10A Action 2008 0602 Attach - Preliminary Official Statement

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Appeals of Assessed Values Assessment appeals filed by property owners in the Project Area and granted by the County Assessor could adversely impact the amount of Tax Revenues available to pay debt service on the 2008 Bonds. See "RISK FACTORS" herein. Proposition 8 Appeals. Most of the appeals that might be filed in the Project Area would be based on Section 51 of the Revenue and Taxation Code, which requires that for each lien date the value of real property shall be the lesser of its base year value annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Pursuant to California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. These market-driven appeals are known as Proposition 8 appeals. Any reduction in the assessment ultimately granted as a Proposition 8 appeal applies to the year for which application is made and during which the written application was filed. These reductions are often temporary and are adjusted back to their original values when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. See also "LIMITATIONS ON TAX REVENUES -Article XIIIA of the California Constitution."' Base Year Appeals. A second type of assessment appeal is called a Base Year appeal, where the property owners challenge the original (basis) value of their property. Appeals for reduction in the "base year" value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. Appeals in the Project Area. It has been the practice of the County of Alameda not to deduct current appeal refunds from redevelopment agency tax increment; these refunds are instead apportioned to other taxing entities using the normal apportionment mechanism. The Controller has made exception to this general practice in at least one instance where a major shopping center in the Project Area received substantial retroactive assessment reductions over several years. In that case the Controller notified the Agency of its intention to collect from the Agency the taxes repaid to the property owner and worked with Agency staff to establish the amount and method of recovery, spread out over several years. The recovered taxes were split between the Agency and the County Economic Development Agency using a modification of the revenue sharing formula in effect between the two entities. In addition, the Agency acted to remove the shopping center from the Project Area in order to have the valuation removed from the base year valuation; the removal and the corresponding new base year valuation took effect with the 2002-03 roll year. Based on information provided by the County Assessment Appeals Board and shown in the following table, there have been 342 appeals filed in the Project Area since 2000-01. Of these, 283 have been resolved resulting in valuation reductions of $98 million. The largest appeal during that period was filed on the Bay Fair Mall shopping center in 2000-01 (the property owner had filed appeals for prior years as well); that appeal resulted in a valuation -25-