Likely taxing case to go unheard

Deirdre Newman

Orange County officials are celebrating because they won’t have to

absorb a loss of more than $400 million in past and future property

tax revenue.

The celebration is in response to the state Supreme Court’s

decision not to review a case originally brought by a Seal Beach

couple who addressed how properties should be assessed after they

decline in value and then rebound. The court decided on July 21 not

to review the case by Robert Pool and Renee Bezaire.

Cities would also have suffered. Newport Beach anticipated losing

$3.4 million the first year and $1.7 million in subsequent years if

Pool had triumphed. Costa Mesa would have been hammered with an

estimated $1.5-million loss the first year and $780,000 in subsequent

years.

Pool and Bezaire argued that property tax assessment should not

exceed 2% of the previous year’s assessment -- as guaranteed by

Proposition 13 -- even following a recovery from a decrease in a

home’s value. They felt homeowners should get a refund if this type

of increase, known as recapturing, affected them.

While an Orange County Superior Court judge sided with the couple,

an appellate court reversed that decision

The state Supreme Court’s decision not to take the case means it

has reached the end of the judicial line in California. Pool and

Bezaire still have the option of taking their case to the U.S.

Supreme Court.

Barring that option, the decision means taxpayers in Orange

County, and throughout the state, will not have to bear the burden of

the county taking such a financial hit, which inevitably would have

been compensated for with a tax increase, county Treasurer John

Moorlach said.

“If Robert Pool were right, one out of six taxpayers would win

some kind of money, but the rest of us would have paid for it,”

Moorlach said. “That’s anti-taxpayer.”

Pool said he was disappointed by the Supreme Court’s decision, but

not 100% surprised by it. He holds fast to his contention that

recapturing undermines what voters added to the state constitution

with the landmark initiative of Proposition 13, and then Proposition

8, which further clarified Proposition 13 in the case of decreasing

property values.

“This is a complete subversion of California constitutional law,”

Pool said. “You can’t have the legislature pulling the rug out from

under the voters after there’s been a voters’ initiative. That’s

anathema.”

If the state Supreme Court had taken the case and ruled in favor

of the Seal Beach couple, it would have greatly complicated cities’

efforts to do long-term financial planning, Newport Beach City

Manager Homer Bludau said.

“That would really affect their ability to build big

capital-improvement projects,” Bludau said. “It really would have

hurt local government badly and, in doing so, would have hurt their

citizens a great deal.”

Costa Mesa City Manager Allan Roeder applauded the judgment of the

majority of the state Supreme Court justices for refraining from

taking the case. But he said the issue of recapturing illustrates why

Proposition 13, which was passed by voters in 1978, needs to be

reexamined.

“Not to rework it so people must pay for more taxes, but rework it

to make sure it’s doing what voters expected it to do,” Roeder said.

“Having said that, I don’t have any expectation of that happening

anytime soon.”

The decision is also a relief for the Newport Mesa Unified School

District, since it stood to lose $11.5 million the first year if

property taxes were refunded.

“It’s nice for our district, because at least this particular

future challenge to our finances is not on the table,” Supt. Robert

Barbot said. “Because the more secure we are, the better we can plan

for our kids’ future.”

The original case began when Pool, a property tax lawyer, and his

wife Bezaire, sued the county for raising their property assessment

above the 2% limit set by Proposition 13. In December 2002, Superior

Court Judge John Watson expanded the case from Pool to a class-action

lawsuit.

Watson ruled if a home’s assessed value decreased and then

rebounded, it couldn’t be assessed more than 2%. Anything more than

that was illegal, Watson said.

But the appellate court judges reasoned that if a home’s assessed

value goes down and then rebounds, it can still be assessed from its

higher base value plus 2%, though no more than that.

A similar case is working its way through the appellate court in

Marin County with a single plaintiff. If that appellate court issues

a different ruling than the Fourth Appellate District Court, which

ruled on the Orange County case, then the state Supreme Court would

have to take up the issue, Moorlach said.

He said he doesn’t think that is likely.

Pool and Bezaire have 90 days from July 21 to decide whether they

will take their case to the U.S. Supreme Court.

* DEIRDRE NEWMAN covers Costa Mesa. She may be reached at (949)

574-4221 or by e-mail at [email protected].