Ambulance-chasing may have been the stock-in-trade of the legal profession for centuries. But building-chasing is where the money is.
Tracking how many assessable events — how many One Market Plazas — slip past the assessor's office is befuddling; it recalls Donald Rumsfeld's "known unknowns" and "unknown unknowns." Stephen Dunbar knows, though.
Michael Short
Years of litigation in the One Market Plaza case, triggered by Wayne Lesser, earned the city $23 million. Lesser got nothing.
Michael Short
One Market Plaza remains the only
commercial property in the state in which a concealed change of ownership resulted in fraud penalties.
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"I'm contacted by attorneys quite often asking me to look at a transaction and see if it's something that should result in a reassessment and higher tax bill," says Dunbar, now a private appraiser. "Often I do say there should be a reassessment. But it's their choice whether to report that to the appropriate authority. And quite often they don't." And in that case, the assessor probably doesn't find out. "The assessor is so busy doing the easy, slam-dunk stuff, they don't look at these other events."
Catching the next One Market Plaza without the benefit of a disgruntled sandwich-maker would require a vastly different approach. The assessor "is managing the day-to-day stuff. But is he looking where he should be to make sure people are afraid of them?" asks Ron Chun, a tax lawyer and former deputy assessor. Chun chaired the Assessment Appeals Board that ruled on One Market Plaza and twice ran unsuccessfully for assessor. A former IRS agent, he thinks the assessor should emulate the tax men. "They need troops on the ground. They need people saying 'Hey, we'd like to audit you.' 'What'd I do wrong?' 'Nothing. We'd like to do it anyway.'"
Focus on downtown; it's where the money is, continues Chun. Randomly choose a handful of big buildings. And if you ferreted out even one transaction — well, "that'd indicate how widespread the problem is." Dunbar agrees. "One Market Plaza had no event that brought it to the assessor's attention. There are a lot of properties in San Francisco that are never looked at because they don't have that trigger event. Their bills could be bigger."
In fact, the assessor already audits San Francisco businesses. But "real property" — land and buildings — is not audited. Only "business and personal property" — computers, office equipment, vehicles — is. When asked why real property couldn't be subject to random audits, Ting replies, "that's a great question."
As California's only city-county, San Francisco retains a vastly larger portion of its property taxes than anywhere else, around 65 percent. Most counties only keep between 11 and 29 cents on the dollar; here, it would make unquestionable economic sense to vastly enhance the assessor's office. Ting notes that his department's budget has seen its general fund allocation rise from around $11 million five years ago to some $15 million currently. This growth represents one-tenth of 1 percent of the general fund — for an office generating 39 percent of the fund's revenue.
The reason Ting isn't blessed with more money and manpower is that it might make his office too effective, and, unlike the head of the IRS, the assessor is an elected position — as are the supervisors who approve his budget. Sure, San Francisco is facing down a $263 million budget shortfall, but there would be a different price to pay for empowering city employees to harry taxpayers. "A bumper sticker popular when Prop. 13 was enacted said 'Bring Back the Corrupt Assessors,'" says U.C. Berkeley law professor David Gamage. Assessors had attempted to "modernize, rationalize, and make effective assessment laws. But, on an individual basis, voters don't like having property taxes enforced in a rational, effective manner." Neither do corporations.
"We are not knocking on doors," Ting notes. Instead, he says, his staff diligently peruses the San Francisco Business Times to spot potential reassessment-inducing transactions. They also monitor communications from the Franchise Tax Board and Board of Equalization (BOE). Corporations, in fact, now must report more information to the government than ever before. Those failing to inform the BOE of an ownership change face hefty penalties. The BOE sends twice-monthly Legal Entity Ownership Program (LEOP) reports to all assessors, who may then look into reassessing local holdings.
This program is not infallible. A 2002 merger that should have resulted in reassessments of every Jiffy Lube property in California wasn't caught until David Kersten, a private researcher with the California Tax Reform Association, contacted the BOE in 2010. Meanwhile, multiple sources within San Francisco's assessor's office confirm one dazzlingly inept employee, unable to grasp the substance of the LEOP reports, simply crammed them into his desk — for months. Once a property falls through the cracks, it tends to stay there. Asked if there's a retroactive measure to undo past oversights, Ting responds "There really isn't."
One of the most sought-after experts on Prop. 13 is also a stay-at-home mom from the Peninsula. Jennifer Bestor is a former high-tech executive with an infectious laugh and an insatiable drive for research who systematically crunched the numbers from the assessor's rolls in her hometown Menlo Park and its neighboring environs. A Republican whose ancestors have been GOP members since it truly was the party of Lincoln, she has become one of the most outspoken critics of Prop. 13.
Bestor wanders through the suburb's quaint downtown. By memory, she recites the property tax payments of store after store. Per Prop. 13, they're wildly variant; the hulking Trader Joe's has been owned by one family trust for generations. It's valued in the vicinity of $700,000 — less than many of the nearby houses it dwarfs — and contributes around one-ninth the property taxes of a grocery store around the corner. Property taxes are the lifeblood of local communities — but the savings generated by that piddling assessment are enjoyed by out-of-state heirs. George Carlin used to say that one advantage of living in the past is that it's cheaper. In California, it's the basis for property tax administration.
