Publication 216, The First 100 Years
Property Tax Reform: Assembly Bill 80
It would appear that the focus of the post-Riley-Stewart period was entirely on business taxes; but during this period, there was a growing concern with property taxation leading to a series of reforms which eventually resulted in the enactment of the 1966 Property Tax Assessment Reform Law (Assembly Bill 80).
The Property Tax Assessment Reform Law was actually the final phase in a long series of property tax revisions. The return of utilities to the local tax rolls in 1935 had compelled the Board of Equalization as assessor of such properties to renew its concern with intercounty equalization. Whatever the reasons—World War II, the responsibilities of liquor control, business tax interests, inadequate funds—the Board appears to have given scant attention to property tax matters until the mid-1950s. Most evidence indicates that the Board’s preoccupation with its ever-demanding responsibilities in liquor control was largely responsible for its seemingly passive role in property taxation matters. The fact that its first equalization orders since 1937 were issued in 1955, the same year the Board was relieved of liquor control, seems more than coincidence. That was the year in which the Board assumed a growing role in property tax reform.
The adoption of the 1945 Strayer Plan appears to have been the immediate cause of renewed interest in intercounty equalization.100 The plan provided for the allocation of state subsidies to local school districts on the basis of assessed value. Concern arose from the fact that the Strayer Plan “. . . made it possible for local school districts with low assessment ratios to derive a disproportionate share of state subventions and construction grants at the expense of districts falling within counties with higher assessment ratios.” 101 The demands upon the Legislature to rectify this situation resulted in the 1949 enactment of Assembly Bill 2027 (Chapter 1466).102
Chapter 1466 directed the Board of Equalization to “. . . make a finding with respect to the average assessment level in each county by comparing market and assessed values of properties sufficient in number and dispersion to afford a fair cross-section of all the taxable property in the county.” 103 The new law was to go into effect on the 1951 assessment rolls. The Board had requested an appropriation for this purpose for fiscal year 1950-51, but even though the Governor’s budget had included such an appropriation, the Legislature deleted it from the budget bill. Nevertheless the Board decided to carry out the provisions of the law by conducting the 1951 assessment ratios study with its limited staff.
On July 16, 1951, the Board adopted a resolution officially establishing the average assessment ratios found to be prevailing in each county of the state as contrasted with the statewide average assessment ratio.104 Later the same day, the Governor signed a bill suspending the operative date of Chapter 1466 for two years.105
However, the Board decided to proceed under its own constitutional authority and continued its assessment equalization studies during the 1951-52 fiscal year. As a result of these studies, six counties were ordered to show cause why their assessments should not be raised; but no equalization orders were issued since the Board “concluded that the data at hand were too limited to support such action.” 106
This situation changed appreciably in 1953 after a thorough study by the Senate Interim Committee on State and Local Taxation. The committee, while conceding that neither the 1949 law nor the pre-1949 equalization practices were favorable, basically supported the findings of the Board’s staff. The committee, nevertheless, noted the need for improvement in both assessment and equalization practices. Although Chapter 1466 was again suspended until 1955, the Legislature appropriated moderate sums in 1953 and 1954, ostensibly to allow the Board the necessary staff to prepare for the 1955 implementation of Chapter 1466.107
With this tacit sanction by the Legislature, the Board zealously undertook the task of equalizing the 1955 assessment rolls. In August 1955, the Board ordered 14 counties to raise their assessed values, stating that its “. . . principal objective in issuing intercounty equalization orders (aside from the obvious objective of performing its constitutional duty, long delayed for lack of appropriations with which to secure adequate data on county assessment practices ) was to curtail the misdirection of state school aid which is distributed in a manner that favors a school district with a low assessed value over one with equal needs and equal taxable resources but a higher assessed value.” 108
These were the first such equalization orders since 1937, and the emotional outbursts following the 1955 orders were surprisingly acrimonious. Reactions from both the county assessors and the public in general were negative. Yet, in spite of all the clamor, all but one county complied with the Board's orders.109
The Board of Equalization was not inclined to placate the assessors and county supervisors, but its members did wish to alleviate some of the harsh feelings resulting from their decision. Many of the differences between the Board and the county assessors were soon resolved, on October 1, 1956, by an agreement commonly referred to as the “Monterey Agreement.” 110 The adopted agreement recommended the following steps:
- Comparison of appraised values of sample properties with their assessed values as entered upon the last assessment roll.
- Cooperative examination and discussion of these comparisons by the county assessors and Board appraisers as soon as appraisals are completed.
- Utilization of these comparisons by assessors in promoting conformance to a statewide standard.
- Computation of the total market value of locally assessable property in each county as of the assessment date for the last roll.
- Trending this total market value forward to the current assessment date and comparing the result with the current assessed value of the county to determine the current assessment ratio.
