Charles Simpson stepped to the podium, took a stack of papers and manila envelopes from under his arm and set it down. "Well," he said, fumbling with the pages and staring into the middle distance, "I'm not a public speaker. Just bear with me and I'll try to explain this the best I can." Mr. Simpson had come to the county courthouse this particular Thursday morning hoping to convince the tax man that his Fortuna house had been overvalued, meaning he was being charged too much in property taxes. The tax man, in this case, was actually three men: Thomas Rowe, Charles Petty and Greg Anderson, who together make up the Humboldt County Assessment Appeals Board, an independent body operating on behalf of the county assessor's office. Sitting comfortably behind the bench in the Board of Supervisors' chambers, the men waited patiently as Simpson presented his evidence.
They've been seeing a lot of people like Simpson lately -- people whose homes have dropped in value and who believe their property taxes don't accurately reflect that drop. Under California's Prop. 8 -- the 1978 version, not the gay marriage one -- homeowners can apply for a temporary reduction in the assessed value of their homes during a declining market, which can save them some dough come tax time. It's clearly not a fun position for homeowners to be in. They've lost money on an investment, just like countless others in this recession, only it's more personal than that: These are their homes, after all, not stocks in a portfolio. The loss seems to them profoundly unfair, and in many cases it impacts their quality of life.
"I'm not gonna cry over spilled milk, but I'm on Social Security now," Simpson recently told the Journal, his voice trembling. "I'm gonna be forced to sell that house as soon as my mother-in-law passes away. I'll sell that place and buy somethin' smaller."
Simpson built the house himself -- four-bedrooms, two-and-a-half-baths, completed in December of 2004 as the housing bubble was inflating like mad. The following year he added a mother-in-law unit (which was, in fact, for his ailing mother-in-law) and in 2006, at the perilous height of the housing market, he built a detached garage.
For each phase of this construction, Joan Watanabe, a senior property appraiser with the county, visited Simpson's property to assess its value. Defending those findings to the appeals board that Thursday morning, Watanabe said she followed the usual procedures -- consulting the California Board of Equalization's residential building cost book, then looking at sales prices of comparable properties during the same time period -- to arrive at an assessed value for Mr. Simpson's home. For the 2008 roll year -- the one Simpson was here to appeal -- Watanabe said she'd double-checked the evidence, re-done the math and arrived at the same number. "I believe the 2008 roll year assessed value of $561,889 to be a fair and reasonable estimation of the fair market value of Mr. Simpson's property as of Jan 1, 2008," Watanabe concluded.
Simpson begged to differ. "I think you kinda cherry-picked the sales from 2007 to make it sound like those values are still good for today," he told the board. Then he pulled out evidence he'd gathered himself -- documentation on nearby homes that have sold in recent months for much less than his own property's assessed value. The market has been in a free-fall, he said, and there's just no way his property's worth as much as they say it is. More like $410,000.
The problem, the board informed him, was that most of his evidence was irrelevant. He had to look at what his property was worth on January 1, 2008 -- not what it's worth today. "And it sounds to me that the argument you're making is that the values have been declining steadily, and I don't think anyone disagrees with that," said Anderson, the board chair. "The question is how much, and where's the proof for exactly how much?" After each side had presented its case, the board asked a few questions of Simpson, then Watanabe, engaging them in an informal back-and-forth not unlike The People's Court.
When it came time to deliberate, the three board members scooched their chairs closer together, leaned in and spoke softly amongst themselves while Simpson stood with shoulders hunched, gripping the podium with both hands. After a couple minutes, the board members wrapped up their discussion and settled back behind their respective name plaques. Petty leaned into his microphone. "It's our opinion that the county's estimate is on the high side, based on the evidence we have," he said. "What we would come to is a value of $535,000." The finding, which was quickly moved, seconded and carried with a unanimous vote, saved Simpson $268.89 this year -- not bad, but considerably less than he was hoping for.
"I don't think the value is over four-fifty," he told the Journal after the hearing. "I offered to sell it to ’em. I told ’em, 'Why don't you buy the house for four-fifty and sell it for what you think it's worth? You'll make $100,000. That's more than you'll make collecting taxes in 18 years.'" He shook his head. "They balked at that." Simpson is clearly upset, not so much at the appeals board as at the banks and mortgage lenders that allowed the bubble to inflate in the first place, and at the opportunistic buyers who took advantage of it. Anyone whose property was assessed at the height of the market, which peaked locally in early 2006, is now literally paying the price for those irresponsible lending practices, Simpson said.
"People were buyin' houses -- they didn't care what they paid for ’em because they were buyin' ’em for no money down," he said, eyebrows raised incredulously. "It would be almost like you go into a casino and [borrow] $200 from them. And if you win money you leave with that. If you lose, you just walk out the door. Basically it's the same kind of game."
Mari Wilson, an assistant assessor with the county, said the appeals board has received roughly 150 applications so far this year. It's the highest number in several years, she said, at least partially because of the declining market. The median selling price of a Humboldt County home in February 2006 was $342,000, and they were selling like hotcakes despite the fact that, according to traditional lending guidelines, only one in 10 residents should have been able to afford that price. Three years later, the median price had fallen 22 percent to $266,500. (Stats courtesy the Humboldt Association of Realtors.) The rise and fall was drastic, but because California tax laws generally keep assessed property values from increasing more than two percent per year, the number of homeowners who actually qualify for a reduced tax rate is pretty small, Wilson said. "Unless they bought in that big surge where value was inflated ... it's not likely that their [tax rate] would be higher than the current assessed value."
The market has died off so much that even arriving at that value can provide a challenge, as Watanabe noted in her presentation to the appeals board. Sales were so slow by the end of 2007 -- when Watanabe was attempting to assess Simpson's property value -- she had trouble finding any comparable homes that sold. "Nothing was moving," she told the board.
"It's tough," Anderson said. "We'll all admit it's tough."