A lawsuit has been filed against the Rancho Santa Fe Association by a group of members called the Rancho Santa Fe Covenant Residents for Fair Assessments. The complaint filed on Oct. 5 challenges the Association’s “inequitable” method of assessing its members, creating a gap between what is paid by longtime homeowners and those who have recently purchased, built or remodeled a Covenant property.
“The Association has referred the complaint to counsel and will provide further comment to its members when appropriate,” said RSF Association Manager Christy Whalen in a statement.
The RSF Covenant Residents for Fair Assessments includes a group of more than 50 residents whose goal is to address a “fundamental unfairness in the assessment methodology of the Covenant.”
Currently homeowners are assessed at a rate of $100 per the assessed value of the lot as shown on the San Diego County tax assessor’s roll, not on the property’s fair market value. The plaintiffs argue that the “unfair” assessment method is a result of Proposition 13, which was enacted in 1978, more than 50 years after the Protective Covenant came into existence.
Prop 13, the “People’s Initiative to Limit Property Taxation,” decreased property taxes by assessing property values at their 1975 values and restricting annual increases of assessed value to an inflation factor not to exceed 2 percent per year. It also prohibited reassessment of a new base year value except in the case of a change of ownership or completion of new construction.
Per the lawsuit, Prop 13 created a new element in the way the SD County tax accessor calculates its assessments—time of purchase—that could not have been forseen by the framers of the Covenant. According to the lawsuit, the problem has been compounded by the fact that Prop 13 assessment rates can be inherited. A number of Covenant properties also qualify for the Mills Act assessment which reduces the assessed values on properties that are deemed to have cultural significance.
According to the lawsuit, those who purchased, built or remodeled their assessed properties “effectively subsidize” long-time owners, heirs of long-time owners and Mills Act beneficiaries.
“As a result, two equally valuable properties receiving equal services are often paying dramatically different assessments,” according to a RSF Covenant Residents for Fair Assessments spokesperson, noting for example, hundreds of properties within the Covenant pay less than a $1,000 a year in assessments (more than 100 pay less than $500 a year, and some less than $100), while others pay tens of thousands. “The Mills Act and the ability to pass down through inheritance a property's tax basis further exacerbates the situation. This was clearly not the intent of the Covenant.”
Due to the “peculiarities” of the 90 year-old Covenant, the RSF Covenant Residents for Fair Assessments group believes the only way to change the Association’s assessment methodology is through court action.
“There is specific precedent for this type of lawsuit, which was undertaken successfully by residents of Emerald Bay in Orange County,” said the group spokesperson. “We have been in touch with the RSFA board, and our respective lawyers have spoken, and we hope to work with them to correct this unintended and unfair situation.”