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GRF Wins Property Tax Appeal

LAGUNA WOODS, CA. July 27, 2004 – The Golden Rain Foundation of Laguna Woods (GRF) is pleased to announce that the Orange County Tax Assessor has agreed to eliminate assessments of GRF property from 2004 on, which will result in a savings to the community of approximately $550,000 in 2004, increasing each year thereafter.

For several years, GRF’s management agent Professional Community Management, Inc., (PCM) has disagreed with the County of Orange Tax Assessor about the property taxes paid by GRF and its members, the individual homeowners. It was the contention of Janet Price, Finance & Administration Director that the taxes paid by GRF resulted in the homeowners being subjected to double taxation in violation of Proposition 13 and the California constitution. Ms. Price and Pat McLaughlin, Controller, with the invaluable assistance of the Law Offices of Gary R. King & Associates, along with Commercial Assessment Consultants and Patrick J. Chambers, property tax consultant, filed an appeal on behalf of GRF, alleging that taxes assessed to GRF were incorrect and/or improper. After many years of work by all the parties, the County Assessor and GRF reached an agreement last week and signed a stipulation that was accepted by the Board of Appeals at a hearing yesterday.

Background
The issue of double taxation of all LAGUNA WOODS VILLAGE homeowners began with the implementation of Proposition 13, which was passed in 1978 but not fully implemented until 1980-81. Under Prop.13, each home’s initial assessment is equal to its purchase price, reduced by any exemptions such as the homeowners’ exemption for a primary residence. In the case of LAGUNA WOODS VILLAGE homes, the value of all the GRF properties are reflected in the purchase price of each home. In other words, the home prices would not be as high as they are if it weren’t for the clubhouses, golf courses and other GRF facilities. Therefore, the individual homeowners are personally assessed for all the GRF assets by virtue of their purchase of their home in LAGUNA WOODS VILLAGE. To then assess GRF, which must collect from those same homeowners in order to pay its own property taxes, is clearly double taxation.

The OC Assessor agreed in 1980 to reduce the initial assessed value of each co-operative unit purchased after 1980 by its share of the value of GRF assets, called a “common area exemption.” Had this been done properly and consistently for all units in LAGUNA WOODS VILLAGE, there would have been almost no double taxation. In fact, the Assessor did not adequately reduce the assessed values of the units purchased before 1995, when the community’s management staff discovered and addressed the issue. Even then, the initial assessed values were only adjusted for co-operative purchasers, not for the purchasers of condominiums, which make up over half of the community.

To make matters worse, the common area exemptions that were given to purchasers were not increased each year as GRF’s assessed values were increased. As with most taxpayers, GRF’s assessed values were generally increased up to 2% per year, but that was not reflected in the common area adjustments. Also, GRF acquired new property over the years, such as raw land in 1996 and the new Community Center building property in Town Centre in 2001. Those new assets caused GRF’s property taxes to increase considerably, but offsets for those items were not given to the homeowners, as the Assessor was required to do.

After the LAGUNA WOODS VILLAGE Staff questioned the OC Assessor’s practices, the Assessor began giving common area offsets to purchasers of condominiums as well as co-operatives, and later began to adjust those offsets annually by 2%. However, the Assessor still had not taken into account the property GRF has acquired since 1981, and none of the required offsets were made retroactively. The result is that many of the LAGUNA WOODS VILLAGE owners who purchased their homes after 1980 may have been subject to some extent to double taxation.

GRF sought equity for its members through relief from future assessments and taxation as well as refunds for the portion of taxes it had been improperly assessed. Through its PCM staff, attorney and consultants, GRF made a formal appeal, and has been attempting to negotiate a settlement with the OC Assessor. There were numerous issues and points of disagreement, but the overriding concept that the Assessor had apparently not grasped is that GRF is its members, that substantially all the money needed to operate the community facilities comes directly from the individual homeowners. Every dollar GRF pays in taxes is a dollar that is collected from GRF’s members, and is a dollar that is not available to provide services to the senior citizens of the community. Conversely, any savings GRF realizes directly benefits the homeowners because it reduces the amount GRF must charge to recover the operating costs of its facilities.

The Assessor’s office ultimately agreed to eliminate all taxes on GRF property (other than the value that is already embedded in the value of the individual homes) starting in 2004. A refund of some previously paid taxes has also been raised and more details will be forthcoming as they are known.

Ms. Price said, “I think I can speak for all the staff of PCM when I say that it is a great pleasure to be able to achieve this tremendous cost savings for the Community we serve. It is the result of a great deal of work on the part of my staff, and there have been many obstacles along the way, but we never wavered in our belief that our valuable client deserved this relief from the County. Although it has taken longer than we’d hoped, we are pleased that the Assessor came to the same conclusion, and the end result will be well worth the time and effort spent.”

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