by substantial evidence in the record for the following reasons: i) the debt/equity ratio used in the Findings is based upon ratios for entire companies (which includes business enterprise and intangible assets in addition to tangible assets) and is not limited specifically to refineries, and such ratio there- fore does not reflect true market conditions; ii) the calculation of the equity rate in the Findings was performed incorrectly and thus does not represent the true before-tax equity rate for the subject property; iii) the income stream used overstates the actual gross income of the subject property; and iv) the residual terminal value used is based upon evidence from a property which - is not comparable to the subject property. (c) Prior to the hearing, the Assessor initiated an "exchange of information" under the procedure set forth in Revenue and Taxation Code Section 1606 and State Board of Equalization Rule 305. 1. The information provided by the Assessor in the course of that exchange failed to include the Assessor's information supporting his fair market value of the subject 1 ( . . .continued) jury have to find facts and determine the rights of litigants without evidence. ") ; City and County of San Francisco v. Flood (1884) 64 Cal. 508 [2 P. 267] ("As to increase of amount of valuation or reduction, the board [of equalization] can only act on evidence. ") ; City of Oakland v. Southern Pacific Co. (1900) 131 Cal. 226, 230 [63 P. 371] (" [I]t has become the settled rule in this state that the board [of equalization] can only act upon evidence in raising or lowering an assessment. ") . When an assessment appeals board or a board of equalization fails to base its actions on evidence, its actions are void and any assessment made invalid. Reynolds, supra; Shasta County v. Mountain Copper Co. (9th Cir. 1922) 278 F. 155, 158, cert. den. 258 U.S. 630, 42 S.Ct. 463 , 66 L.Ed. 800 (an equalization unsupported by any evidence is invalid) . HONORABLE BOARD OF SUPERVISORS COUNTY OF CONTRA COSTA August 14, 1995 Page 5 property using the cost approach to value. When the Assessor sought to introduce such fair market value cost approach information during the hearing before the AAB, Pacific Refining objected to such information under the provisions of Section 1606 (b) and Rule 305. 1(c) , both of which prohibit the introduction at the hearing of information which has not been exchanged as part of the pre- hearing information exchange. Nevertheless, the AAB accepted the new information from the Assessor over Pacific Refining's objection and in violation of the prohibitions contained in Section 1606 and Rule 305. 1. Because the Board improperly relied upon the Assessor's market value cost information, the Decision and Findings are erroneous and the value found by the Board is invalid and unsupportable. (d) The only value evidence offered by the Assessor during the hearing which the AAB agreed to receive was evidence supporting a cost approach. The Assessor failed to introduce into evidence documents or testimony supporting any other method of valuing the subject property i) even though testimony clearly demonstrated that the income approach to value was and is the method by which potential buyers evaluate purchases of properties, such as the subject, on the open market; ii) even though State Board of Equalization Rule 6 (a) requires that other value approaches be used when there is reliable sales and income data, and where significant physical deterioration and obsolescence is present (as was the case here) ; iii) even though information to support an income analysis and a comparable sales analysis of the property was available and in the possession of the Assessor (which information the Assessor failed to investigate) ; and iv) even though the age of the property, 25 years, made reliance upon the cost approach questionable at best. In view of the above, it was error for the AAB to rely upon the Assessor's cost approach in valuing Pacific Refining's property. (e) The cost approach employed by the Assessor and followed by the AAB was bottomed on calculations using "percent good" factors and Prop. 13 inflationary factors which contained c HONORABLE BOARD OF SUPERVISORS COUNTY OF CONTRA COSTA August 14, 1995 Page 6 numerous errors (including the wrong base year and incorrect figures) , a fact which the Assessor's appraiser conceded during the hearing before the AAB. (f) The Assessor's cost approach and resulting value, which was adopted by the AAB, failed to take into account the considerable functional and economic obsolescence associated with the subject property. (g) At the hearing the Assessor attempted to introduce evidence to support the land value portion of his cost analysis. However, Pacific Refining objected to the introduction of that evidence because it had not been included by the Assessor in the Revenue and Taxation Code Section 1606/State Board of Equalization Rule 305. 