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Findings and Recommendations 10 findings
F1
2-3: There are no performance standards for appraisal positions. RECOMMENDATIONS: 2-3a: The OAR’s newly created Standards and Quality Control Group should develop performance standards to measure quality and productivity of individual appraisers. 2-3b: The assessor-recorder should implement an employee performance evaluation program based on the performance standards developed by the Standards and Quality Control Group.
Related Recommendations (1)
R2
“We found a lack of standards and quality control in the OAR. As mentioned earlier, there is no policies or procedures manual. Staff within each unit determines their own arbitrary minimum value for assessing new construction. ... Recommendation 2: Task the assessment standards section with the responsibilities of standards and quality control. Recommendation 3: Develop a comprehensive policies and procedures manual.” ( .) 4 All figures were confirmed by e-mail from the OAR to the Civil Grand Jury on May 15, 2006. State Board of Equalization, Assessment Practices Survey of the City and County of San Francisco, December 2002. 4
F2
Office Procedures Findings: 2-1a: The OAR does not have written procedures or processes for appraisers and other OAR staff to efficiently and effectively perform their job duties. 2-1b: Although the assessor-recorder has created a Standards and Quality Control Group within the OAR, headed by a senior staff employee, to develop uniform standards for day-to-day operations, and some standards have been drafted, no such manual currently exists.
Related Recommendations (2)
R2
“We found a lack of standards and quality control in the OAR. As mentioned earlier, there is no policies or procedures manual. Staff within each unit determines their own arbitrary minimum value for assessing new construction. ... Recommendation 2: Task the assessment standards section with the responsibilities of standards and quality control. Recommendation 3: Develop a comprehensive policies and procedures manual.” ( .) 4 All figures were confirmed by e-mail from the OAR to the Civil Grand Jury on May 15, 2006. State Board of Equalization, Assessment Practices Survey of the City and County of San Francisco, December 2002. 4
R5
Implement a system to control access to appraisal records.” ( .) 4. “We found lengthy delays in processing building permits and enrolling value added due to new construction. … The assessor's delay in the assessment of new construction beyond the four-year statute of limitations, per Section 532(a) of the Revenue & Taxation Code, has resulted in lost tax revenue for the city and county … the city and county have irretrievably lost revenue from assessable new construction as indicated by over 500 permits. Recommendation 25: Eliminate the backlog of assessable new construction.” ( .) In fact, the BOE ranked San Francisco’s OAR as the least efficient of the assessor-recorder offices in the ten largest counties, measured by total assessed valuation.6 Other problems that have plagued the OAR and resulted in low morale and poor staff productivity include: 1. Unfilled Positions and Recruiting Process: Many positions are vacant. The OAR has a budgeted staff of 140 employees, but as of May 19, 2006, there were only 112 employees. This is a vacancy rate of 20%; the December 2002 BOE report found that “The high vacancy rate for assessment positions has adversely affected the assessment of property.” Hiring a new appraiser under the current civil service system takes about six months. Candidates for jobs are lost due to the lengthly hiring process. In addition, there are few mid-level appraisers to replace senior appraisers as they retire. 2. Standardized Filing and Appraisal Procedures: Procedures for filing, retrieving, and securely storing records are not standardized. Procedures for conducting appraisals vary from desk to desk. As of the writing of this report, there are thirty-six real property appraisers, each of whom has his/her own approach and interpretation of appraisal methods for estimating property values, and own procedure for record keeping. As previously noted by the BOE, “There is no policies or procedures manual. Staff within each unit determines their own arbitrary minimum value for assessing new construction.” Within the past year the new assessor-recorder has created a Standards and Quality Control Group to begin development of standards for the OAR’s operations. This group is making progress; the Civil Grand Jury received its draft Operations Manual (undated) for new construction assessment standards. Civil Grand Jury interview with the BOE, November 28, 2005. 5 3. Information Technology: Computer systems are ineffectively used. The OAR uses the EZ Access computer sytem for record keeping, but lacks internal programming staff and has only one operator capable of running the OAR’s I.B.M. AS400 computer. Furthermore, there is no written user’s manual within the OAR, most of the staff are not content with the system, and many think the system should be replaced. 