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HomeMy WebLinkAboutMINUTES - 06271988 - 1.38 TO' BOARD OF SUPERVISORS eFROM: Phil Batchelor Vt.JI itra County Administrator C )sta DATE. June 21, 1988 COQ,* SUBJECT: Legislation: Assembly Bill 3234 (Hill) SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATION• Adopt a position of opposition to AB 3234 by Assemblyman Hill which intrudes on the Constitutional duties of the Assessor by specifying the recommended method the Assessor should use in valuating the possessory interests in real property of cable television systems. BACKGROUND: Attached is a memorandum from the County Counsel' s Office commenting on AB 3234 by Assemblyman Hill. The State Constitution presently requires each County Assessor to determine the fair market value of property subject to assessment. This includes the possessory interests in real property used by a cable television company, including public streets and rights-of-way. A strong effort is apparently being made by the. TV industry this year to reduce their taxes by one mechanism or another. County Counsel points out that AB 3234 appears to intrude on the Assessor' s Constitutional duty to determine the fair market value of property by indicating the method the , Legislature considers the most appropriate or recommended method for the Assessor to use. This method, however, would result in a lower valuation of property than would occur if the assessor could use the same methods that are applied for the assessment of other property. County Counsel and the Assessor believe that this legislation establishes a dangerous precedent which might allow the Legislature in the future, at the request of any other special interest, to similarly constrain the Assessor' s Constitutional duties by indicating a method of assessment which would result in financial benefit to the special interest. The Assessor and County Counsel both strongly recommend that the Board oppose AB 3234 and this office concurs in that recommendation. CONTINUED ON ATTACHMENT: _ YES SIGNATURE: l�gh ze, � X RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE X APPROVE OTHER SIGNATURE S ACTION OF BOARD ON June 28, 1988 APPROVED AS RECOMMENDED OTHER VOTE OF SUPERVISORS 1 HEREBY CERTIFY THAT THIS IS A TRUE UNANIMOUS (ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN AYES; NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. County Counsel JUN 2 8 1999 Cc: County Assessor ATTESTED County Counsel PHIL BATCHELOR, CLERK OF THE BOARD OF Cable TV Administrator SUPERVISORS AND COUNTY ADMINISTRATOR Assemblyman Frank Hill Ralph Heim, Jackson/Barish BY M382/7-83DEPUTY �. COUNTY COUNSEL'S OFFICE �^ CONTRA COSTA COUNTY Contra Costa County MARTINEZ, CALIFORNIA RECEIVED Date: June 16, 1988 JUN 16 1988 To: John Biasotti, Assessor Office of Ccs rz!fir Admi-o stretor From: Victor J. Westman, County Counselj �4el By: Dennis C. Graves, Deputy Cou Re: AB 3234, CATV Valuation This responds to your request for our analysis and comments on AB 3234, regarding assessment of CATV real property interests . Although many issues are raised by the proposed legislation, most are discussed very well in the excellent analysis of the Assembly Revenue and Tax Committee consultant and are not repeated here. In this memorandum, we address the critical threshold issue of interference with the Assessor 's constitutional duty to determine fair market value. The Constitution commands that all property be assessed at fair market value as of its date of change of ownership or new construction. (Art. XIII, S 1 , Art. XIIIA, S 2; see Bauer- Schweitzer Malting v. San Francisco [ 1973] 8 C. 3d 42 . ) Fair market value, of course, is the traditional appraisal standard of the highest amount that would be paid by. a purchaser in an open market transaction. (See Rev. & Tax. Code, SS 110, 110 . 1 , 401 . ) The foundation of the entire California property taxation system is the requirement that fairness exist among taxpayers by insuring that assessments are always made at true fair market value . An essential element of the system is that this requirement be carried out by objective professionals working under the supervision of an elected assessor who is sworn to uphold the constitutional mandate of determining fair market value for all assessees. (See Rev. & Tax. Code S 401 . ) As part of carrying out the mandate that all real property assessments fairly reflect true fair market value, an important feature of the California system of real property taxation is that the Constitution precludes the Legislature from in any manner exempting any real property. (See e.g. , Lundberg v. Alameda [1956 ] 46 C. 2d 644 . ) Another important feature of the system is that the Assessor must have broad discretion to determine the fair market value of assessments and that the courts will protect the reasonable exercise of that discretion. (See DeLuz Homes v. San Diego [ 1955] 45 C. 2d 546 . ) As the foregoing discloses, the Constitution contemplates a "separation of powers" in the fundamental scheme for the property tax financing of California local government: the executive s John Biasotti, Assessor -2- June 16, 1988 branch, through the elected assessor and his - professional appraisal staff, are duty-bound to place a proper fair market value on real property due for reassessment and that duty . cannot be mitigated, usurped or in any way defeated by the legislative branch, which by its very nature is susceptible to political influences . Further, the third branch, the courts, will enforce this separation. In our opinion, AB 3234 strikes at the very heart of the California property taxation system because it