City leaders fear effects of tax ruling

June Casagrande

A court case originating in Seal Beach could hit Newport in the

pocketbook so hard it would outweigh the local effects of the state

budget crunch.

A Superior Court has ruled that the county’s practice of assessing

some home values is inconsistent with state Proposition 13. If an

appeal by Orange County fails, it could mean Newport Beach would have

pay back $5.7 million in property taxes and would collect $2.3

million less each year.

During the early and mid-1990s, when many homes were losing value,

assessed values on some homes were lowered accordingly. The assessed

values are used as the basis for taxes levied by the county, of which

portions are redistributed to the cities.

Since Orange County property values have bounced back, the county

has been readjusting assessments, sometimes by increasing them by 5%

or 10% in a single year. That, a Seal Beach plaintiff said, is

contrary to the state proposition that limits annual assessment

increases to no more than 2% a year.

The city takes in about $33 million a year in property taxes.

“Newport Beach is a very high property tax city. So it would hurt

the city proportionately more versus a low property tax city,”

Administrative Services Director Dennis Danner said.

By comparison, cutbacks in the state budget, including the

cutbacks of a portion of vehicle license fees to the city, could cost

Newport Beach about $3.5 million in fiscal 2003-04.

Danner said that it’s too soon to say whether the city might take

action to oppose the move or what city services would suffer from the

revenue loss.

It may be years before the case is resolved. But if the appeal

fails, Assistant City Manager Dave Kiff said, “It would be a huge

hit.”

Newport Beach resident Ron Hendrickson, an activist frequently in

support of taxpayers’ rights, said that the county should be allowed

to reverse the large benefits some homeowners received when their

assessed values were reduced.

“It’s seems equitable to me that if you’re one of those people who

had the benefit of having your property assessment reduced by 5% or

10%, it’s only fair that the county should be allowed to get it back

to where it was,” Hendrickson said. “Then it makes sense for the 2%

rule to kick back in.”