- Computation of the average assessment ratio for the state on the basis of county ratios so computed.111
Additionally, the Board and the assessors agreed on “the necessity to repeal or amend Chapter 1466 at the 1957 session of the State Legislature. There must, however, be provision written into the prior law which will insure the Board’s ability to carry out the program for intercounty equalization to which we have agreed.” 112
The Board of Equalization perceived this agreement as follows:
“The necessity of curtailing the 1955-56 intercounty equalization program and developing a method of updating marketvalue findings of a prior year inspired a new procedure which we have worked out jointly with a committee of the State Association of County Assessors. The plan is to appraise randomly selected properties in the 1956-57 fiscal year at their market values on the 1956 assessment date instead of the 1957 assessment date. These appraisals will then be used to estimate the market value of all locally assessable property in a county as of the 1956 assessment date, and the estimated 1956 market value will be trended forward to the 1957 assessment date for comparison with the total 1957 assessed value on the local roll.” 113
Instrumental in developing the Monterey Agreement in 1956 and in refining the sampling process in the ensuing years was Ronald B. Welch, Chief of Research and Statistics, who became Assistant Executive Secretary for Property Tax when the property tax divisions were organized into a unified department. Robert Hamlin, the Board’s Chief Counsel, was also active in facilitating more effective cooperation between the Board and the county assessors.
A bill embodying the provisions of the Monterey Agreement was drafted by the Board of Equalization and the assessors and introduced by Senator James E. Cunningham of San Bernardino County during the 1957 session, but the Legislature referred the assessment and equalization problems to the joint Interim Committee on Assessment Practices. This committee, under the chairmanship of Assemblyman Glenn Coolidge, submitted its final report in May 1959. The Legislature responded with the passage of two important 1959 bills, the Coolidge Bill and the Collier Bill.114
The Coolidge Bill (AB 2674), as the Board interpreted it, “. . . writes into the Revenue and Taxation Code the procedures which were developed cooperatively by this Board and the County Assessors and adopted in a form known as the Monterey Agreement on October 1, 1956. . . . The new law differs from prior practice mainly in its requirements for public disclosure of the calculations that underlie the Board’s conclusions and of the ratios of total assessed value to total market value which are the end result of work performed by the staff of the Intercounty Equalization Division.” 115
The law also specifically required that appraisal surveys be conducted in each county at least once every three years. Prior to this legislation, when the Board undertook its intercounty equalization role in 1954, it zealously sampled all 58 counties during the first year. This function was performed by the Assessment Standards Division, which had been established in 1938 to bring greater uniformity to county assessor practices. That responsibility was transferred then to a unit created from that division-the Research and Statistics Division, which remained a separate entity. Eventually, sampling was assigned to the Division of Intercounty Equalization, where it remained until the adoption in 1978 of Proposition 13 changed the very nature of property taxation.
The Collier Bill, which was formulated by Assemblyman John L. E. “Bud” Collier, was designed to resolve the problem of allocating state grants to school districts as provided for by the 1945 Strayer Plan and repayment of loans to school districts for capital improvements. The Collier Bill directed the Secretary of the Board to certify to the Superintendent of Public Instruction a “factor” for each county derived from the assessment level findings of the Board’s staff. This “factor”, now commonly referred to as a “Collier factor”, was merely the ratio of a county’s assessment level to the statewide assessment level. Thus, if a county had an assessment level of 20 percent with a statewide average of 23.5 percent, the “Collier factor” would be 1.175. This means that if the assessment roll for that county were multiplied by 1.175, the resulting modified assessed value would be the same as if the assessor achieved a 23.5 percent level in the first place. The “Collier factor” became a tool by which the State Department of Education was able to adjust for variations in assessment ratios for the purpose of allocating state funds to school districts on the basis of school attendance and property values. This assessed value modifier or “Collier factor” is particularly noteworthy because it not only eliminated the need for the outright issuance of equalization orders in such cases, but also became applicable to future state aid programs based on assessed values.
The 1959 Coolidge and Collier bills offered solid guidelines to the Board for property taxation, but neither bill would have the impact of the upcoming 1966 Property Tax Assessment Reform Law. It is difficult to say whether these reforms would have been instituted in any event, but most certainly, the immediate cause behind these reforms was the assessment scandal of 1965. On July 23, 1965, the San Francisco Chronicle printed a story indicating the acceptance of bribes by personnel in the Alameda and San Francisco County Assessors’ offices. The subsequent indictment of various assessors, assessors’ aides, tax agents and taxpayers caused such a stir that the Legislature reacted with the passage of the Property Tax Assessment Reform Law (AB 80) effective October 1966.
The newly enacted AB 80 (Chapter 147, First Extraordinary Session ), included a number of changes, some of which were proposed by the Board in a 1965 list of fifteen suggestions.116 One of the most significant changes mandated by AB 80 directed the Board to “. . . issue rules and regulations to govern assessors when assessing and local boards of equalization when equalizing, to prescribe and enforce the use of all forms for assessing and collecting property taxes, and to issue instructions to assessors designed to promote uniformity.” 117 The result was improved statewide uniformity in property tax assessments.
