Schools Hit Hard in Prop. 13 Ruling

Orange County’s general fund would have to repay $18.6 million in excessive taxes to property owners if a December court ruling is upheld, according to an analysis released this week by Auditor-Controller David Sundstrom.

Also hard hit would be the Capistrano Unified School District and the Orange County Fire Authority. Capistrano Unified could be forced to refund as much as $15.6 million to property owners, while the fire authority could have to repay as much as $12.1 million.

Sundstrom’s analysis represents the first accounting of the court ruling’s possible effect on nearly 300 tax-collecting agencies in Orange County. Some 49 cities, schools, special districts and redevelopment agencies potentially would have to refund at least $1 million each.

The auditor previously estimated that about $285 million could be refunded under the ruling by Superior Court Judge John M. Watson. An additional $147 million in future revenue would be lost in the first year of new assessments, he said.

“Please note that the schedule excludes interest that must be paid with the refunds,” Sundstrom wrote in a letter distributed Tuesday to each agency. “If the assessor decides not to appeal the decision, the taxing authorities would have little choice other than to reduce their revenue projections.”

Watson found that some Orange County property assessments violated Proposition 13, the landmark tax reform measure passed by California voters in 1978. The judge ruled that the assessor--following a practice used by his colleagues statewide--illegally raised the assessed value of a Seal Beach home more than the 2%-a-year limit found in Proposition 13.

County attorneys defended the practice, used after properties have dropped in value and their assessments lowered. When the values rebound, the new assessments routinely exceed the 2% limit--a method called recapturing.

Last week, the Orange County Board of Supervisors voted 4 to 1 against appealing Watson’s ruling. Supervisors said it was up to Assessor Webster Guillory to defend his assessment practices, and approved his hiring of private attorneys for an appeal.

Guillory said he is still considering an appeal.

Supervisor Chuck Smith, the lone vote on the board in favor of appealing, said supervisors should reconsider their decision in light of Sundstrom’s new numbers. County attorneys believe Watson’s ruling would be overturned by state justices.

“Now you see why we really need to get a reading from the court,” Smith said. “We don’t want to put these taxing agencies under these dire straits. We need to get a good solid ruling on this and not depend on one judge.”

But Supervisor Todd Spitzer, who led the board’s backing of Watson’s ruling, said he believes that the “recapturing” method of taxing property is unconstitutional. Smith’s argument, he said, is the same as pleading for a burglar to continue his crimes because the money is needed to feed his family.

Attorney Rob Pool, who owns the Seal Beach home and filed the lawsuit, has asked Watson to expand the ruling to all taxpayers whose property assessments increased more than 2% for each of the last four years. Watson will consider the request Tuesday.

If Watson expands his ruling, it would affect every taxing agency in Orange County. Though schools would be among the hardest hit, the state guarantees a minimum level of funding under a separate statewide measure, Proposition 98, passed in 1988.

If the decision is appealed and ultimately upheld by a higher court, it could apply statewide. Sundstrom has estimated that refunds statewide could top $4 billion.

The Board of Supervisors last week also directed the assessor, Tax Collector John M.W. Moorlach and Sundstrom to notify those whose properties were assessed under the recapturing method during the last four years that they might have overpaid their taxes. State law allows taxpayers up to four years to seek refunds.

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Court Case Impact

Assessor Webster Guillory is considering whether to appeal a December ruling by an Orange County Superior Court judge declaring a key assessment method to be unconstitutional. The method, used by every assessor in the state, allows property assessments to rise more than the 2%-a-year limit passed by voters in 1978 if the property dropped in value and later rebounded. Auditor-Controller David Sundstrom estimates that, if upheld, county taxing agencies would have to refund $285 million and lose an additional $147 million in taxes in the first year. Below is a list of only those agencies that could face estimated refunds of at least $1 million:

Estimated Estimated

refund future loss

ORANGE COUNTY

General Fund Total $18,583,005 $9,478,370

CITIES

Anaheim 2,519,366 1,283,762

Costa Mesa 1,531,676 782,083

Fullerton 1,376,628 702,157

Huntington Beach 2,970,189 1,514,962

Laguna Beach 1,561,492 801,707

Mission Viejo 1,473,521 751,578

Orange 1,396,393 712,238

San Clemente 1,004,105 512,150

Santa Ana 2,209,873 1,127,158

SPECIAL DISTRICTS

Irvine Ranch Water Dist. 1,204,990 614,612

Metro Water Districts 2,031,851 1,034,593

Moulton Niguel Wtr Dist. 1,569,951 800,763

O.C. Fire Authority 12,109,621 6,176,583

O.C. Flood Control Dist. 4,593,676 2,343,031

O.C. Harbors Bches & Parks 3,404,811 1,736,644

O.C. Sanitation Districts 4,491,441 2,290,886

O.C. Water Districts 1,285,524 655,689

SCHOOL DISTRICTS

Anaheim Elementary 3,911,659 1,995,165

Fountain Valley Elementary 1,514,490 762,736

Fullerton Elementary 1,995,647 1,017,892

Huntington Beach Elem. 2,086,897 1,064,434

Ocean View Elementary 2,006,655 1,023,506

Westminster Elementary 1,179,874 601,801

Anaheim High School 3,833,518 1,966,309

Fullerton High School 2,983,713 1,526,961

Huntington Beach High 5,511,871 2,811,362

Brea-Olinda Unified 1,135,981 579,414

Capistrano Unified 15,559,249 7,936,086

Garden Grove Unified 5,193,391 2,648,920

Irvine Unified 8,377,197 4,272,838

Laguna Beach Unified 1,876,731 957,238

Los Alamitos Unified 1,933,718 986,304

Newport-Mesa Unified 11,577,408 5,906,125

Orange Unified 8,813,008 4,495,126

Placentia-Yorba Linda 4,616,792 2,354,822

Saddleback Valley Unified 9,997,434 6,099,250

Santa Ana Unified 6,125,368 3,124,780

Tustin Unified 5,293,839 2,700,154

COLLEGE DISTRICTS

Coast Community 6,089,963 3,106,221

North O.C. Community 3,896,168 1,987,263

Rancho Santiago Comm. 3,021,891 1,541,333

South O.C. Community 9,598,568 4,895,806

O.C. Dept. of Education 4,906,897 2,502,791

CITY REDEVELOPMENT AGENCIES

Anaheim 1,519,442 1,152,889

Fullerton 1,128,933 518,316

Garden Grove 1,002,722 694,049

Orange 2,088,698 1,247,857

Santa Ana 2,312,337 1,367,671

Yorba Linda 2,483,812 1,222,923

TOTAL ALL AGENCIES $284,532,452 $146,726,719

Source: Orange County Auditor-Controller David Sundstrom