is a thinly disguised legislative proposal to constrain or even usurp the Assessor' s constitutional duty in order to achieve lower valuations than would occur if the Assessor could use the same methods that are applied for assessment of other taxpayers ' property. If this dangerous precedent is set, there would be little to preclude the Legislature, at the behest of any other special interests (e .g . , the oil companies)., to similarly constrain the Assessor's constitutional duty so as to result in favorable values . It is not difficult to foresee virtually every influential special interest clamoring for similar benefits, which would seriously undermine the linchpin principle of fair assessments at true market value for all assessees, as determined by an unbiased, independent elected county assessor. AB 3234 is logically inconsistent with the fundamental scheme of California property taxation outlined above. Although paying lip service to the constitutional requirement of fair market value (e.g. , "the county assessor shall value these possessory interests by any method that yields a value consistent with the requirement of section 401" ) , when specifying a "recommended" and "preferred" method of valuation the Bill hobbles the assessor' s ability to properly find fair market value by - properly exercising his professional, independent appraisal judgment. It is apparent that the proponents intend that the "recommended" and "preferred" method of valuation will result in a valuation which is less than what an assessor, in his professional appraisal opinion, might otherwise determine. Although it can be argued that an assessor could justifiably refuse to accept the "preferred" and "recommended" method of valuation if he thinks it might result in less than a true fair market value, the insidious (and intended) effect of the bill is that in many cases it will influence an assessment appeals board (or court) to accept a valuation based on the legislatively specified "preferred" and "recommended" method (which method doubtless will be argued by the taxpayer) rather than another method which the assessor may determine to be preferable under the circumstances to find the true fair market value. Given the aforenoted constitutional scheme of an independent, professional appraisal staff supervised by an elected public official who is constitutionally bound to make fair and equal fair market value assessments, and given that the field of appraisal (particularly in difficult areas such as appraisal of CATV interests ) is a highly technical professional field, it is difficult to see how the Legislature could reasonably presume to carte blanche John Biasotti, Assessor -3- June 16, 1988 "recommend" a "preferred" method of valuation over that which an independent, professional appraisal staff might otherwise use in many cases for assessment of CATV real property interests . In the oftentimes complex and difficult field of appraisal, where reasonable appraisers often differ in both methodology and result, the intent of the law is quite transparently to limit the free and open evaluation of . competing methods in order to influence the assessment appeals board to accept the method that will give lower values for CATV real property interests . In our opinion, the logical conclusion regarding the scheme of AB 3234 is that, to the extent it achieves its obvious goal of either constraining the assessor to a particular methodology or influencing an appeals board to accept a taxpayer' s methodology over the methodology used by the assessor, the Bill would violate the fundamental constitutional scheme of true fair market value being determined by an independent, objective elected public official. To the extent that the Legislature finds and declares that the act is declaratory of existing law, the finding is both unsupportable and unnecessary. Under the above-described constitutional scheme, it should be the province of the public official appraisal professionals, assessment appeals boards, and the courts to determine the proper appraisal methodology and the appropriate circumstances in which to apply it when making assessments . It is particularly inappropriate for the Legislature to attempt to resolve a very difficult and arguable issue of CATV appraisal methodology by rendering a fiat that a significant portion of fair market value is attributable to intangible assets and then to specify that those intangible assets are subscriber contracts , marketing and programming contracts, lease agreements, etc. While assessors would agree with the bald proposition that it is not proper to assess intangible assets, the legislative finding presumes the use of only the comparable sales approach and ignores the key issue of the treatment of intangibles if the income approach is used. If the income approach to valuation is used, California courts have long recognized that -the income stream which is capitalized to determine the value of the real property interests that are properly taxable inherently reflects some value attributable to intangibles that are not separately taxable. (See ITT v. Santa Clara [1980 ] 101 C.A. 3d 246, Michael Todd v. Los Angeles [ 1962] 57 C. 2d 684 . ) Such a legislative finding is, in our opinion, a direct and improper attempt of the Legislature to usurp the assessor' s constitutional duties of appraising at fair market value according to the method which, in his discretion, will most appropriately yield the true fair market value. Should this Bill become law, we recommend that the assessors of California consider an immediate legal challenge, beginning with the points discussed above. DCG/jh