Another important provision of AB 80 was the requirement that assessors select and publicly announce an assessment ratio between 20 and 25 percent of the full value at which they were assessing property. This was to take place from 1967 to 1970. Thereafter all assessors were to assess all properties at 25 percent of their full value.
Adherence to these ratio requirements was encouraged by an amendment of Section 1605 of the Revenue and Taxation Code. The amendment gave taxpayers who appealed to county boards of equalization the right to assessments which did not exceed 115 percent of the State Board of Equalization’s ratio finding for the county, or 25 percent, whichever was lower. The Board viewed this as a “. . . powerful device for enforcing adherence to the ratio which an assessor purports to use.” 118
One of the AB 80 amendments provided for an expansion of the Board’s assessment practices survey program. In 1947, the Legislature had initiated a survey program which required the Board of Equalization to conduct a study of each county’s assessment practices. The findings of each survey were to be reported to the assessors, the board of supervisors, and the Legislature. One round of surveys was completed during the five-year period ending in 1952. Thereafter, no further surveys were made until AB 80 was enacted, expanding the “timing, scope and content of the surveys. The Board is now required to survey each county not less often than once each six years. An analysis of the quality of the local assessment roll, as revealed by the latest intercounty equalization survey, is required.” 119 The Board of Equalization was thus committed to playing an increasing role in intracounty as well as intercounty equalization.
Other noteworthy provisions of AB 80 (Chapter 147) are listed as follows:
- A specific directive to assessors to recognize the effect of enforceable restrictions on the use of land and creation of a rebuttable presumption that such restrictions will not be removed or substantially modified in the predictable future.
- Greater authority for assessors to acquire information concerning property—its terms of acquisition, construction and development costs, rental income, and other data relevant to determination of value.
- Requirements that appraisers and auditors working in state and county assessment agencies (other than elected assessors) meet specified qualifications. Appraisers must
pass an examination prepared by the Board, with the advice and assistance of a committee of assessors, or given by a county with a civil service or merit system. In the latter
case, the scope of the examination must be approved by the State Board of Equalization. Auditors must have a degree in accounting from a recognized institution of higher
education, or be licensed to practice accounting in California, or have passed a state or county civil service or merit system examination for accountant or auditor.
Auditor-appraisers must apparently qualify both as appraisers and as auditors. Appraisers and auditors who were employed on October 6, 1966, the effective date of Chapter 147, were not required to qualify until October 1, 1971, and October 1, 1972, respectively.
- A conflict-of-interest law for assessors and their employees and for members of the State Board and its employees. Receipt of compensation or gifts from private parties for advice or service relating to the taxation or assessment of property is specifically prohibited.
- A requirement that the State Board specify the contents of property statements in detail, including the exact wording of questions, at least six months prior to the lien date in 1968 and each year thereafter.
- Prohibition of separate assessment and collection of property taxes by general-law cities after January 1, 1969.
- Creation of an Office of Appraisal Appeals within the Board to review appraisals made by the intercounty Equalization Division with which an assessor disagrees and to present its conclusions to the Board for disposition.120
These and other provisions strengthened and expanded the Board’s role in equalization.
100 Ronald B. Welch, A Brief History of Intercounty Equalization in California, p. 7, as found on p. 89 from Speeches and Papers of R. B. Welch, Vol III (1955-1958)
101 Swanson, Jess Nelson, Equalization of Property Assessments: A critical analysis of the political, educational, and administrative considerations which have shaped intercounty equalization in California with guidelines for supplemental inquiry. University of Southern California Ed.D., 1961
102 Statutes of 1949, Chapter 1466
103 Report of the State Board of Equalization, 1948-1949, p. 6
104 Swanson, J. N., op. cit., p. 138
105 This was only the first of suspensions which would take place in 1951, 1953, 1955, and 1957.
106 Ronald B. Welch, A Brief History, etc., p. 10
107 Report of the State Board of Equalization 1953-54, p. 7
108 Report of the State Board of Equalization 1954-55, p. 6
109 Tulare County successfully defied the Board decision in a suit filed in the Superior Court in 1955. The State Supreme Court refused to take original jurisdiction on the Board’s request for a writ of mandate.
110 A Practical Program for Intercounty Equalization. A Joint Report of Assessors Committee on Equalization Procedures and the State Board of Equalization made to the State Association of County Assessors at Monterey, California, October 1, 1956.
111 “Trending” is when the method of forecasting market value changes for property in a county by comparing them with other published economic indicators.
112 lbid., pp. 5 and 6
113 Report of the State Board of Equalization, 1955-1956, p. 5
114 Statutes of 1959 Chaps. 1662 and 1786, respectively
115 Report of the State Board of Equalization. 1958-1959, p. 8
116 State Board of Equalization, Suggestions for Property Tax Legislation, October 1, 1965.
117 Report of the State Board of Equalization, 1965-66, p. 7
118 Report of the State Board of Equalization, 1965-66, p. 5
119 Report of the State Board of Equalization, 1967-68, p. 17
120 Report of the State Board of Equalization, 1965-66, pp. 9-10