C. Slow-turning classes of property.

In many jurisdictions it takes a sale to trigger reassessment, which may therefore be avoided by sitting on lands quietly and avoiding attention. I know a Vermont farmer who will not sell the smallest corner of his now-exurban dairy farm for fear it might trigger a review of the whole, but that is small potatoes next to the steel corporation around Birmingham, timber companies around Seattle, estates in Orange County, and so on. The effects are not as extreme as the dead hand grip of old English entails, but tending the same way.

I have already noted what differential turnover rates do to median home assessments. Proposition 13 has further refined and legalized this now by providing that no upward reassessment (other than a nominal annual factor) can occur without a sale. If this seems to worsen the original problem don't blame me, I am only a camera at The Cabaret. It also ironically reverses the old doctrine of the innocent purchaser whose chastity was supposed to sanctify all unearned increments. Now it is the ancient possessor, the least innocent purchaser, who is best protected from taxation. O tempora! O mores! But for technicians using assessment data the lesson is clear: restrict your data sources to the recent sales, then extrapolate from them yourself, the assessor isn't doing it for you.

Turnover alone may not generate the right information, either, where parcels traditionally are held in oversized units that resist subdivision. A reverse twist occurred recently when the 80,000 acre Irvine Ranch of Orange County, California changed hands. The county assessor appraised the land at about three times the sales price, using comparable sales and highest use. The new owners won a court case requiring him to use the new sales price instead.

They relied in part on the peculiar language of our own Proposition 13. But this case is a cater-cousin of the Oregon practice cited earlier of underassessing large timber holdings on the assumption that they will be sold out slower, an assumption tailored to the needs of those who are holding out against negative plottage. In the Irvine case the tradition is never to sell, only to lease. In Hawaii, of course, that tradition is statewide, presumably with parallel effects.

A growing and vexing problem is that of corporate landholdings. Corporations are our largest landholders. Ownership turnover occurs mainly through shares of stock; seldom by direct sale of specific assets. When assets do move it is often in large, complex bundles. This kind of ownership as it grows keeps reducing the reservoir of comparable sales on which to base valuations. Some California assessors under Proposition 13 are claiming that real estate has been sold (and may therefore be reassessed) when some arbitrary percentage of the shares are sold. I wish them all success. The successful assessor must be resourceful and bold! (By 2008 it is evident that the bold assessors lost. Corporate stock sales do not trigger reassessments.)

D. Different assessment methods.

It is time for assessors to stifle the refrain that they can use three methods of assessment on one roll at one time and reconcile the results. The plain fact is that comparable sales and capitalized income and historical cost, when applied to different properties, do not provide fair assessments as between the properties. Pick one method for all, and the only justifiable method is comparable sales. If some class of property doesn't generate many comparable sales, that is a good sign that assessments are too low, but meantime do the best you can with what you have and spare us the old saws that seek to square the circle. If you have to fight in court, do it. But stop underassessing industrial and commercial property on the pretext that you must use capitalized income in a time of inflation.

E. Preferential assessment.

A lot of assessment bias is now legislated, of course, and assessors are innocent victims along with us all. We know about the institutionalized underassessment of farmland. In Spiro Agnew's Maryland this was supposed to save farms in suburban areas, although a relative in Potomac has removed his four steers, dropped from The Hunt Club, subdivided his 110 acres and retired, while Montgomery County is turning to TDRs (Transferable Development Rights) for salvation. In California, the homologous Williamson Act has been applied less in suburban areas than almost everywhere else. But no matter, the point here is that vast farming areas are underassessed by legislative mandate in more than half the states, so there is little reason to believe that farm assessments now yield any accurate index to farm values.

Fewer people know about preferential assessment for timberland. Second growth timber in California has long been exempt from property taxation, which may be a good thing unless you believe in uniformity, but the timber landholders had another problem. It seems that the land under the trees was valued for homesites and recreation, which was pushing up values and assessments. The late Don Hagman, beloved Professor of Law at UCLA, played Paul Revere on this but in vain as the legislature quietly slipped through its "TPZ" Act which, as Hagman kept warning, affects more acreage in California than the Williamson Act.

The moving force was our largest timber holder, Southern Pacific, a fact not sequestered but bragged on in the standard literature of business administration, where it is treated as a good example of creative business problem-solving; and TPZ means simply Timber Preserve Zone, and not anything about Crown Zed. But the land in the zone must be assessed on its capitalized income from timber culture, and nothing else. Now timber culture yields a return once every 50-100 years, depending on the site class, and if you cannot imagine what kind of a capitalized income that yields I will tell you: about zero.

Then there are golf courses. Clubbing smooth ivory balls into holes from a green cloth is a sign of misspent youth, so they say in The Music Man, echoing a popular attitude. On the other hand, clubbing smaller dimpled balls into holes from green grass has redeeming social merit, our legislature believes, so California extends preferential assessment to golf course land. An 18-holer takes some 200 acres. The Los Angeles Country Club straddling Wilshire Boulevard near Century City and Rodeo Drive has a value at give or take $100 per square foot. This double-sized course actually has 36 holes, plus 3 for good measure, making perhaps 450 acres. At 43,560 square feet per acre, I leave the total value to your calculators. But you will find no such calculation on the assessment rolls.

This article is an excerpt from an invited paper presented at the Assessment Workshop cosponsored by USDA-ERS-NRED and the International Association of Assessing Officers, Chicago, IL, June 25-26, 1985. The paper was published in Almy, Richard R., and T.A. Majchrowitz (eds.), Property Tax Assessment (Chicago: U.S. Department of Agriculture, International Association of Assessing Officers, and The Farm Foundation, 1985), pp. 91-109. The whole paper will be published daily in increments over this week and part of next week. This is excerpt 5 of 9.