Riverside County’s annual “fee” on owners of timeshare estates, ostensibly to cover the assessor’s costs of conducting a separate assessment of the value of the owner’s estate for property tax purposes, is actually an illegal tax, the Fourth District Court of Appeal ruled June 24 in a published opinion (James Scott v. County of Riverside).
Timeshare estates give their owners the right to use accommodations at a property for a period of less than a full year during any given year. A timeshare estate is a separate interest in real property for tax purposes, and upon a written request and provision of specified information to the assessor, each timeshare estate in a project must be separately assessed and billed. The assessor determines the value of the entire project and then allocates a portion to each timeshare estate.
While the county may charge a fee “for the initial and the ongoing costs, not to exceed the actual cost, of the separate assessment and billing, and mailings, with respect to a time-share project,” the Court of Appeal found that the county’s $23 “fee” is based on flawed methodology and doesn’t meet the legal test.
The county set the fee amount by starting with the assessor’s budget for the 2016-17 fiscal year ($24,093,533), subtracting grant funds in that year for locating and adding properties to the assessment roll ($2,592,240), dividing the difference ($21,501,293) by the total number of property assessments in that year (919,810), and rounding the quotient ($23.38) down to $23.
The assessor chose this method premised on a determination that “when timeshare estates opt to be treated as separately taxed parcels, each estate is asking to be treated like every other assessed property in Riverside County and should be held responsible for an equal share of the costs of all assessment-related activities.”
Several owners of timeshare estates sued, arguing that the cost of performing a separate assessment for a timeshare estate is less than the amount of the “fee,” and thus the charge is a tax that must be, but has not been, approved by the voters under article XIII C of the California Constitution.
The trial court sided with the county, but the Court of Appeal reversed that decision.
“[W]e conclude the County did not sustain its burden to prove the $23 it charges for a separate timeshare assessment is not a tax that requires voter approval,” the court wrote. “It introduced no evidence of the ‘actual cost’ of a ‘separate assessment,’ … i.e., ‘the real expenditures incurred’ in doing the extra work beyond that of valuing a timeshare project as a whole that is needed to apportion the value among all timeshare estates …. The County instead averaged the total cost of running the assessor’s office for the 2016-2017 fiscal year (less certain grant funds) over all taxed properties, and arbitrarily assigned that average as the cost of a separate timeshare assessment. A fee that is based largely on the costs of services not provided exclusively to the payor (here, running the assessor’s office) or that exceeds the reasonable cost of the service that is exclusively provided (here, doing a separate timeshare assessment) is not excepted from the definition of a tax and must be approved by the voters.”
The court remanded the case to the trial court for a determination of remedies, and urged the parties to pursue a course they had suggested during the appeal – to try to resolve the amount of the refund informally, and proceed to a second phase of the trial if they are not able to do so.