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Home My WebLink AboutMINUTES - 10242000 - C74 C.74 THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY,CALIFORNIA Adopted this Order on October 24, 2000 by the following vote: AYES: Supervisors Gioia, Uilkema, Gerber, DeSaulnier and Canciamilla NOES: None ABSENT: None ABSTAIN: None SUBJECT: Correspondence C.74 LETTER, dated October 12, from John D. Cahill, of Rodi, Pollock, Pettker, Galbraith & Cahill, 444 South Flower Street Ste 1700, Los Angeles, CA 90071, requesting transmittal/processing of a claim for refund of certain property takes levied by Contra Costa County to the appropriate department. IT IS BY THE BOARD ORDERED that the above mentioned matter is REFERRED to the Assessor. I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN AND ENTERED ON THE MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. ATTESTED ' 1 _ 29Z 'i Phil Batchelor, erk of the Board aT Supervisors and County Administrator BY % ePuty c.c.Correspondents (1) County Administrator it+ +Il � rr ,r�. s -POLLOCK JOHN D.r AHILL RODI,POLLOCK, PETTKER,GALBRAITH &CAHILL KARL B. ROD[(1908-1982) JOHN D. PETTKER A LAW CORPORATION DANIEL C. BOND(1942-1977) WILLIAM R. CHRISTIAN PAUL E. SCHWAB(1895-1973) HENRY P. PRAMOV,JR. JOHN F.CERMAK,JR. 444 SOUTH FLOWER STREET OF COUNSEL ALLAN E. CERANB. BLAKELY SUITE 1700 ELIZABETH B. JOHN P. POLLOCK EJAMES M.GALE RAITH ROBERT C. NORTON LOS ANGELES,CALIFORNIA 9007 1-290 1 TIMOTHY G.CEPERLEY CORALIE KUPFER TEL:(213)895-4900 TELECOPIERS (RIS K.O'N EALL (213)895-4921 SONJA A. INGLIN (218)895-4922 SCOTT E.ADAMSON (213)895-4750 MARGARET ROSENTHAL October 1^1 f'I flllfl MICHAEL A.ABRAHAM V v 1G, LVVV OUR FILE NUMBER KENNETH A. FRANKLIN DONNA YAMINI WADE E. NORWOOD 5081-L1 GREGORY E. EISNER MICHAEL D.VIGIL Honorable Board of Supervisors Contra Costa County County Administration Building 651 Pine St., Room 106 Martinez, CA 94553 Re: Claim for Refund of Property Taxes of Sears, Roebuck and Company Dear Members of the Board: Enclosed please find a verified claim for refund of certain property taxes levied by Contra Costa County against Sears, Roebuck and Company for the years 1998 and 1999 on its store located in the Hilltop Mall in Richmond, California. Please process the claim to the appropriate county department for review and payment. If you have any questions on the above,please contact us. All good wishes. Sinc , Jo . Cahill JDC:j1j Enclosure cc: Mr. Jeff King, Sears, Roebuck and Company 219938_1.doc 7�irrlrel Oersary 4 Sears, Roebuck and Co. SEAM3333 Beverly Road B2-108A Hoffman Estates, IL 60179 September 11,2000 HONORABLE BOARD OF SUPERVISORS CONTRA COSTA COUNTY County Administration Building 651 Pine St.,Room 106 Martinez,CA 94553 Re: CLAIM FOR REFUND OF PROPERTY TAXES by Sears Roebuck and Company for Taxes Erroneously and Illegally Assessed and Collected for the 1998 and 1999 Tax Years Dear Members of the Board: In accordance with Division 1, Part 9, Chapter 5, Article I of the California Revenue and Taxation Code(Sections 5096 and 5097,et seq.),Sears Roebuck and Company C'Sears")hereby claims a refund of taxes assessed against Sears by the Contra Costa County Assessor and collected by the Contra Costa County Tax Collector for the 1998 and 1999 tax years. On the basis that these taxes were erroneously and illegally assessed and collected, Sears hereby requests that the Board of Supervisors order the proper Contra Costa County officials to refund to Sears the sum of $ 140,759.99 for tax year 1998, and $ 79,162.27 for tax year 1999, together with appropriate interest thereon. In support of this claim,Sears states the following: L Claimant. Sears is, and at all times herein mentioned was, a corporation qualified to do business in the State of California. H. Prope For tax years 1998 and 1999,the Assessor of Contra Costa County assessed property located in Centra Costa County described as Sears Department Store, Hilltop Mall, Richmond, California (Assessor's Parcel Numbers 405-320-001-2, 405-320-016-0, 405-320-020-0, 405-320-021-0, the "Property") to Sears, as the owner thereof. M. Amount of Taxes. The amount of tax levied for each year was as follows: 1998: $312,574.18 1999: $ 179,804.24 IV. Taxes Were Paid. The taxes levied for 1998 and 1999 were duly and timely paid by Sears. V. Assessment Appeal Application. HONORABLE BOARD OF SUPERVISORS Page 2 of September 11,2000 Sears filed timely Applications for Changed Assessment on the above-referenced parcels for tax years 1998 and 1999(Assessment Appeal Numbers 98-0215 through 98-0218,and 99-0306 through 99-0309). VI. Board Decision. On March 