1 exchange of information, _ and the Board properly sustained the objection. Consequently, there was no evidence in the record to support the land value in the Assessor's cost or summation analysis and, therefore, the Assessor's cost approach value for the subject property, which was adopted by the AAB, is invalid. (h) The AAB's Findings improperly excluded Pacific Refining's second comparable sale to support the land value in its cost analysis; there was no legal or factual basis for excluding that sale from consideration. (i) The 1992 roll value for Pacific Refining's property was $46,889, 101 (Assessor's hearing Exhibit 1) which value reflects trended 1982 Prop. 13 and trended 1989 Prop. 13 base year values. At the hearing, the Assessor presented evidence that the trended 1992 Prop. 13 value of the property was $60, 220, 281, and the AAB adopted that figure as the taxable value of the subject property (such value being lower than the Prop. 8 market value presented by the Assessor) . The $60, 220, 281 figure, which is considerably higher than the 1992 roll value, results from carrying forward an increase by the Assessor in the 1989 base year value of the property. Such increase violates the statute of limitations set forth in Revenue and Taxation Code Section 51.5 which permits the Assessor to go back a maximum of four years to correct a base year value on the assessment roll. The $60,220, 281 figure was not calculated by the Assessor until July 1994 at the earliest and four years prior to that date is 1990. Therefore, the Assessor was barred from correcting the 1989 base year value of the subject property under the provisions of Section 51. 5, and the Assessor should not have increased the 1992 assessment HONORABLE BOARD OF SUPERVISORS COUNTY OF CONTRA COSTA August 14, 1995 Page 7 roll value (the true trended 1992 Prop. 13 value in this case) by carrying forward a correction to the 1989 base year value. The Board's adoption of the higher trended 1992 Prop. 13 value of $60, 220, 281 violates the provisions of Section 51.5 of the Revenue and Taxation Code because that value is based on an impermissible correction to the 1989 base year value. If the Board intended to hold that the taxable value of the property is the true trended 1992 Prop. 13 value, it should have adopted the $46, 889, 101 figure on the assessment roll. (j) Finally, at the hearing before the Assessment Appeals Board, the Applicant introduced substantial and credible evidence that the subject refinery was worth $25, 000, 000 as of March 1, 1992 and the Board, by unanimous vote, agreed that such evidence rebutted the presumption of correctness as to the Assessor's roll value. Moreover, the Assessor introduced no -- repeat -- no evidence at the hearing to support his roll value of $46, 889, 101. As a result, the roll value of $46,889, 101 is no longer an option in this case. Thus, the County Assessor is left with defending his higher value of $60, 220, 281 (the value adopted by the Appeals Board by a two-to-one vote) which value is based on insufficient evidence, on an analysis which admittedly was replete with error, and on evidence not admitted at the hearing. In seeking an increase in the value of the property at the hearing, the Assessor had the burden of proof on that issue. The sort of evidence characterized above does not rise to the credibility of "substantial evidence, " let alone meet the Assessor's burden of proof. This Claim for Refund, on the other hand, is bottomed on a sound appraisal of the property at $25, 000, 000, which — appraisal and the evidence supporting the same was properly admitted into the record before the Appeals Board and which the Board acknowledged overcame the presumption that the Assessor's work product was correct. It constitutes and is evidence of a substantial nature, and thus supports the merits of this claim for refund. 7 . Conclusion. Pacific Refining challenges the majority of the methods of valuation used by the Assessor in valuing Pacific Refining's property for the 1992 tax year. Those methods either failed to follow standards prescribed by law or were arbitrary. By accepting and adopting the Assessor's methods and value conclusion, the AAB exceeded its discretion. This is clearly seen in the AAB's Findings, the majority of which are not HONORABLE BOARD OF SUPERVISORS COUNTY OF CONTRA COSTA August 14, 1995 Page 8 supported by any evidence in the administrative record and, in fact, rely upon evidence outside of the record. Because the methods used by the Assessor and adopted by the AAB were unlawful, arbitrary, or not supported by substantial evidence, and because the AAB relied upon evidence outside the record in deciding this case, the value found by the AAB is incorrect and the assessment thereon void, invalid and illegal. Therefore, Pacific Refining respectfully requests that an order of this Board of Supervisors be made directing the proper officials of the County of Contra Costa to refund to Pacific Refining the property taxes paid to the Contra Costa County Tax Collector referred to above for the 1992 tax year, together with interest thereon, as required by law. Respectfully submitted, J n D. Cahill Attorney for Pacific Refining Company/ PRC Joint Venture CK0\3833-L1\REFUND.CLM VERIFICATION OF CLAIM COUNTY OF HARRIS § STATE OF TEXAS § The undersigned, Austin O'Toole, hereby avers: I am the Senior Vice President of Pacific Refining Company, and am authorized to make this verification on its behalf. I have read the foregoing Claim for Refund of Property Taxes and know the contents thereof to be true to the best of my knowledge, information and belief. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on August-'3—, 1995 at Houston, Texas. Austin O'Toole Tracking 66 3 911313 2 _� _ M Recip�e�at s Copy �FBC�C® LISA Airbzll Number From Service* Date 08/14/95INE gays= ®FedEx Priority Overnight ❑fedExStandardOvernight ❑FedEx 2Day (Nombus tress morning) (Nextb ssalternoon) ISecond bus tress day) dE Ne xGovt.0 vernight F Ath zedeseronlyl Cris j� O�NIQLU. 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