Thursday, August 19, 2010
Homeowners pay the lion’s share of Monterey County’s property taxes. In the last 30 years their tax burden has ballooned, while the county’s commercial and industrial property owners have steadily lightened their load.
Seventy-three percent of the county’s property taxes now come from residential property owners, up from 51 percent in 1972-73, according to a study released earlier this year by the Sacramento-based California Tax Reform Association. Tax experts quibble with the study’s numbers, but not the overall trend.
The study finds that nearly every county in the state has experienced the same shift. That’s not only because commercial properties don’t turn over as frequently as private homes, but also because loopholes in Proposition 13 allow many businesses to escape reassessment when they change ownership.
Now with local governments strapped for cash, and cutting staff and services, some local labor and community activists are demanding that the firms pay up.
“We’re asking them to wake up and do what’s right,” says Joe Keffer of the Service Employees International Union’s Local 521, which represents county employees.
Armed with the CTRA study, Keffer was among several dozen men and women who jammed the Watsonville branch of JPMorgan Chase bank earlier this month, wielding a symbolic oversized check for $16.5 million. The staggering sum, protesters say, represents what the bank would owe the state if all of its branches had been re-assessed following its 2008 acquisition of Washington Mutual.
JPMorgan Chase spokesman Gary Kishner says the company pays the government what it owes.
The activists’ figures are open to question, but it’s virtually undisputed that banks like JPMorgan Chase and Wells Fargo, which acquired Wachovia in 2008, along with a handful of other high-profile mergers and acquisitions, could add millions of dollars to county coffers in Monterey and around the state.
CVS Caremark, with at least 10 Monterey County locations, gobbled up Long’s Drugs two years ago. Jiffy Lube stores were purchased by Shell Oil, while SaveMart scooped up Albertson’s, including seven Monterey County locations, in 2006.
Those big-dollar deals are very much on the mind of Lori Beth Merrill of the Monterey County Assessor’s office. “I’m the corporate cowgirl,” she says. “I’m in charge of tracking those folks.”
Merrill notes that she follows mergers, acquisitions and transfers of ownership like some people devour celebrity gossip.
It isn’t always easy. Two years after its acquisition, CVS contends, its newly purchased California drug stores aren’t subject to reassessment because they are still held by their original owner. A company spokesman says via e-mail that CVS is still discussing the matter with state and local officials.
“We’re all just exhausted from the shenanigans,” Merrill says.
Still, Merrill notes that if the state finally concludes the properties can be re-valued, counties won’t lose money. When companies finally confess “with bright lights and needles in the eye, it’s all retroactive,” she says.
But Prop. 13 exemptions allow some businesses to escape what Merrill calls her truth lasso, even when they agree there’s been an ownership change.
For example, if a group of partners purchase a company, but no single one owns more than a 50 percent share, its property cannot be re-assessed.
If a firm takes over a lease of less than 35 years, the lease is not considered long-term and the property isn’t subject to re-valuation.
“We see a lot of 34-year leases,” says Steve Cagle, the county’s assistant assessor.
Indeed, of 15 Monterey County JPMorgan Chase branches, just three are clearly subject to reassessment because the buildings were owned by Washington Mutual.
In Sacramento, an attempt to close one Prop. 13 loophole, AB 2492, sponsored by San Francisco Assemblyman Tom Ammiano, provides that if a company changes hands, it would be subject to reassessment and higher taxes. Period – regardless of its ownership structure.
The State Board of Equalization estimates that if passed, the new law would bring an additional $21 million to the state in its first year. Assemblyman Bill Monning (D-Carmel) supports it, but because it would raise taxes, it requires a two-thirds supermajority to pass, and is almost certainly dead on arrival.
A powerful coalition of business groups, including the California Chamber of Commerce, opposes the bill, disputing its premise that many business properties have not been reassessed following ownership changes.
The coalition notes in a statement that “any property tax increase could be the tipping point that causes business owners to close their doors.”
Still, an Ammiano spokesman says the assemblyman might bring the bill to the floor anyway, because he thinks Californians have to discuss tax disparities, especially given the state’s current budget mess.
As for Monterey County’s Lori Beth Merrill, she says the complexity of her pursuits has driven her to law school. This week, she starts her last year at the Monterey College of Law.