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CA Appeals Court Strikes Down
Arbitrary Valuation


An assessment appeals board cannot arbitrarily reach a property value at the current tax roll without substantial evidentiary documentation, knowledge of the assessor’s valuation, and sufficient explanation of its decision. That’s the ruling of the California Court of Appeals in Next Century Associates LLC v. County of Los Angeles (2018) 29 Cal.App.5th 713.




Next Century LLC purchased the Century Plaza Hotel in mid-2008 for $366.5 million. As of January 1, 2009, the property’s enrolled assessed value was $367,612,305. Next Century sought a reduction claiming the “global economic meltdown” had caused the property’s market value to drop significantly.


The Los Angeles Assessment Appeals Board considered discounted cash flow analyses that reflected a decline in value below the enrolled assessment. The assessor did not attempt to defend the enrolled value. The board rejected the assessor’s analysis because it contained an admitted error of overstated 2006 net operating income.


Next Century asserted that if the assessor’s analysis were correct, it would generally have supported the owner’s proposed value. The board rejected Next Century’s proposed valuation and upheld the enrolled value, although neither party thought it correctly reflected the property’s lien date value. As a result, Next Century sued for a tax refund.


Appeals Court Ruling


After the Superior Court found in favor of the respondent County of Los Angeles, the appellate court concluded that the assessment appeal board’s rejection of the taxpayer's valuation was arbitrary, as was its decision to leave in place the enrolled value that had been repudiated by the assessor and was unsupported by evidence.


The ruling stated that that board’s cryptic findings were insufficient to bridge the analytic gap between the evidence its conclusions.