The response to alleged improprieties by Los Angeles County Assessor John Noguez has hurt taxpayers in ways that were unforeseeable when Noguez took office more than two years ago, or when the investigation into those improprieties started last year.
Prosecutors filed dozens of new charges on April 23 in relation to a corruption probe that began more than a year ago. Prosecutors have alleged that Noguez accepted bribes to illegally lower assessments on a number of properties represented by tax consultant Ramin Salari, and named Mark McNeil, one of Noguez’s aides, in the charges as well. Prosecutors contend that the scheme cost taxpayers at least $9.8 million in lost tax revenue.
As if the scandal alone weren’t enough, the response by the Los Angeles County Assessor’s Office to those improprieties has impaired taxpayers’ ability to communicate with the assessor’s office to resolve property tax appeals. This new communication breakdown, in turn, has increased the cost and time required to process appeals.
After Noguez took a leave of absence in mid-2012, the Los Angeles County Board of Supervisors appointed an interim assessor who launched an internal investigation of the assessor’s office. The temporary assessor published a “First 100 Days” report in October 2012, establishing two policy initiatives that have significantly damaged the property assessment system’s function and efficiency. One measure assigns new personnel to represent the assessor’s office before the county’s assessment appeals board; the second institutes higher assessed value approval thresholds for settlement of cases pending before the board.
The latter initiative was instituted after a former appraiser in the assessor’s office unilaterally changed assessed values for wealthy property owners without management approval. Requiring approval from upper management has reduced the number of cases settled prior to hearing, and either forces more property tax appeals to go to hearing (a surge which has overwhelmed the appeals board’s limited resources) or necessitates postponement (which adds to the backlog of pending cases).
Report by independent auditors
The investigation of Noguez also prompted the county’s board of supervisors to retain independent auditors to evaluate the assessor’s management practices. In late 2012, those auditors issued a comprehensive report which included specific recommendations for the handling of property tax assessment appeals. For example, the auditors recommended that the assessment appeals board force appeals to hearing by not granting more than one hearing postponement to taxpayers.
The assessor’s office and the appeals board agreed with some of the auditors’ suggestions: The assessor adopted a suggestion that the assessor’s office not share case data informally with taxpayers prior to appeals board hearings, and the appeals board concurred with the suggestion that a fee be charged to file assessment appeals.
The changes suggested by the independent auditors, particularly prohibiting informal pre-hearing information exchanges with taxpayers, reduces the possibility of resolving cases short of hearing. The auditors’ recommendation that the appeals board avoid granting taxpayers postponements is unrealistic because, in many cases, the assessor is the party asking for more time.
Registration of property tax agents
Another recommendation by the independent auditors was to require persons who represent taxpayers to register as “tax agents.” As of this writing, the board of supervisors is considering a registration program that will require people who appear before the assessment appeals board or have contact with the assessor’s office, tax collector’s office or auditor-controller’s office to register as tax agents and pay an annual fee of $250. The program will cover in-house company tax representatives, attorneys and enrolled agents. Registrants would have to follow an 11-point code of ethics and report all political contributions made to any public official in Los Angeles County. Individuals who fail to comply with the registration program would be fined and their names would be listed on the county’s website. The California Legislature has also introduced a bill with provisions similar to the proposed Los Angeles County ordinance.
The policy changes described above have slowed the assessment appeal process in Los Angeles County at a time when the system can least afford it. In 2012, assessment appeal filings in the county increased to more than 40,000, a four-fold increase since 2007. The changes in personnel representing the assessor at the appeals boards, new limits on staff authority to settle cases prior to hearings, the recommendation to limit postponements coupled with a restriction on informal information exchanges with taxpayers before hearings, and the requirement that taxpayers’ agents register with the county, all work against the speedy resolution of assessment appeals.
The county’s assessment appeal system was intended to promote informal and rapid resolutions of property tax appeals. The changes recently implemented or to be implemented by the county and its assessor will thwart those aims, hampering taxpayers’ ability to obtain speedy redress of their claims and undermining the effectiveness of the assessment appeal process.
Cris K. O’Neall specializes in property and local tax matters as a partner in the law firm of Cahill, Davis & O’Neall LLP, the California member of American Property Tax Counsel, the national affiliation of property tax attorneys.