The 2001-2002 Grand Jury studied selected performance and customer service aspects of the County Assessor's Office. The Grand Jury gave particular attention to the time lag associated with property re-appraisal and the resulting issuance of notices of property tax adjustments, which resulted in six recommendations.

Issue: Are there opportunities to improve the operations and customer service of the San Mateo County Assessor's Office?

The Appraisal Services Division of the Office of Assessor-County Clerk-Recorder is responsible for appraisals and property tax adjustments. When notified of an action that may alter the assessed valuation of a property (re-assessment event), such as a change of ownership or the issuance of a building permit for new construction or modifications, this office may re-appraise that real property and issue any notice of property tax adjustment. Approximately 35,000 to 40,000 such documents are received and reviewed annually. Workload increases in times of recession because there are a large number of requests for re-assessments.

The 2001-2002 Grand Jury was asked to examine the length of time between a re-assessment event and the issuance of a property tax adjustment. The Grand Jury reviewed this issue as well as some service aspects, the qualification of the appraisers, and public access to the Assessor's Office database.

Re-assessments due to change in ownership resulted in $6.3 billion in incremental appraised value for the county in FY 2000-2001*. Time lags associated with reassessment can result in significant delays in the receipt of incremental tax revenues for the county, cities, and other taxing entities in the county.

The Grand Jury's findings are divided into three sections: Appraisal Time Lag, Public Access to the Assessor's Office Database, and Appraiser Certification
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APPRAISAL TIME LAG

In May 2001 the Appraisal Services Division reported that, for FY 1999-2000, the median number of days from their receipt of formal notification of a residential sale to their production of a Notice of Supplemental Assessment (i.e., the Notice-to-Notice "time lag" as used in this report) was estimated to be 210 days. The fact that this was a median figure is significant, because it means that half of the time lags were in fact longer than 210 days. The performance was even worse in FY 2000-01, when the median time lag was estimated to be 250 days.

The Appraisal Services Division made a special effort for the current Grand Jury investigation to examine its backfile database more thoroughly, in order to to obtain actual data to replace estimates. This expanded analysis also included the determination of time lag data for the sale of commercial property. "Commercial" property in this report is defined to include commercial, industrial, and multi-family property. Single-family and commercial categories account for about 98% of all the Assessor's office appraisal work; the remainder includes such property as mobile homes and agricultural land. The actual historical data obtained by this special analysis-actual median time lag from recording date to notice mailing date for notices issued during FY 1999-2001-is summarized in Table 1.

Two reasons given by the Appraisal Services Division for the delays shown in Table 1 were: (1) a large backlog, and (2) implementing a major proprietary software system (EZ system).

The EZ system became fully operational for all real property in January 2000. It was expected that this system would greatly facilitate information processing and that the resulting time lag performance would be greatly improved. The Appraisal Services Division was confident that its time lag performance for residential sales would be reduced to 60 days in FY 2001-02 and 30 days in FY 2002-03. As shown in Table 2, through April 22, 2002, the median time lag had been reduced to 84 days. It is clear that the office will not meet its published objective of 60 days for single-family residential housing units in the current fiscal year.

While no reporting or projections were made for the time lag performance for commercial property, those time lags were very long in prior years and continue in the current year to be much longer than that of single-family residential sales. The actual time lag performance measured for several periods during the current fiscal year is shown in Table 2.

For several years the Assessor's Office has had serious performance problems with regard to the time lag associated with the processing of single-family unit property appraisals. This performance improved significantly over the last 15 months, but will still fall short of the Assessor's published objective of a 60-day median time lag for Fiscal Year 2001-02.

The Assessor's Office has had even worse time lag performance with regard to other types of property (commercial, industrial, multi-family units).Unfortunately, this performance has gotten progressively worse over the last 15 months, to the point where, for the most recent quarter available for this report (3rd Quarter of FY 2001-02), the time lag for this type of property was almost three times longer than the time lag for single family units. Because there were no published objectives for the time lag associated with this type of property, the Grand Jury cannot report the extent to which the Assessor's office failed to meet its objectives.