4. Handling of Appeals: The amount of time consumed by the appeals process is excessive. The OAR represents the city before the Assessment Appeals Board, with some assistance from the city attorney’s office, as well as private consultants, who have particular areas of experise. Top flight, expert attorneys and private appraisers represent major property owners, and often the OAR’s advocates are “out gunned.” This unbalanced situation could certainly be greatly improved by better staff preparation of appraisals and appeals, by training, by a more consistent approach to valuation procedures, and by working diligently with property owners to settle appeals administratively. From our interviews it soon became apparent to the Civil Grand Jury that an incessant “push-pull” struggle exists in two major areas of the OAR’s workload. As we see it, the “push” is to keep on top of the daily appraising and assessing required in order to be within the four-year statute of limitations. The OAR has four years from completion of new construction or change of ownership reported to the city in which to appraise and reassess property for tax purposes. If the appraisal or reassessment is done within four years, then the new valuation applies from the date construction was completed or ownership changed, and the city’s treasurer/tax collector bills the property taxes retroactively. If the property is not appraised and reassessed within four years from the date construction was completed or ownership transferred, the treasurer/tax collector may not bill and collect taxes on the property that are more than four years from the date the new construction or transfer is finally assessed. On the other hand, the “pull” that is diverting scarce manpower resources from appraising, assessing and reassessing is the two-year statute of limitations for deciding appeals that property owners bring before the Assessment Appeals Board. The number of appeals will typically spike during a weakening local economy and/or a softening of commercial or residential real estate markets. If the OAR and property owner do not reach agreement during a disputed assessment, the property owner can then take his/her case before the Assessment Appeals Board, which according to statute must decide the appeal within two years. The property owner may agree to waive the two-year deadline, but is not obligated to do so, and many do not. Without a waiver, particularly in cases involving complex high-value properties, the OAR is under pressure to defend its assessed value before the Assessment Appeals Board prior to the two-year deadline. During the past fiscal year, 2004-2005, there were 1,683 appealed assessments that the OAR had to defend. Of this number, 1,198 or 71.18% were settled without a hearing.7 If the two years pass without a settlement or decision, then the OAR must enroll the property owner’s estimate of value stated on the appeals application. Office of the Assessor-Recorder, 2005 Annual Report, , May 2006. The OAR needs guidance and discipline, which have been lacking for well over a decade, and it needs accountability to correct longstanding problems that are costing the city millions of dollars in lost revenue annually. The Civil Grand Jury has confidence in the newly-elected assessor-recorder and his abilities. We hope this call to action will be heeded. V. Findings and Recommendations The Civil Grand Jury submits to the people of the City and County of San Francisco and to the city’s government the following findings and recommendations for the Office of the Assessor-Recorder. 1. Most Critical Concerns: Assessment Backlogs and BOE Recommendations
F3
Information Technology Findings: 3-1a: The OAR uses a packaged computer system, EZ Access, for record keeping. This system is used by other large California counties such as Los Angeles and San Mateo, with vendor modifications. 3-1b: The OAR lacks internal programming staff for EZ Access and only one person in the OAR is authorized and capable of running the EZ Access I.B.M. AS400 computer. There is no written user’s manual available for the EZ Access system in the OAR. 3-1c: Although the EZ Access computer system has been installed for over five years, the OAR staff approaches the system with vague feelings of discontent.
No recommendations for this finding
F4
Staffing Findings: 4-1a: The OAR has 112 employees out of a budgeted staff of 140 employees, leaving 28 positions unfilled as of May 2006. 4-1b: The assessor-recorder has an immediate need to fill seven new positions as noted in Finding 1-1b on .
Related Recommendations (2)
R1
“The high vacancy rate for assessment positions has adversely affected the assessment of property. The already high number of unprocessed building permits has increased since the BOE surveyed in 1996. As a result, property in the city and county is being under assessed. Recommendation 1: To complete the Assessor's statutory obligations, we recommend the assessor fill current assessment vacancies.” ( .)
R4
“We found lengthy delays in processing building permits and enrolling value added due to new construction. … The assessor's delay in the assessment of new construction beyond the four-year statute of limitations, per Section 532(a) of the Revenue & Taxation Code, has resulted in lost tax revenue for the city and county … the city and county have irretrievably lost revenue from assessable new construction as indicated by over 500 permits. Recommendation 25: Eliminate the backlog of assessable new construction.” ( .) In fact, the BOE ranked San Francisco’s OAR as the least efficient of the assessor-recorder offices in the ten largest counties, measured by total assessed valuation.6 Other problems that have plagued the OAR and resulted in low morale and poor staff productivity include:
F5
Backlog of Appeals Findings: 5-1a: Resolution of valuation differences with taxpayers varies with appraisers. Some appraisers make an effort to resolve valuation differences with taxpayers and others refuse to negotiate, resulting in the unnecessary filing of appeals to the Assessment Appeals Board. 5-1b: Of the almost 1,700 assessment appeals closed in fiscal year 2004-2005, approximately 70% were resolved without a hearing.