2,2000,a hearing on the Applications was held(the"Hearing")by the Contra Costa County Assessment Appeals Board (the "AAB"). On March 16, 2000, the AAB reconvened to render its decision. Finally,on March 30,2000,the AAB issued its Findings of Fact in the aforementioned applications. VII. Grounds for Refund. A. Violations of Sears'Due Process Rights. At the Hearing,the AAB improperly allowed the Assessor to present a cost approach to value that was not exchanged with the Applicant, even though the Applicant did not consent to such evidence. Revenue and Taxation Code Section 1606 provides: Whenever information has been exchanged pursuant to this section the parties may not introduce evidence on matters not so exchanged unless the other party consents to such introduction. At the Hearing,the Assessor admitted in testimony that the cost approach he presented to the AAB was a"completely revised"and"different"cost approach than that which he exchanged with the Applicant prior to the Hearing. In addition,the Applicant never consented to the introduction of the Assessor's new cost approach. Nevertheless, in violation of Section 1606,the AAB relied on and adopted the Assessor's cost approach,giving it some weight! Because the AAB accepted and gave weight to the Assessor's cost approach,the Applicant's due process rights were violated. B. Methodological Errors by the Assessor and the AAB. State Board of Equalization Property Tax Rule 8 requires Assessors and Assessment Appeals Boards to establish capitalization rates for the income approach to value in one of two ways: (1) by adjusting the capitalization rates of specific comparable properties that were the subject of a recent open-market sale, or(2) by the band-of-investment method, in which, a weighted average of capitalization rates for debt and for equity capital is used to derive the capitalization rate. California case law unequivocally requires Boards and Assessors to follow the State Board's Property Tax Rules.2 Nevertheless,both the Assessor and the Assessment Appeals Board used a capitalization rate that does not comply with Property Tax Rule 8: "The Board employed a capitalization rate of 8.45% [in 1998 and 8.56% in 1999], which was derived from market trends collected by Korpacz Real Estate Investment Survey,Fourth Quarter 1998(Assessor at p.24)." (Brackets added). The Assessor and the AAB's use of a published capitalization rate from a multi-state survey of malls did not comply with Property Tax Rule 8 because the rate was not determined by either of the two permitted methods of determining a capitalization rate: (1) by comparing the net incomes that could reasonably be anticipated from recently sold properties with their sale prices,adjusted,if necessary to cash equivalents or(2) from the band-of-investment method. In fact,the survey does not even segregate California properties from those located in other states, nor does it indicate that any of the properties are located in California. By ' Findings of Fact,pages 2-3. 2 See Main& Von Karman Associates v. County of grange(1994)23 Cal.App.4`"337,343. HONORABLE BOARD OF SUPERVISORS Page 3 of 4 September 11,2000 using a published survey capitalization rate the AAB and Assessor utilized an illegal method of valuing the Property under the income approach to value. C. The AAB's Final:Decision and Findings are Not Supported by Substantial Evidence. An assessment appeals board is required to make its decision based upon the evidence presented to it at an equalization hearing. In the instant case,the AAB failed to act on the evidence presented at the Hearing„and its decision is not supported by substantial evidence. In its Findings of Fact the AAB states that it"relied primarily on the Income Approach to value. For the 1998 lien date, the AAB felt that the rents in effect at the Sears store in the Montebello Shopping Plaza, namely$8.54lsq. ft,,rounded to$8.501sq.ft.,were the best indicator of economic rents for a Sears type facility such as the subject property" The AAB's reliance on this single rental, however, was not supported by substantial evidence for four reasons: (1) the Assessor admitted that he relied on second-hand, unverified information regarding the rent amount, (2) the AAB was presented with first-hand evidence when a Sears executive testified of his own knowledge that the Assessor's rent figure for the comparable was in error and that the rent was not $8.50 per square foot for 1998 or $9.35 per square foot for 1999, but rather was $5.60 per square foot,(3)the Assessor's purported rent comparable was a free-standing Sears store in Southern