Local officials rejoice at judicial ruling

Deirdre Newman

An appellate court Friday reversed an Orange County property-tax

ruling that could have financially pummeled Newport, Costa Mesa and

the school district.

The Fourth Appellate District Court ruled that Superior Court

Judge John Watson was incorrect when he ruled that property tax

assessments should be limited to no more than 2% of the previous

year’s assessment, even following a decrease in a home’s value.

The appellate court decision means that Orange County, and other

counties around the state, will not have to refund hundreds of

millions of dollars to property owners. It also means the property

tax base for school districts, cities and other agencies that rely on

property taxes won’t be reduced by hundreds of millions of dollars a

year.

The Newport-Mesa Unified School District stood to lose $11.5

million the first year if property taxes were refunded.

“It sure takes an uncertain cloud away from us,” Superintendent

Robert Barbot said. “So with money being so tight, it’s good news for

at least this school district.”

The city managers of Newport Beach and Costa Mesa were equally

thrilled with the ruling.

“That certainly is good news,” Newport Beach City Manager Homer

Bludau said. “We really couldn’t even begin to plan our budget based

upon that case not being turned over because the consequences not

only to local government, but to the school districts, would be so

devastating that local government and school districts could not

operate anywhere close to the way they’re operating now.”

Costa Mesa City Manager Allan Roeder cautioned that while the

ruling is favorable, it doesn’t mean that cities will get any money

from the decision.

“The fact that it’s overturned is good news, but I wouldn’t want

people to think that all of a sudden it’s released some new flow of

revenue to be appropriated for other uses,” Roeder said. “It [just]

won’t be any more taken away on top of what we’re already losing.”

The original case began when Rob Pool, a property tax lawyer, sued

the county for raising his property assessment above the 2% limit

that was set by Proposition 13. In December 2002, Watson expanded the

case from Pool to a class-action lawsuit.

Watson had ruled that if a home’s assessed value decreased and

then rebounded, it couldn’t be assessed more than 2%. Anything more

than that, considered “recapturing,” was illegal, Watson said.

But the appellate court judges reasoned that if a home’s assessed

value goes down and then rebounds, it can still be assessed from its

higher base value plus 2%, though no more than that.

“Calculating the inflation cap based on a previous year’s

reassessed value is fundamentally inconsistent with the system that

Proposition 13 put in place,” the judges wrote in the ruling.

John Moorlach, Orange County’s treasurer and a Costa Mesa

resident, said the appellate court’s reasoning was more logical than

Watson’s.

“We have felt all along that Judge Watson was not correct,”

Moorlach said. “And other similar court cases had ruled in the manner

that we thought was appropriate and Watson was sort of the odd man

out.”

Steven Harris, Pool’s attorney, said his client is planning on

appealing the ruling to the state Supreme Court.

“We’re disappointed but we’re committed to pressing on,” Pool

said.

* DEIRDRE NEWMAN covers Costa Mesa. She may be reached at (949)

574-4221 or by e-mail at deirdre.newman@latimes.com.