Taxpayers May Be Getting Bad Advice

An Orange County Superior Court judge who ruled last year that a common method for assessing property taxes is unconstitutional indicated Monday that he is worried government workers have been wrongly advising taxpayers against filing for refunds.

In a hearing, Judge John M. Watson agreed with attorneys representing several county officials that, by law, the only remedy for challenging a property assessment is to file for a refund. But if people were told by government workers that doing so would be futile, it would rob them of the only way to fight their tax bill, he said.

The judge said he has seen no evidence of that happening but has heard of taxpayers either calling government offices or logging onto Web sites and being told, despite Watson’s ruling, that the county’s assessment method is legal.

“If these local officials being protective of their revenue flow are giving or alleged to be giving false information [about refunds], I would hardly find that an adequate remedy at law,� Watson said. “In fact, I find that no remedy at all.�

Watson found in December that an assessment method used by Orange County Assessor Webster J. Guillory violated Proposition 13, the landmark tax reform measure passed by California voters in 1978. He ruled that Guillory illegally raised the assessed value of attorney Robert Pool’s Seal Beach home by more than the 2%-a-year limit set by Proposition 13.

County attorneys defended the practice, which has been used across the state on properties that dropped in value and had their assessments lowered. When the values rebound, the new assessments routinely exceed the 2% limit--a method called recapturing.

If Watson’s ruling ultimately is upheld by a state appellate court, it would affect every county in California. In Orange County, taxing agencies would have to refund $285 million in excess property taxes paid from 1998 to 2001, Orange County Auditor-Controller David E. Sundstrom estimated. Statewide, the loss could go as high as $4 billion, he said.

So far, the ruling applies only to Pool and his wife, Renee Bezaire, who sued over their 1998-99 tax bill. The value of the couple’s $330,000 home had stayed the same for a year, thanks to a flat real estate market. But in 1998, the assessor decided that the market had recovered and raised the home’s taxable value to $343,332--a 4% increase.

The issue about what government workers might have told taxpayers questioning their assessments is key in the ongoing case. If Watson finds that the government interfered with the only way for taxpayers to fight their assessments, he might be inclined to make his ruling more sweeping.

Pool wants Watson to issue an identical judgment on behalf of everyone in Orange County whose assessments rose more than 2% a year. Doing so would trigger a separate legal requirement that the county tax collector notify those who overpaid property taxes by at least $10 that they are due a refund. Those who filed for the refund would then be sent a check.

Orange County supervisors already have asked Guillory, Sundstrom and Treasurer-Tax Collector John M.W. Moorlach--all elected officials--to do just that. The three have declined, citing the ongoing court case.

Sundstrom said it could cost as much as $2 million to identify and notify everyone in Orange County who overpaid their taxes under Watson’s ruling. Some 1,768 claims for refunds have been filed since December, citing Watson’s ruling, Pool said Monday. He estimated that as many as 400,000 taxpayers may be affected.

Watson also agreed Monday to reconsider a motion by Moorlach that he hand the case to another judge, a motion he denied this month. Moorlach wants another judge to rule on the case as a way of vetting Watson’s interpretation of the law before it is applied countywide.