Orange County judge rules method used by tax assessors is unconstitutional

The Associated Press
Wednesday November 14, 2001

SANTA ANA — A judge’s ruling on the application of Proposition 13 could cost cities and counties millions of dollars and mean lower property taxes for thousands of homeowners. 

The ruling issued earlier this month said the method used by tax assessors to determine how some properties are taxed violates state law. 

Proposition 13 limits the amount of property taxes that local governments can collect. Passed by voters in 1978, the initiative protects property from an annual assessment increase of more than 2 percent until it changes hands, 

Local governments argue that the provision doesn’t apply when property values remain flat or drop during a recession then surge as real estate values rebound. In those cases, counties routinely hike the taxable property value beyond 2 percent. 

Judge John M. Watson ruled that the Orange County assessor violated Proposition 13 by increasing the taxable value of a home in Seal Beach by 4 percent in one year. 

Robert Pool bought the house for $330,000 in November 1995. The home’s taxable value was flat for two years but the assessor raised the price more than $13,000 in 1998, saying the jump was justified. 

County attorneys argued that the assessment was legal because it made up for years in which the property value did not increase. The county maintains it was merely recapturing the full tax value of the property, charging 2 percent for each of the years the property values did not rise. 

Watson said in his Nov. 2 ruling that the recapturing method is unconstitutional.  

He said the measure was clear that taxable values cannot rise more than 2 percent a year, no matter how much the property value rebounds. 

Jon Coupal, president of the Howard Jarvis Taxpayers Association, said Watson’s ruling is the first time the issue has been tested in court. 

“This has profound implications for property tax policy and Proposition 13, specifically,” Coupal said. 

Watson still must rule on a motion to broaden the complaint to class-action status, which could apply to other cases statewide.