L.A. County Assessor on Implementing a Split Roll

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Los Angeles County Assessor Jeffrey Prang told an audience that implementing the split roll property tax increase proposal headed for the 2020 ballot would put a strain on his office. The split roll would require property assessments on many commercial properties every one to three years. Prang said he currently doesn’t have the staff or resources to do the job in Los Angeles County.

Knowing what it requires to assess commercial property, Prang sketched out some details his office faces if the measure passes:

  • An initial $130 million increase in his budget and an on-going $80 million increase every year.
  • An assessor’s office staff increase of more than a third.  The office has 1400 employees now and would need an additional 500-plus to make the split roll work. 
  • It takes five years to train appraisers to properly assess commercial property, as opposed to the two years needed for training of residential property appraisers.
  • A dramatic increase in assessment appeals.

His office estimates that Los Angeles County will get 25-30% of the revenue projected to come from a split roll, or about $3 billion at the high end.

Prang said, “We presume there will be an economic impact” under a change in the property tax law. Costs are fixed for purchases under the Proposition 13 rules. Under a split roll, commercial property would be reassessed on a regular basis and that change would find its way into the price of a purchase.

The assessor raised another long-term projection if a split roll is passed—concern for small businesses. He used as an example, a liquor store on the Sunset Strip in Hollywood, which is housed in a building that recently sold. The previous owner of the building held the property since Prop 13 passed and was paying taxes on the 1975 assessment of $350,000, plus the yearly inflation capped increase. The liquor store paid a third of the taxes under a triple net lease requiring business renters to pick up their share of the property taxes. The building recently sold for $20 million. The liquor store would now have to pay a tax on one-third of $200,000. Even if the store can meet its new tax obligation, under the split roll, the tax on the liquor store would increase every few years threatening the business to close or to cut jobs.

Prang said, as a self-described liberal Democrat, he was not totally supportive of Proposition 13, but he thought reforms of the measure in bits and pieces was not the best way to go.

He said he supports some reforms to the tax system such as changing the rules on sale of property to different entities that don’t make up 50% of the sale so no change in ownership is recorded. He referred to the infamous Fairmont Hotel case in Santa Monica, in which computer entrepreneur Michael Dell, his wife, and two of his investment entities purchased the ownership each with no more than 49 percent control of the entity thus not triggering a change in ownership tax increase.

A bill was introduced to make changes to the law to recognize end-runs around the change of ownership provisions of Prop 13. It initially had wide support but was spiked after supporters of the split roll idea convinced legislators they needed examples like the Fairmont Hotel to push their agenda.

Prang also would like to see changes to mobile home treatment as housing property. Mobile homes fall into a category that considers their vehicular nature. Yet, along the beaches they are restructured as beach houses.

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