The San Francisco Assessment Appeals Board is grappling with a surge in applications for property tax reductions, reflecting a decline in real estate values.
Between July 2 and Sept. 15, the board received 6,836 applications, 3.5 times more than the previous year’s 1,878 tax reduction requests, the San Francisco Chronicle reported.
Residential appeals outpaced office-building appeals, despite the downtown office market facing significant declines.
The total assessed value of the 6,836 appealed properties is $90 billion, with owners valuing them at $43 billion. However, these opinion values are often placeholders for negotiation, and experts caution against using them for accurate revenue loss estimates.
The decrease in real estate prices is expected to impact property tax revenues, with an estimated $200 million reduction by 2027-28, according to the City Controller’s Office.
The Golden State Warriors, among the largest applicants, appealed 16 parcels, including the Chase Center, with an assessed value of about $1.7 billion and an opinion value of $707 million.
Residential appeals, comprising 80 percent of the total, increased nearly five times compared to the previous year, while office-building appeals rose by 150 percent. Despite their lower numbers, the assessed values of office buildings far exceed those of residential properties.
The San Francisco Appeals Board, facing vacancies among its 24 members, anticipates resolving all appeals filed during FY 2023/24 within one year from the filing date, with decisions made within two years. The surge in appeals has prompted the City Assessor-Recorder’s Office to add four new positions in the first quarter to manage the increased workload.
The decline in commercial property values, particularly in the downtown office sector, is attributed to factors such as remote work, higher interest rates and rising vacancies.
The impact of the appeals avalanche on the city’s economy is yet to be fully realized, pending resolution timelines and outcomes. As the appeals process unfolds, the city is navigating the complexities of property assessments and their correlation with market shifts.
According to the mayor’s forecast, the general fund will pull in $2.51 billion in property tax revenues this year, up 5.5 percent from last year. But with real estate prices down and new construction in the doldrums, that could fall 1.5 percent to $2.47 billion next fiscal year.
Transfer taxes on residential and commercial sales in San Francisco fell over the past year to levels not seen since the Great Recession. Transfer tax revenue for the 2022-23 fiscal year that ended June 30 was $186 million, 64 percent less than the $520 million the city collected in fiscal year 2021-22.
— Dana Bartholomew