California, which is clearly different from the subject Property which is an anchor store in a Regional Mall, and thus was not comparable, (4) the Applicant presented extensive evidence to the AAB of rents from mall-anchor department stores that the AAB declined to consider, As noted above, to the extent that the AAB relied on the Assessor's cost approach, its decision is unsupported because the Assessor's unexchanged cost approach was improperly accepted into evidence and relied upon. In addition, the AAB disregarded properly presented and carefully adjusted comparable sales presented by the Applicant in the Applicant's comparables sales approach to value. VIII. Conclusion. The assessments on the Property were arbitrary, erroneous, and contrary to law for 1998 and 1999 because the Assessment Appeals Board violated Sears due process rights by admitting into evidence and relying upon the Assessor's unexchanged cost approach to value,the Assessor and the AAB used an illegal method to establish a capitalization rate for the Property in its income approach to value,contrary to Property Tax.Rule 8, and the AAB's decision was unsupported by substantial evidence. For the reasons set forth above, Sears respectfully requests that the Board of Supervisors issue an order directing the proper officials to refund to Sears the property taxes paid to the Contra Costa County Tax Collector in the amount of$ 140,759.99 for the 1998 and$79,162.27 for 1999,together with interest thereon,as required by law. Respectfully submi ed, 1ery King Manager--Property Tax 3 Property Tax Rule 324. HONORABLE BOARD OF SUPERVISORS Page 4 of September 11,2000 VERIFICATION OF CLAIM FOR REFUND State of Illinois } } ss County of Cook ) The undersigned,Jeffery King,hereby avers: I am the Manager,Property Tax of Sears Roebuck and 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 and the same is true of my own knowledge, except as to those matters which are stated on information and belief, and as to those matters,I believe them to be true. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on September 11,2000 at Hoffman Estates, Illinois. 217331-1.doc Sincerely, r Je ry King Manager i Property Tax Appointment and Delegation of Authority Pursuant to the authority vested in me by a resolution of the Board of Directors of Sears, Roebuck and Co., 1, Jeffrey Boyer, Chief Financial Officer of Sears, Roebuck and Co., hereby appoint and designate Marjory Bonilla Tax Analyst Kathy Peavley Senior Manager, Sales, Use and Miscellaneous Taxes John Dalton Manager, Sales,Use and Miscellaneous Taxes Violet Grisham Manager, Property Tax Richard E. Keslinke Director, Property Tax Jeffrey E. King Manager, Property Tax D. Kendall Lees Senior Manager,Property Tax Richard Lofstrand Senior Manager, Sales,Use and Miscellaneous Taxes Warner D.McClure Director, Sales, Use and Miscellaneous Taxes Conrad J. Montgomery Manager, Property Tax Leonard Saul Manager, Property Tax Darlene A. Siciliano Senior Manager,Property Tax Steven R. Stallings Manager, Sales,Use and Miscellaneous Taxes Robert G.Taylor Manager, Sales,Use and Miscellaneous Taxes of Sears, Roebuck and Co.,to sign, execute and deliver on behalf of and in the name of Sears, Roebuck and Co. and its wholly-owned subsidiaries,with respect to every state of the United States, and any jurisdiction therein and the District of Columbia, any of the following instruments: 1. applications for licenses and permits necessary to the conduct of the business of the company and bonds securing performance by the company under such licenses and permits and agreements of indemnity in place of insurance; 2. reports and tax returns and statements of valuation for tax purposes,to state and local authorities; and 3. pleadings, bonds, petitions,affidavits and other documents and instruments pertaining to the conduct of litigation or to administrative proceedings involving taxes and licenses. The authority designated pursuant to this resolution shall remain in full force and effect notwithstanding the fact that the individual who granted such authority ceases to hold the position he or she held at the time such authority was granted.,whether due to promotion,transfer, resignation,retirement, death or otherwise; provided however,that such individual, his or her successor or any other individual having plenary authority under this resolution, as noted above,may modify or rescind such designated authority at any time. IN WITNESS WHEREOF,the undersigned set his hand as Chief Financial Officer of Sears,Roebuck and Co. this /7 0t� day of April, 2000, Jeff Boyer Chief Financial Officer