Assessor's Office managers got bigger tax reductions than neighbors in these neighborhoods

Former Assessor Kathleen Kelleher and former Assistant Assessor John Solie received significantly lower valuations than neighboring property owners during the recessionary housing crash. One difference: their properties were appraised by outside a
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Former Assessor Kathleen Kelleher and former Assistant Assessor John Solie received significantly lower valuations than neighboring property owners during the recessionary housing crash. One difference: their properties were appraised by outside a
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The Public Eye

Did conflict-of-interest rules give county officials special treatment on tax bills instead?

By Brad Branan

bbranan@sacbee.com

July 28, 2017 03:55 AM

During the region’s most recent housing crash, top managers in the Sacramento County Assessor’s Office received bigger reductions on tax bills than neighbors with similar properties, a Sacramento Bee investigation has found.

From 2008 until 2012, former Assessor Kathleen Kelleher and former Assistant Assessor John Solie received significantly lower valuations for residential property than adjacent property owners did, though the homes were around the same size and age.

A system designed to prevent sweetheart deals might instead have resulted in office employees getting lower values. The Kelleher and Solie valuations were conducted by out-of-county appraisers under protocols intended to prevent conflicts of interest. Their neighbors, by comparison, had homes valued through a computer model.

“The human element is key in appraisals,” said Ryan Lundquist of Lundquist Appraisal Company. “A computer doesn’t understand the motives of buyers and sellers. A computer doesn’t really understand what’s driving values.... A computer misses what’s inside a house.”

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The Assessor’s Office determines property values in the county for tax collection and must reduce them when the market falls. During the five years reviewed by The Bee, the Assessor’s Office reduced values on 170,000 properties a year, almost always using a computer mass-appraisal system necessary for such a high volume.

The Bee reviewed value reductions for 13 homes owned by current and former employees of the Assessor’s Office. The properties were identified in a 2016 state Board of Equalization report completed at Kelleher’s request.

Values for three of the properties were lower than for similar neighboring properties, while reductions for 10 of the homes were in line with those for adjacent houses.

Appraisals of five of the 13 homes reviewed by The Bee were done by out-of-county assessors, including the Kelleher and Solie properties. The rest were conducted by computer.

Kelleher said the appraisals for her staff meet state standards for property owned by Assessor’s Office employees. She noted that the state Board of Equalization review found no problems.

“It was very important to me and my staff that these properties were valued appropriately,” she said.

Allegations of favorable assessments surfaced in May when employees of the Assessor’s Office went public with complaints about alleged mistreatment, including harassment and unfair promotions. Kelleher was accused of receiving a county appraisal for a pool and spa addition in Natomas that was too low, although she said the review was handled no differently than other pool assessments.

The county opened three investigations this year to review the allegations, which Kelleher has denied. The county closed two of them, finding no evidence of policy violations, said county spokeswoman Kim Nava. A third investigation by a Sacramento law firm, looking at assessments of employee property and other issues, is pending.

Kelleher resigned in May, citing health reasons she declined to specify. She was replaced by former Assistant Assessor Christina Wynn. Kelleher left in the middle of her second term and was first elected to the office in 2010.

In 2008, when the market slide started to make a big dent in assessed values, an Orangevale condo owned by Kelleher and her husband was valued at $147,000 – nearly the same as two other condos in a four-unit cluster, and $8,000 less than the fourth condo. They were all built in 1985 and have three bedrooms each, with the exception of one condo that has two.

By 2012, the value on Kelleher’s condo was lowered by 22 percent, down to $115,000. The reduction would have lowered her property taxes by about $320. Values on two of her neighbors’ condos went up by 5 percent, while the fourth condo received a 4 percent reduction.

Kelleher’s condo was appraised by two employees of the Yolo County Assessor’s Office, Tamie Levish and Deveron Ford, the latter of whom has since retired.

Bob Milbrodt, a commercial appraiser in the Roseville office of Colliers International, reviewed several appraisals of Sacramento County employee-owned property at the request of The Bee. Milbrodt has worked as a commercial appraiser for more than 10 years and previously was employed by the Yolo County Assessor’s Office for 15 years.

“They’re sloppy at best and outright favors at worst,” he said. Milbrodt believes the Yolo appraisers failed to take routine steps to support the values put on the tax rolls.

Milbrodt stopped working for the Yolo County Assessor’s Office after a well-publicized whistleblower incident in which he alleged his colleagues were undervaluing properties. He said he resigned before the county could fire him, though county spokeswoman Beth Gabor said he was terminated for insubordination.

Milbrodt reviewed the appraisal records signed by Levish and Ford and said they are incomplete. He said appraisers should use at least two of three methods to accurately determine property value: the cost method, which combines an appraisal of the land with the cost of constructing the building; the income approach based on what comparable properties would bring in rent; and the sales method, based on recent sales of comparable property.

Yolo County Chief Deputy Assessor George Galang said the sales method is the “preferred method” in state law and the one his office uses for residential property reductions. His office uses multiple valuation methods when appraising commercial property.

Milbrodt countered that “giving reliance to one approach is no rationale for doing only one approach. That leaves no cross check and no reconciliation ... where the appraiser explains why reliance was given to a particular approach.”

Levish and Ford used the sales method on Kelleher’s condo and other properties owned by Sacramento County employees. Milbrodt said at least some of the sales appear to be distressed, meaning they were the result of foreclosure or pending foreclosure, and should not have been used because they don’t reflect the true state of the market.

“Their numbers don’t reflect analysis,” Milbrodt said. “They reflect perhaps educated guesses.”

Levish agreed that distressed sales should not be used but said there was no way to identify such transactions in the data Sacramento County provided. She said she and Ford accessed the sales data at the Sacramento County Assessor’s Office, where they always performed their reviews.

Levish and Ford used the same approach to value a Natomas home owned by former Assistant Assessor John Solie. Most of the homes on the block were built the same year, 2009, with the remaining few built a few years earlier. From 2010 until 2012, Solie’s assessed value was reduced by a third, the biggest decrease for the original owners on the block, and nearly three times the average reduction for those homes.

Milbrodt said the Solie appraisal suffered from flaws similar to the Kelleher appraisal.

But Solie said his appraisal is more accurate than his neighbors’ appraisals because his was done by people and his neighbors were reviewed by a computer-appraisal system. People can more accurately determine the nuances of property appraisal than a computer, he said.

Galang agreed. “When you have the properties reviewed by human beings, looking at comparisons, you can get precision. A computer may be including comparisons that a person would not,” he said.

Some Sacramento County Assessor’s Office employees fared better than neighbors under computer appraisals, which take into account property characteristics and the neighborhood real estate market.

William Silva, until recently a manager in the Assessor’s Office, received a 15 percent reduction on the value of a Sacramento home he co-owned between 2008 and 2012. Two other homes of similar size and age on the block received increases of 5 percent during the same time, while a third comparable home received a 2 percent reduction. Other nearby homes were not comparable because they had longtime owners and much lower values.

Chance plays a role in the values assigned by a computer, Silva said. A computer will inevitably value some homes too high and some too low.

“It’s kind of hit or miss – some people get deals. Others don’t,” he said. “If you work in an assessor’s office, you’re not going to complain about a value spit out by a computer.”