San Francisco’s Property Tax ‘House of Horrors’

Roughly two years ago the San Francisco Examiner reported on a relatively new trend that was on the upswing in the city. People were appealing their property tax assessments.

With record vacancies in San Francisco office buildings and home prices down, the number of property owners appealing to lower their property taxes has skyrocketed to the highest level since at least the Great Recession year of 2009.

The number of appeals challenging city property assessments — the dollar amount a city says a property is worth and the basis for calculating taxes owed — shot up more than two and half times in the recent initial filing period for fiscal 2023-24 compared to all of last year…

The number of appeals received for the filing period ending Sept. 15 ballooned to 7,508, up from 2,873 for the entire 2022-23 fiscal year, according to Alistair Gibson, administrator of the Assessment Appeals Board.

That trend has continued to climb and now the city is in a bit of a bind. There are so many appeals pending with the city that it may not be able to resolve them all before a state mandated deadline. And here’s the catch. If the Assessment Appeals Board doesn’t resolve each appeal in time, it automatically loses and has to accept whatever reduction the taxpayer is asking for.

The number of property value appeals has gone from a trickle to a tidal wave. During the 2019/2020 fiscal year, the Assessment Appeals Board processed 1,417 applications. In the 2024/2025 fiscal year, the number surged to 9,281…

“It’s a house of horrors administratively,” said Peter Fatooh, president of SF Property Tax Appeals and a former member of the appeals board. “The city is dealing with this huge backlog, but individuals are paying the price.”…

 If the agency fails to evaluate an appeal within two years, then it surrenders by default to the taxpayer’s opinion of the property’s value.

Part of the problem is that it’s not just the thousands of appeals to reduce property taxes the city is behind on. The same office is also responsible for dealing with new assessments every time a property sells. In most cases, the property’s assessed value goes up when that happens. But the city has a backlog of 14,000 “assessable events” going back to the pandemic. So if they try to work through things in chronological order, they are going to wind up losing a billion dollars as the appeals to lower taxes extend beyond the two year deadline.

Often, owners put an unrealistically low value (sometimes even $0) for their property as a starting point for negotiations on an assessment appeal. The problem is that if the assessor-recorder’s office doesn’t hit the two-year timeline for addressing the request, it is forced to automatically accept that claim. The city estimates that it will be forced to refund more than $1 billion if it fails to meet its deadlines.

The really bad news is that even if the city manages to beat all of those deadlines by focusing on the requests to lower taxes first, it’s still going to wind up refunding a lot of money. All those empty buildings throughout the city mean the assessed value of property in the city just is not what it used to be.

But even if the agency does process all its appeals within the two-year limit, the amount the city expects to refund is sizable: The controller’s office has projected that San Francisco will need to refund between about $105 million and $189 million annually for six fiscal years, totaling around $817 million.

A loss of $800 million over the next six years is not something the city can really afford right now. In May, Mayor Daniel Lurie came up with a budget that closed an $800 million gap that was expected to open over the next two years.

To do so, Lurie proposed several overhauls to city government, including eliminating more than 1,000 city jobs and scaling back the use of one-time funding sources to make ends meet, according to preliminary budget information released by the Mayor’s Office on Friday.

Of the 1,400 positions Lurie proposes cutting, the vast majority are currently vacant — but about 100 are actively filled, many by temporary employees or people who are expected to retire in the near future, according to the Mayor’s Office.

The city won’t be hiring anytime soon. Meanwhile, San Francisco is still facing a major transit problem. Here’s how a local news outlet reported the problem in September.

Let’s not sugarcoat this. Either Bay Area transit agencies get funding or drastic cuts will be made.

Here’s a scenario not far from the truth presented during a recent rally in support of public transportation.

“Under one of our worst-case scenarios, BART closing at 9 p.m., trains run only once an hour, stations shut down and 1,000 workers lose their jobs,” expressed one of the protesters.

To sum up, tax assessments are down and bordering on a crisis, budgets are being cut and the city’s transit system is on the verge of cutting service in a major way. If that happens, it will feedback on the number of people heading downtown and that in turn could lead to more closed businesses and another year where record numbers of taxpayers demand lower property tax assessments. No one talks about the SF doom loop anymore, but what we’re seeing shows those concerns haven’t gone away.

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