At least a dozen commercial properties in San Francisco are under investigation for failing to report changes in ownership, a violation of state law that could lead The City to more than $1 million in additional tax revenue, according to Assessor-Recorder Phil Ting.
The properties are owned by big banks that went through mergers in recent years as the result of the financial meltdown. State law mandates that owners of commercial and residential properties must inform the assessor-recorder of an ownership change and pay a transfer tax.
A change in ownership would lead to a reassessment of the property. If the reassessment reveals an increase in value — which Ting said is likely for the bank properties — that would lead to more tax revenue for The City.
City officials hope to complete their investigation of the banks within four weeks, Ting said. A further examination “could generate millions more” for The City’s ailing coffers, he said.
San Francisco is trying to close a $483 million budget gap.
Among the banks being investigated are JP Morgan Chase & Co., which acquired Washington Mutual; Bank of America Corp., which acquired Merrill Lynch; and Wells Fargo & Co., which acquired Wachovia, Ting said.
The City has asked the banks to come forward with information regarding their post-merger properties in San Francisco, he said.
“You can drive around town and you can see certain banks that changed their signs,” Ting said.
Some bank officials said they haven’t broken any rules.
In a statement to The Examiner, Bank of America said it has complied with local tax laws linked to its acquisition of Merrill Lynch last year.
“Merrill Lynch did not own or lease any properties that required new reporting to local assessment authorities,” the bank said.
Ting said the banks have large legal teams that know how to work around the law to avoid property reassessments and fees.
Ting said Proposition 13, the 1978 constitutional amendment, set property tax assessments generally to whenever the property changes ownership, though it offers a gray area for corporations and little gray area for homeowners.
Banks can own properties “in any way shape or form” and under multiple names, he said.
Ting vowed to investigate all bank properties subject to reassessment as a result of their change in ownership, saying “the burden of proof is on them.”
Mayor Gavin Newsom pledged support for the investigation.
“Taxpayers already bailed many of these banks out once before, but they’re not going to get a free ride in San Francisco,” he said.
1978 Year enacted
2.67% Average tax rate before enacted
1.2% Average tax rate after enacted
8-1 1992 vote by U.S. Supreme Court to uphold in Nordlinger v. Hahn
40.4% Total property tax paid by homeowners to The City
59.6% Total property tax paid by non-residential owners to The City
Source: California Taxpayers’ Association