Boat, Plane Owners Could Be Under-Taxed

A new state report questions whether owners of yachts, pleasure boats and private airplanes are getting unwarranted tax breaks from the county.

State tax officials suggest that the Orange County assessor’s office is being too conservative in determining the value of boats as well as airplane tie-downs, leaving owners with smaller tax bills than the state believes they deserve.

The concerns are outlined in a 62-page study by the California Board of Equalization, which otherwise gives Assessor Bradley L. Jacobs high marks for the way his office calculates property values.

“We want to make sure these assessments are based on fair market values and that people are being assessed correctly,” said Tom McClaskey, principal appraiser for the state.

McClaskey acknowledged that the changes recommended by the Board of Equalization aren’t likely to produce a windfall of new tax revenue. “It’s a matter of accuracy,” he said.

Jacobs strongly defends the formula his office follows in assessing yachts, automatically depreciating the value of most boats annually, rather than checking the market values of each. Jacobs said some of the remedies proposed by the state could actually result in some owners being overtaxed.

Jacobs’ assessment practice certainly has support along the docks and in the yacht clubs of Newport Bay, the largest small-craft harbor in the country, where many of the county’s 33,000 boats are berthed or anchored.

Owners have long complained about property taxes being levied on their vessels in the first place, and the prospect of higher assessments doesn’t sit well with them.

“People buy a yacht and they think it’s like a car. They aren’t aware it’s taxed as property,” said Mike Whitehead, a Newport Beach charter boat captain.

“They already pay fuel tax and sales tax. Once you get that boat in the water, it begins to depreciate in value,” Whitehead said. “It’s not like a house.”

As it stands now, the assessor fixes a value to a boat when it is sold. The value is then depreciated annually under a formula established by the assessor’s office.

The Board of Equalization report urges the county to check the market value of each boat every year, saying the practice would result in more accurate assessments that would probably be slightly higher than the current roll values.

Jacobs, however, said his office does check the value of each boat every few years and conducts “sample” checks of certain types of vessels to make sure the depreciation formula is accurate. Annual value checks, he said, would be inefficient and not result in any changes.

“We could look at every boat every year but that wouldn’t change the value,” he said.

Whitehead and other boaters agree with Jacobs, noting that boats tend to depreciate consistently with age in the same way cars do. They also said most boat price books are notoriously inaccurate because so many owners customize their vessels.

“They should leave things the way they are,” said Jeff Helsing, a salesman at Crow’s Nest Boat Brokers in Newport Beach.

Another issue of contention centers on the 800 airplane tie-downs used primarily by light plane owners at John Wayne Airport. Though owners rent the tie-downs from the airport, they are an exclusive use of public land and therefore are subject to property taxation.

About half of the tie-downs are not currently assessed because the county concluded that their values are less than $1,375, the legal exemption threshold. A new state law allows property to be exempted if the value is less than $5,000.

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But the board report said the assessor’s office is being too conservative in determining the values of some tie-downs, because it assumes plane owners will rent the tie-downs for only one year.

“There is a waiting list for the tie-downs, and some people keep them for 10, 15 years,” McClaskey said. “It’s reasonable to assume that once someone gets one, he is going to keep it for more than five years.”

By assuming the plane owners will rent the tie-downs for more than five years, the report said the assessed value would actually be more than $5,000 and could be taxed.

Jacobs, however, disagrees, noting that the roughly 400 tie-downs in question are rented on a month-to-month basis.

“We are looking at real life. We don’t assume that a month-to-month situation is going to be five years,” added Richard Swanson, quality assurance manager for the assessor’s office. “We are monitoring those contracts every year. . . . We don’t feel we are losing any value.”

Swanson and Jacobs pointed out that the county does impose assessments on owners who use three or more tie-downs.

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Overall, the Board of Equalization praised operations at the assessor’s office, describing its accomplishments as “outstanding.”

The report found that Orange County has the lowest roll value-to-staff ratio in California and one of the lowest roll assessment unit-to-staff ratios. The study also praised the office for its innovative use of technology.

“They are producing quality assessment rolls in an efficient manner,” the report states. “With few layers of administration, problems can be quickly solved, often by those closest to the situation.”

Nonetheless, it did raise concerns about how the assessor was valuing the counters and space that airlines and rent-a-car companies lease at John Wayne Airport.

The assessor’s office determines the value of the holdings based on a five-year term of possession. The Board of Equalization report suggests the assessor adopt a much longer term of possession, which would substantially increase the values--and mean the companies would pay more taxes.

But Jacobs said a 1977 appeals court ruling involving American Airlines and Los Angeles County requires assessors to follow the formula his office uses.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Assessments Ebb

The average assessed value of registered boats in Orange County has declined 28% in two years:

Boats

1997

In thousands: 33,136

Average Value

1997

In thousands

$15,461

Source: Orange County assessor’s office