It might be argued that the time lag and backlog is due in large part to the volume of transactions handled by the Assessor's Office. However, the total transaction volume has not changed significantly over recent years, as shown by the data in Table 3.

The total annual number of property transfers noted here is higher than those given in the time lag tables because not all property transfers require an appraisal or re-appraisal of the property.

A special "accounts aging" type of analysis was done to determine the distribution of ages of transactions in the backlog at different times during the year. The objective was to see if, on average, the records in the backlog were getting older. To support this analysis, the Appraisal Services Division developed and ran a series of special programs to determine the distribution of ages of records in the backlog at different times. The results of that special data collection effort are shown in Table 4.

The data in Table 4 show that reduction in time lag has not been achieved at the expense of increasing the median age of records in the backfile. The age of records in the backfile has decreased significantly over the last 15 months. This is an accomplishment that reflects well on the Appraisal Services Division.

PUBLIC ACCESS TO ASSESSOR'S OFFICE DATABASE

It became increasingly clear to the Grand Jury that the data in the Assessor's database, such as the names of property owners and the building and sales history and description of the property, including tax exemptions, was an important public resource..

Although this database has been made available to commercial organizations that re-package it in CD and other forms for sale to real estate firms and to other interested parties, it is not widely known that it is also available at a dozen online terminals in the public information room of the Office of the Assessor-County Clerk-Recorder at County Center in Redwood City. The public interest would be served by publicizing that this information isreadily available to the public.

APPRAISER CERTIFICATION

During the course of the Grand Jury's study, some questions were raised regarding the qualifications and training of the appraisers. The Grand Jury felt that it was important that the taxpayers have confidence in the professional knowledge and experience of the people who are appraising their property and determining their tax bills. It is helpful here to know that there are some standards for certifying the professional qualifications of appraisers.

The State of California has a variety of licensing requirements for California appraisers, depending on the subject matter. Before 1990, the industry was basically self-regulated, with the exception of property tax appraisers (i.e., all the appraisers in the Assessor's Office), who since 1966 have been required to be certified by the California State Board of Equalization (BOE). All of the current appraisers in the Assessor's Office have this certification.

Additionally, as a result of the federal savings and loan scandals of the late 1980s, the Office of Real Estate Appraisers (OREA) was established in 1990 within the California Business, Transportation and Housing Agency and charged with developing and implementing a real estate licensing and certification program that complied with the federal mandate to license all real estate appraisers performing appraisals that were required for any federally-related transaction (which amounts to 99% of all financing transactions).

Today, the vast majority of California's real estate appraisers (more than 18,000) are licensed by the OREA; the possession of an OREA license is the industry standard for professional real estate appraisers. State-licensed appraisers must provide an appraisal product that conforms to the Uniform Standards of Professional Appraisal Practice (USPAP).

The OREA provides four levels of licensing. Each requires passing a state exam and periodic licensing renewal: Trainee license, Residential license, Certified Residential license, and Certified General license. Each license level permits a specific scope of work and has different training and experience requirements.

The OREA license is considered to be a more demanding and more comprehensive test than the BOE certification test. Possession of an OREA license, in addition to the required Board of Equalization certification, would confirm the professional competence of appraisers in the Assessor's Office and would enhance the professional image and public confidence in their work product. This is particularly important in the context of the increasing complexity of evaluating certain commercial and industrial property and recent legal challenges to the Assessor's appraisals. The OREA license levels could also be used as an independent factor for evaluation of skills and compensation associated with each appraiser grade level. Few San Mateo County appraisers have an OREA license.

1. The Assessor's Office should make a regular practice of establishing and publishing general performance standards and objectives associated with its production processes. Specific performance objectives should be incorporated in its budget and annual review processes for the time lags associated with each type of property discussed in this report.
   
2. For at least the next two years, the Assessor's Office should report these specific performance measurements on a quarterly basis to the County Manager's Office.
   
3. The Assessor's Office should make a concerted effort to meet the 30-day time lag objective for property re-appraisal that it previously published for single family units in FY 2002-03.
   
