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Board of Supervisors Calls for Audit of County Assessor’s Office

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LOS ANGELES, Calif.–Los Angeles County supervisors today expressed shock at an projected drop of more than $50 million in property tax revenues for next year and called for an audit of the county assessor’s office.

Assessor John Noguez estimated in December that the county property tax base would grow by almost $18.7 billion for the next fiscal year, but recently revised that figure to $5.1 billion based on anticipated drops in property values.

“It’s perplexing, it’s confounding, it’s unprecedented,” Supervisor Zev Yaroslavsky said of the adjustment.

County Chief Executive Officer William Fujioka expressed surprise, saying that changes in property tax revenue projections historically had been incremental, rather than dramatic decreases.

The bulk of Noguez’ revision was based on expected declines in property values, but Yaroslavsky said he couldn’t make sense of how so many properties could have been reassessed downward in just a three-month period.

In December, Noguez estimated the tax base would drop by about $2.6 billion because of falling home prices. That number burgeoned to about $13.5 billion in his latest report to the board.

Noguez and his chief of staff, George Renkei, told the board today that market trends in property valuations were essentially flat from January 2011 through September and his office’s December projections were based on that data. But drops in valuation on the order of 4.5 to 5 percent were seen from September to January, triggering the latest estimate.

Assessments for the year ahead are based on January values and Noguez said that more than 500,000 properties totaling $220 billion in value were currently under review. If those properties have declined in value by 5 percent, the tax base would be cut by about $11 billion, Noguez explained.

To put that into perspective, the drop in county property rolls from 2008 to 2009, immediately following the financial crisis, was $18.5 billion.

But the 5 percent decline is based on an average change in valuations countywide rather than specifics related to the properties under review, so the numbers could move significantly as county employees look at individual properties.

Based on a recommendation by Yaroslavsky and Ridley-Thomas, the board asked Auditor-Controller Wendy Watanabe to audit the assessor’s estimates and conduct a more comprehensive review of practices in his office.

Yaroslavsky said he wanted a broader inquiry because he was concerned that the dramatic change in revenue estimates might be a symptom of something bigger. He seemed unsatisfied by the assessor’s explanations, saying he hadn’t heard reports of dramatic market changes.

Renkei said broader economic factors and delayed processing of foreclosures contributed to the latest trends.

Property in Los Angeles County was valued at $1.1 trillion last year.

Taxes paid on that real estate is the county’s largest source of local revenue, helping fund law enforcement, fire protection and education.

The county has an annual budget of about $23 billion and the supervisors are scheduled to begin considering the new budget next week.

Supervisor Mark Ridley-Thomas said he had called for the audit largely to determine what the impact would be on county services and the budgeting process. He asked Watanabe how quickly she could complete the review.

She couldn’t yet guess at how long the audit might take, but Watanabe said, “We will approach this aggressively and, of course, immediately.”

The board requested that she provide a monthly update.

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