Downtown's Fairy Godmother

After retiring from the Alameda County Assessor's Office in 1993, Grant Flint took a temporary job assessing downtown real estate for Doris Ward. He was excited about the prospect of practicing his art on the giant landmarks silhouetting the San Francisco skyline. Flint, 64, was particularly excited about assessing 555 California St., BankAmerica's world headquarters.

The angular 555 California St. office behemoth is owned by a partnership that includes the building's manager, Walter Shorenstein, and BankAmerica Corp. In 1994, assessor's records show, the taxable value of 555 California was $773 million. Because San Francisco's real estate market was just emerging from a recession in 1995, Shorenstein asked for a Prop. 8 reduction of the assessments on which he had paid taxes the two previous years. He asked that the building's assessed value be reduced to $600 million.

The Assessment Appeals Board, with the blessing of Ward's office, awarded Shorenstein a value $105 million lower than what he had initially requested, reducing the building's assessment to $495 million. Then, the tax collector sent Shorenstein a check for $5 million -- a refund of "overpayments."

Flint was outraged. His own careful appraisal of 555 California -- based on its sale price in 1993, when the building's ownership structure changed -- came in at $838 million. In consideration of the previously weak real estate market, Flint says, he was willing to temporarily reduce the value to $758 million. But, he says, Doris Ward quickly reassigned him, and another appraiser gave the building a value $343 million less than Flint's, resulting in a $4 million annual tax saving for Shorenstein and BankAmerica.

Flint says he resigned in disgust.
(Today, 555 California is assessed at what seems to be a bargain-basement level -- $546 million, or $227 million lower than the building's tax value four years earlier.)

Repeated requests to interview Ward about the performance of her office were denied.

Assistant Assessor Verne Walton did, however, produce a list of the 30 largest downtown office buildings ranked according to value. The list shows that the combined assessed value of these properties is $2 billion less than it was in 1990, due to Prop. 8 reductions. Clearly, that $2 billion reduction should have been restored at some time during the current San Francisco real estate boom. Instead, Walton acknowledges that the assessor has increased the values of a few of the 30 buildings by just $190 million. Because of the assessor's failure to reverse the Prop. 8 reductions on these 30 skyscrapers, the city treasury missed out on $24 million in tax revenue this year.

Dozens of other commercial buildings have benefited from managerial meltdown at the Assessor's Office.

San Francisco's chief of protocol, Charlotte Mailliard Swig Shultz, is part of a partnership that owns an office building at 633 Folsom that is leased to the city. Prop. 8 reductions have saved her -- and cost the city government -- $170,000 in property taxes on that building over four years.

The Fairmont Hotel, in which Swig Shultz has an interest, had a 50 percent ownership change in 1994, when Prince Alwaleed Al Saud bought into it. Yet, the Fairmont was not brought up to market value by the assessor. Instead, Prop. 8 was used to reduced it in value -- to $78 million. San Francisco has been losing a cool quarter-million a year in property taxes from the devalued Fairmont, which was just sold for a reported price of $200 million.

A handful of tax attorneys and appraisal firms do a large percentage of the Prop. 8 work for the owners of the office monoliths. The story of the courtyard for the Citicorp Building at 1 Sansome St. is an example of the magic they can work.

The granite-pillared courtyard at 1 Sansome opens onto Market Street, providing a luxurious open space in congested downtown. In 1994, the courtyard carried an official assessed value of $27 million. In 1995, the courtyard's value was reduced to $7 million, thanks to the efforts of politically savvy Bill Bennett of the law firm Bennett & Yee and appraiser Charles Brinkerhoff of the Arthur Consulting Group.

The office tower attached to the courtyard was reduced by $23 million from its 1994 value, and it has remained at that low assessment.

Citicorp saved $731,000 in real estate taxes last year on the courtyard and tower at 1 Sansome St. through these reductions.

The list of Prop. 8 properties that escape the merciless attentions of the tax collector -- due to the merciful inattention of the assessor -- is long.