4. The Assessor's Office should make a concerted effort to reduce the time lag associated with re-appraisal of commercial/industrial/multi-family units to something much closer to that currently realized for single family units.
   
5. The Assessor's Office should make full use of the county's official publications and media outlets to inform the public of the availability of, and free access to, the considerable store of information in its databases.
   
6. The Assessor's Office should establish an objective of having OREA (Office of Real Estate Appraisers) accreditation for all county appraisers, by including it as one element of job descriptions and hiring practices and providing incentives for current appraisers to achieve certification.
   

I thank the 2001-02 Grand Jury for their constructive review of the operations of our office and look forward to continued improvement of the valuable product that we produce for the citizens of San Mateo County. Additionally, I would like to acknowledge the staff of the San Mateo County Assessor's Office for their hard work, professionalism, and commitment to serving San Mateo County and the San Mateo County taxpayer. Their continuing dedication to improving our performance is greatly appreciated.

This year the Grand Jury focused on three areas of the Assessor's operations; Appraisal Time Lag, Public Access to the Assessor's Office Database and Appraiser Certification.

Appraisal Time Lag

The mission of the Appraisal Services Division of the County Assessor's Office is to produce accurate and timely assessment rolls for the county, cities, school districts and special districts of San Mateo County. In the fall of 2000, as part of the County's 2001 Outcome Based Management process, the Assessor's Office chose to focus on the time lag between the date a residential sale is recorded and the date a supplemental notice is sent to the property owner. Our goal was to make significant improvements in this performance measure that historically had taken over 6 months.

Our legacy assessment system, which required that we complete all activity on one assessment roll before activity could start on the following years assessment roll, was the cause of the time lag. As noted in the Grand Jury Report, a new assessment system was installed in 1999. In addition to mitigating Y2K issues relating to our legacy 1960's computer system, we expect to produce improved performance regarding the timeliness of our assessment process. The results of this endeavor are that we now produce some of the fastest assessment enrollments in the State.

Structural Nature of the Lag between Assessment and Distribution of Property Taxes

The lag time between the sale of a property and the ultimate distribution of property taxes as the result of that sale is primarily based in California property tax law and the state mandated processes of the County Assessor, the County Controller and the County Tax Collector. Examination of California law will show that in most cases, reducing the enrollment time lag by a few months has a minimum impact on the ultimate distribution of the tax revenue to recipients.

A real estate property tax bill requires, among other things, an assessed value from the County Assessor, a property tax rate (the amount of taxes per $100 of assessed value) from the County Controller, a prorated rate (based upon the date of the event and the resulting remaining months in the fiscal year) from the County Controller and the delinquency dates (the date after which penalties and interest will apply) from the County Tax Collector. The structure of the property tax cycle therefore has lag time built in. The following is an illustration of this "time lag" structure, based on California property tax law.

For the annual property tax roll, the January 1 lien date- that point in time when property taxes become a lien on the property assessed - is a full six months before the start of the fiscal year for which the property taxes are billed and collected. This preliminary property tax roll is delivered to the County Controller on July 1. Based upon this data, the County Controller calculates the property tax rates. This process is completed in September and used to calculate the actual property tax amount due from the property owner. Once the tax amount is calculated, the extended property tax roll is delivered to the County Tax Collector for billing and collection. Property taxes are then billed in two equal installments, the first payment being delinquent on December 10 and the second payment being delinquent the following April 10. Distribution of taxes to the various agencies by the County Controller is typically at the end of the month following collection. As these facts demonstrate, final distribution of the property tax is 16 months following the date that they become a lien.

For the supplemental property tax roll, the value assessed is the difference between the new value and the base year factored value. Assuming the lien date is the event date, the enrollment must occur no earlier than 30 days after the filing period for a homeowner's exemption. As discussed earlier, tax rates are produced in September and current-year enrolled supplemental assessments are billed in October. Delinquency dates are the same as regular taxes, December 10 and April 10. Given these facts, the current year supplemental assessment of a January sale that is sent an assessment notice in January would have the same tax distribution date as a same-day sale that is sent a notice in August. The first installment for supplemental assessments enrolled after the tax rate has been established are delinquent date on the last day of the month following the month the bill is mailed. The second installment is delinquent four months after the first installment.