No recommendations for this finding
F6
Additional Concerns Finding: 6-1: The OAR has begun making use of the resources of the California Assessors’ Association since the current assessor-recorder took office.
No recommendations for this finding
F7
14 5-3: Except for trade secret information received in closed session, all information submitted to the Assessment Appeals Board is public information and, if relevant, can be used in any other matter brought before it. The OAR does not track or keep a record of this information for use on subsequent appeals.
No recommendations for this finding
F8
5-5: The OAR lacks an adequate number of qualified staff to prepare and defend appeals.
No recommendations for this finding
F9
6-1: The OAR has begun making use of the resources of the California Assessors’ Association since the current assessor-recorder took office.
No recommendations for this finding
F10
6-2: The OAR has not published an annual report to the public or Board of Supervisors in recent history, but has just published an annual report for 2005 and intends to continue to publish an annual report each year.
No recommendations for this finding
Additional Recommendations 2
These recommendations are not explicitly linked to specific findings.
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R3Information Technology 2 Charlie Goodyear, “Ting Vows End to Assessment Backlog; Understaffed Office Needs Two Years to Catch Up,” San Francisco Chronicle, page B5, March 16, 2006. State Revenue and Taxation Code, Section 532 (a). 2
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R6Additional Concerns III. Procedure and Resources The Civil Grand Jury’s investigation consisted of confidential interviews, correspondence with the OAR and others, examination of documents, and review of Internet sites. The Civil Grand Jury commenced its investigation in October 2005. We obtained records and conducted interviews with officers and employees from the following: Office of the Assessor-Recorder, City and County of San Francisco Office of the City Attorney, City and County of San Francisco Office of the Treasurer and Tax Collector, City and County of San Francisco Department of Building Inspection, City and County of San Francisco Assessment Appeals Board, City and County of San Francisco Board of Equalization, State of California Office of the Assessor, County of Alameda The Civil Grand Jury also obtained information from the following Web sites: City and County of San Francisco - http://www.ci.sf.ca.us/ Office of the Assessor-Recorder - http://www.sfgov.org/site/assessor_index.asp Board of Equalization, State of California - http://www.boe.ca.gov/ California Assessors’ Association - http://www.calassessor.org/ County of Alameda - http://www.acgov.org/assessor/ County of Santa Clara - http://www.sccgov.org/portal/site/asr/ Web site addresses were correct as of March 24, 2006. IV. Discussion Almost without exception the people interviewed by the Civil Grand Jury commented about the backlogs of properties awaiting appraisal and assessment. Rather than aggressively fix the problem, the OAR’s staff seems to be overwhelmed by the problem. Tax rolls close on June 30 at the end of each fiscal year, and the assessor-recorder conservatively estimated that the city loses $2,000,000 per year in uncollected revenue due to the assessment backlog. In March 2006 the number of parcels awaiting processing was approximately 26,600. This total includes approximately 6,800 properties with new construction, having an estimated value of $1 billion; 3,800 properties with changes of 3 ownership, having a current assessment roll value of approximately $8.14 billion; and approximately 16,000 other properties, including personal property, which currently require preparatory processing before an appraisal can be completed.4 (For definitions of “new construction” and “personal property,” refer to the Glossary at the end of this report.) The assessor-recorder’s goal to eliminate the backlog is to reduce it to twelve months, from three to four years or more. We recommend that it be further reduced to six months, except for appraisals under appeal. There are two reasons for this: 1) even if construction lasts a number of months or years, the OAR has had the same number of months or years to consider the appraisal and should therefore be able to arrive at an appraised value very soon after a Certificate of Occupancy is issued; and, 2) there is an advantage in having a shorter backlog of six months because it allows more “breathing room” if a surge in demand extends the backlog by, for example, three months. A surge in appraisal work is certainly more acceptable in extending the length of backlog from six to nine months, than it is from twelve to fifteen months. Once every five years the BOE conducts a review of the top ten counties’ property tax assessment functions to determine whether properties are being assessed properly and to identify areas where improvements should be made. Issued as an “Assessment Practices Survey,” the report provides an overview of how well the duties of the assessor are performed and includes recommendations to correct asssessment deficiencies and improve compliance with state law. In its 2002 report on San Francisco, the BOE identified numerous problems with the OAR and listed 56 specific recommendations, which are summarized in