Tax Case May Force Even More in Refunds

A continuing court battle over rising property taxes could mean that Orange County government, cities and schools will be forced to refund at least $416 million in property taxes -- nearly double previous estimates.

County Auditor-Controller David E. Sundstrom issued revised figures for potential refunds this week, with the case about to head to the state 4th District Court of Appeal. Orange County Superior Court Judge John M. Watson resolved a final issue Thursday, saying officials should notify taxpayers of their right to a refund if he is upheld.

The case stems from a lawsuit by Seal Beach homeowner and attorney Robert Pool, which challenges the way Orange County calculates property tax increases. It has broad implications because all 58 California counties use the same method.

Watson ruled in December 2001 that the county violated the state Constitution by boosting the assessed value of Pool’s home more than 2% in a year. The 2% limit was placed in the Constitution in 1978 by Proposition 13.

Last month, Watson made it a class-action case. He ruled that all Orange County property owners whose assessments rose more than 2% a year since 1978 were potentially harmed.

Attorneys for Orange County have defended the assessment method. Assessor Webster J. Guillory said the value of Pool’s home jumped 4% in 1999 to make up for the previous year, when there had been no increase. Counties frequently boost assessments more than 2% a year to “recapture” taxes they could not collect when property values dropped or stayed flat.

Orange County supervisors voted last year to back Watson’s ruling but allowed private attorneys for Guillory to appeal. Assessors throughout California are watching the case.

In determining what refunds might have to be issued, Sundstrom combed through the past four years of tax information, because conventional assessment challenges by property owners can go back four years. Sundstrom has not calculated what would be owed if repayments stretch back to 1978.

Of the $416-million estimate, schools would be responsible for repaying $261 million. Orange County government would have to refund about $26 million.

The refunds wouldn’t be the only losses: Orange County’s taxing agencies would lose an additional $167 million a year in future revenue because of lower assessments, Sundstrom said. His calculations for every taxing agency, including cities, schools and special districts, can be found at www.oc.ca.gov/ac.

Taxpayers can get refund claim forms at Pool’s Web site, www.propertytaxrefunds.biz.