Additionally, since these supplemental assessments are typically for events that have occurred after July 1, the prorated tax amount due is for less than a full assessment year and are therefore prorated to less than 100%. A December event, for example, has a tax proration of 50%.

Given these facts, the following are the 2001-02 Grand Jury Recommendations and our responses:

The Assessor's Office should make a regular practice of establishing and publishing general performance standards and objectives associated with its production processes. Specific performance objectives should be incorporated in its budget and annual review processes for the time lags associated with each type of property discussed in this report.

Response: This Office does make a regular practice of establishing and publishing performance standards and objectives associated with our production processes. This is done in two ways:

1.) Since 1995, we have participated in the "State-County Property Tax Administration Loan Program". This program makes a $2.2 million loan to San Mateo County for property tax administration and is "repaid" based upon the Assessor's Office meeting rigorous performance objectives. Each contract year we set performance objectives for our major work processes. These processes include: a.) Change in Ownership reassessments; b.) New Construction reassessments; c.) Assessment Appeal resolution; d.) Decline in Value reassessments; and e.) mandatory audit production. We monitor this workload on a weekly basis to insure timely completion of our performance based contract goals and forgiveness of the loan. Additionally, we produce an "Interim" Report each January and an "Annual Report" at the end of each contract year. Upon completion of the contract, our workload productivity is audited by the County Controller. We are proud of our performance which has generated over $13 million to fund continuing improvements to the property administration programs of the County Tax Collector, County Assessment Appeals Board, County Controller and our Office.

2.) As noted earlier, since last year we have produced Outcome Based Management performance measures that are reported quarterly to the County Manager who presents the results to the Board of Supervisors. We are proud of our performance and its results. Our goal was to reduce our 2000-01 median time lag of 250 days by 65% to 90 days. Our actual performance exceeded this goal with a median time lag of 76 days for 2001-02. The last quarter resulted in a reduction to 56 days.

For at least the next two years, the Assessor's Office should report these specific performance measures on a quarterly basis to the County Manager's Office.

Response: When filed with the State Department of Finance, our "Interim Report" and "Annual Report" are sent to both the Board of Supervisors and the County Manager. Additionally, as part of the County's Outcome Based Budgeting process, we file quarterly reports with the County Managers Office. These quarterly reports are included with those of other county departments, to produce a status report that is presented to the Board of Supervisors. We plan to continue to report our progress.

The Assessors Office should make a concerted effort to meet the 30 day time lag objective for property re-appraisal that it previously published for single family units in FY 2002-03.

Response: The FY 2002-03 time lag objectives is 60 days. The last quarter of FY 2001-02 resulted in a 56 day time lag for these properties. We are confident that the work processes that we have in place will produce the results that we have published in our Outcome Based Management goals.

 

The Assessors Office should make a concerted effort to reduce the time lag associated with re-appraisal of commercial/industrial/multi-family units to something much closer to that currently realized for single family units.

 

Response: We agree and plan on achieving these goals and reporting our progress.

The Assessor's Office should make full use of the county's official publications and media outlets to inform the public of the availability of, and free access to, the considerable store of information in its databases.

Response: We agree and will develop a communications plan for FY 2002-03.

 

The Assessor's Office should establish an objective of having OREA (Office of Real Estate Appraisers) accreditations for all county appraisers, by including it as one element of job descriptions and hiring practices and providing incentives for current appraisers to achieve certification.

Response: We agree. This objective however will come at a significant cost and will be part of our employee negotiations this year. Given the current budget climate, we believe an alternative first step is bringing the salaries of our staff up to a competitive level with that offered by adjacent county assessor's offices. Additionally, performance pay for the attainment of the Advanced Certificate issued by the California State Board of Equalization would add to the professional image and confidence in the work product of our professional staff.