Over a five-year period, San Francisco lost $1.4 million because of value reductions at 3 Embarcadero Center, owned by Prudential Insurance and the Rockefeller family. Kentucky Central Life Insurance is getting a $220,000 Prop. 8 tax break every year on its 135 Main St. building.

Walter and Doug Shorenstein are the winners of the overall Prop. 8 sweepstakes, though. Among many other examples of tax breaks, the Shorensteins get a $62,000-a-year tax subsidy on their retail (The Sharper Image) and residential (Golden Gateway North) complex at 75 Broadway; a $255,000 annual tax reduction on Harrison Plaza, a commercial complex on the Embarcadero, near the Bay Bridge; and of course the $4.3 million yearly tax savings that the Shorensteins and BankAmerica get on the Bank of America building.

But the Prop. 8 gravy train is not limited to corporate behemoths or monster office buildings.

In 1994, Mayor Willie L. Brown's condominium at 1200 Gough St. received a Prop. 8 reduction from a $336,000 assessed value to $280,000. Rather than revert to market value after one year, the value of Brown's condo has remained frozen. This continuing reduction is saving the mayor $666 in taxes this year.

And Robert Pritikin's Chenery Street mansion -- which hosted Doris Ward's campaign kickoff party -- benefited from $284,000 in Prop. 8 value reductions over the last year.

In 1995, the San Francisco Chronicle published an investigative series about Ward's stewardship as assessor. Reporters David Deitz and John King secretly shadowed Doris Ward for several days. They reported that she seldom visited her office: She used her city car to shop at Saks, instead of going to work. Three years later, Ward's working habits appear to have changed little. According to a half-dozen of her co-workers, all of whom requested anonymity, she is absent from the office for significant amounts of time.

Prompted by public response to the Chronicle series, the State of California conducted a special audit of Ward's department. That 1995 audit is absolutely damning. It contends Ward's office could not even maintain a basic filing system. The auditors, sent by the State Board of Equalization, came up with a laundry list of dozens of essential operational improvements needed at the Assessor's Office.

The auditors turned pale at the discovery that the assessor's 1960s-vintage mainframe computer could be accessed at will. They called it "ridiculously simple" for nearly anyone in the office to raise or lower property values in the computer without authorization. The auditors urged the assessor to bring her database into the modern age, warning that the "potential for wrongdoing" in Ward's department was omnipresent.

In the 1995 report, the Board of Equalization found that record-keeping in Ward's office was a near-total disaster, resulting in "inaccurate and improper assessments." Ward's method of collecting and storing vital and irreplaceable data left the auditors aghast.

"A lost or misplaced file, which would be treated with alarm at most assessor's offices, is not unusual in San Francisco," the board wrote.

The board observed that huge value reductions on downtown office buildings were not supported by paper trails. The board said that the reasons for changes in assessed values were not being appropriately documented and filed. The report worried that personnel in the Assessor's Office may, therefore, be able to reduce property values "in situations where this is not permitted by law."

The state board went on to complain that the assessor was not reassessing the value of some multimillion-dollar commercial properties when they changed hands, as is required by law. And among other things, the board reported, the assessor did not even look at 500 construction permits issued by the Port of San Francisco since 1990 -- permits that authorized the building of tens of millions of dollars in improvements that should have been placed on the city's tax rolls.

Three years later, few of the auditors' recommendations for improvements in the Assessor's Office appear to have been followed. Undervalued commercial property has not been increased in value. The basic filing system remains a disaster. The state auditors' urgent recommendation that Ward buy a new computer system has been hopelessly bungled (see related story, Page 15).

A 1997 audit of the assessor by KPMG Peat Marwick supports the notion that Doris Ward has made no real headway in fixing her problems. Of particular concern to all the accountants has been the absence of records showing how property values are assessed. Without such a paper trail, decisions made by Ward to lower property values cannot be monitored.

Who gains from the state-certified incompetence, the convenient confusion, the utter bumbling that has been shown, again and again, to permeate Doris Ward's shop?