The typical Los Angeles County home is worth nearly $817,000, up 22% over the last year, according to the county assessor’s office.
Because of Proposition 13, increases in assessed values can rise no more than 2% annually, meaning that property tax increases are similarly limited.
Yet the county assessor’s office in recent years has faced a deluge of appeals from homeowners for property reappraisals and lower taxes.
And, county Assessor Jeff Prang says, many if not most of these tens of thousands of appeals are being submitted in bulk by just a handful of enterprising tax agents hoping for a cut of any reduction they can pull off for clients.
“I’d call it a scam, but it’s not a scam,” Prang told me. “It’s legal.”
And expensive.
Prang estimates he has to commit about a dozen staffers to processing, investigating and possibly challenging all these appeals, costing taxpayers $2.2 million a year.
He also estimates that, because the high volume of assessment appeals has meant a greater number are getting approved without sufficient scrutiny, L.A. County may be losing about $15 million a year in property tax revenue.
This is money that could have gone toward addressing homelessness, paying for police and firefighters and otherwise keeping the municipal wheels spinning, Prang said.
He added that the tsunami of appeals from about half a dozen high-volume tax agents has created such a huge backlog, “people with a legitimate appeal could end up waiting years for their case to be heard.”
Prang cited the example of a Manhattan Beach company called Property Tax Advisors, which files assessment appeals on behalf of residential and commercial clients.
This month, Prang said, Property Tax Advisors filed roughly 3,600 appeals. In many cases, he noted, the appeals seem to be little more than wishful thinking.
Prang said about 70% of appeals submitted by Property Tax Advisors and similar tax agents are withdrawn as soon as his office challenges the claim, or the appeal comes to an abrupt halt when the tax agent doesn’t show up for a scheduled hearing.
Timothy Kim, managing director of Property Tax Advisors, didn’t dispute the massive number of appeals his company has filed in recent weeks. But he said most were on behalf of commercial clients hit hard by COVID-19 losses, not homeowners.
“We recognize that property values have gone up,” Kim told me. “But you’d be surprised how often the assessor’s office gets things wrong.”
The assessor’s office countered that Kim is wrong about his own filings. While Property Tax Advisors is submitting more commercial appeals than in the past, said Stephen Whitmore, a spokesman for the office, “half of the recent 3,600 appeals are residential.”
He shared with me data showing that 49% of all filings from Property Tax Advisors this month involved single-family residences or condos. Twenty-one percent involved apartment buildings and 30% were for nonresidential commercial properties.
Kim said his firm, like most other high-volume tax agents, assumes all the costs of filing an appeal. The payoff, he said, is a one-time commission of 30% of whatever tax reduction he can secure for a client.
“I don’t get paid unless I get the reduction,” Kim said.
I asked if his company’s recent flurry of filings was intended in some way to game the system — giving the assessor’s office so much extra work during the pandemic, some appeals inevitably would get through.
“It’s the taxpayer’s right to look at the value of property and make sure it’s the correct value,” Kim replied.
I asked if he was motivated in part by a proposal from the executive branch of the county Board of Supervisors that a $46 filing fee be imposed on all assessment appeals.
Such a cost would undermine the pay-us-only-if-we-succeed business model. In the case of Property Tax Advisors, its 3,600 recent filings would have cost the company $165,600 in upfront fees.
Kim acknowledged that he’s aware of the proposed filing fee. But he reiterated that his firm’s recent appeals reflect “the taxpayer’s right to get their value correct.”
Another heavy filer cited by Prang is ProTax, which boasts online of having filed 80,000 appeals over the last 30 years. The Poway company submitted 2,645 appeals last year, up 31% from the year before, according to the assessor’s office.
I tried to reach Michael Middleton, ProTax’s president. He never got back to me.
As Prang noted, there’s nothing illegal about a tax agent being especially diligent or aggressive in filing appeals of property assessments.
It seems to me that some of these companies recognized a business opportunity in the fact that they could swamp the assessor’s office with appeals at relatively little cost to themselves.
Prang said that in many cases, tax agents scour publicly available property records in search of recent home purchases, especially in more well-to-do neighborhoods. They then send out form letters telling the homeowners a property tax reduction may be possible.
Since there’s little if any risk to a property owner in agreeing to be represented by these services, many happily give tax agents the go-ahead to file an appeal on their behalf and see what happens.
Ideally, that results in incorrectly valued properties being reassessed. More often than not, however, it forces taxpayer-funded officials to spend inordinate amounts of time handling cases that Prang said are frequently without merit.
According to the assessor’s office, Kim’s Property Tax Advisors withdrew 651 appeals of residential property values last year as soon as officials said they would challenge the claims.
The company then turned around and submitted appeals for the exact same 651 properties this year.
“They didn’t have a case in 2020, but then they cycled them through again in 2021,” said Whitmore, the assessor’s spokesman. “That’s how these guys operate.”
Kim responded that many of last year’s withdrawals were for procedural reasons and not because the cases lacked merit. That’s why the same appeals were submitted this year, he said.
A filing fee, if enacted, would help this situation, and would address the multimillion-dollar cost of handling all these appeals.
I also wonder about establishing a requirement that bulk filers of tax appeals pay the county’s processing costs if their appeals are rejected, just as people who file nuisance lawsuits often have to pay the other side’s legal expenses.
Every taxpayer deserves a fair shake, no question.
But squandering scant public resources on what may be little more than self-serving fishing trips by tax agents — that’s not how our system was intended to work.