Assessor seeks liens on two downtown parcels after audit; property owners raise valuation and timing objections at public hearing

The Board of Supervisors convened as a Committee of the Whole on May 24 to consider objections to the Assessor-Recorder’s report of delinquent real property transfer tax under Business and Tax Regulations Code section 115.1(c) for two downtown parcels: 562 Sutter Street (APN 0284-010) and 550 (transcript: "Magnin") Street (APN 0330-023).

Edward McCaffrey, representing Assessor-Recorder Carmen Chu’s office, told the board that audits found the declared purchase prices understated relative to the real-estate value exclusive of personal property and intangible assets. For 562 Sutter Street (recorded Nov. 14, 2012), the assessor’s valuation identified approximately $444,000 in unpaid transfer tax, penalties and interest after an audit and demand letters. For 550 ("Magnin") Street (recorded Feb. 19, 2015), the assessor reported roughly $5.1 million in delinquent transfer tax, penalties and interest.

Attorneys for the current owners spoke during the public hearing and raised two main objections: (1) valuation — they said the buyer and seller were unrelated, sophisticated parties in the hotel business who allocated part of the transaction value to intangible assets and personal property (going-concern value), and that allocation should be respected; and (2) timing — counsel argued that the assessor’s action came years after the recorded transfers and that a statutory time limit to initiate lien proceedings had passed. Counsel requested time for the parties and the assessor to confer and resolve the dispute.

Deputy City Attorney Moe Jamil advised the board that the city attorney’s office views the delinquency clock as starting from the assessor’s issuance of a delinquency notice after audit completion, and that taxpayers who disagree may pay the tax and pursue administrative or government-code remedies; the "pay first" rule was noted as part of the response.

After the hearing, the board proceeded with the required roll call related to the delinquency report; the clerk recorded a roll-call vote consistent with confirming the hearing and directing the report to the Controller and Tax Collector for collection. The clerk recorded the roll call and the item moved forward with supervisory approval (roll-call details recorded on the record).

Ending: The hearing was held, objections were logged on the record, and the committee directed transmission of the delinquent-report to the Controller and Tax Collector for collection while counsel and assessor’s staff were encouraged to continue resolving valuation disputes. Property owners asked for additional time to meet with the assessor’s office.