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Consent-General Government # 14.
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| Board of Supervisors |
County Counsel |
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| Subject |
| Approve settlement with Conaway Preservation Group, LLC regarding tax refund action and authorize the County Counsel’s Office and the Department of Financial Services to take all steps necessary to effectuate the settlement. (General fund impact approx. $30,000 per year) (Pogledich/May) |
| Recommended Action |
| Approve settlement with Conaway Preservation Group, LLC regarding tax refund action and authorize the County Counsel’s Office and the Department of Financial Services to take all steps necessary to effectuate the settlement. |
| Strategic Plan Goal(s) |
| Operational Excellence |
| Reason for Recommended Action/Background |
Conaway Preservation Group, LLC (“Conaway”) owns Conaway Ranch, a 17,000-acre agricultural property in eastern Yolo County. In 2010, Conaway’s then-owners sold their ownership in the company to new investors at an equivalent value of $85 million. That change in ownership triggered a reassessment of the company's real property under Proposition 13. The Assessor assessed the value of the real property owned by Conaway at a value of $133 million. The Assessor's valuation was higher than the $85 million value that Conaway's new owners paid for their ownership interest in the company itself because the Assessor focuses on the value of the real property, not the corporate entity. Conaway appealed the Assessor's assessment to the Yolo County Assessment Appeals Board ("AAB"), which affirmed the valuation.
Conaway filed a tax refund action with the Yolo County Superior Court, challenging the AAB’s decision. After a three-day bench trial, the Court found that the AAB applied an incorrect methodology in appraising the property, and remanded the matter to the AAB for further proceedings. The County appealed the Court’s judgment to the Court of Appeal, where the case is currently pending.
Conaway and the County have been engaged in extensive settlement negotiations, which has resulted in the attached settlement proposal (Attachment A). Under the settlement agreement, the valuation of Conaway’s property would be reduced from $133 million to $109 million. Staff and the Assessor agree that this figure represents a fair assessment of Conaway’s property and treats Conaway in line with other taxpayers.
The settlement would eliminate the risk of a much lower assessment if Conaway prevailed in its tax refund action, and avoids years of further litigation and associated costs that would have been needed to bring the tax refund matter to a final judgment. The settlement would result in a refund of approximately $95,000 per year for the six years covered by the settlement, plus statutory interest, and future annual tax savings to Conaway. The County’s share of the affected taxes is approximately 30%. Conaway has agreed that any refund can first be applied to the next annual property tax statement, with the remainder paid within 30 days of execution of the agreement. |
| Collaborations (including Board advisory groups and external partner agencies) |
| The County Counsel's Office, the Assessor's Office, and Department of Financial Services collaborated on finalizing the settlement and resulting financial calculations. |
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| Fiscal Impact |
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| Source of Funds for this Expenditure |
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Explanation (Expenditure and/or Revenue) |
| Further explanation as needed: |
| The execution of this agreement will reduce future general fund property tax receipts by approximately $30,000 annually. |
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