Mayor Garcetti’s “Resilience by Design” plan may expose building owners to property tax assessments for new construction.
Los Angeles Mayor Eric Garcetti recently unveiled his plan to require owners of older buildings to seismically retrofit their properties. The Mayoral Seismic Safety Task Force published retrofitting requirements on Dec. 8 as part of a report called “Resilience by Design.”
The question for taxpayers with regards to this report is whether building improvements mandated by the plan may trigger property reassessments that are required on new construction. Before speculating on how the mayor’s plan will impact their properties, owners should take a close look at the relevant new and existing rules. The question for taxpayers with regards to this report is whether building improvements mandated by the plan may trigger property reassessments that are required on new construction. Before speculating on how the mayor’s plan will impact their properties, owners should take a close look at the relevant new and existing rules.
The Seismic-Retrofitting Plan
Mayor Garcetti’s plan targets two types of properties for earthquake upgrades: soft, first-story buildings and reinforced concrete buildings. The first category consists of wood-frame buildings where the first floor has large openings. These may include tuck-under parking, garage doors and retail display windows.
The second category includes concrete buildings built before the implementation of the 1976 building code. Those structures are at higher risk of collapse because parts of the building, such as the columns and frame connectors, are too brittle and may break in strong shaking. The weight of the concrete in these buildings makes them particularly deadly when they fail.
The Seismic Safety Task Force recommended the passage of ordinances that would require soft, first-story building owners to report if seismic retrofitting is required within one year of the ordinance’s approval, and to complete such retrofits within five years. The proposed ordinance would also require owners of concrete buildings to report whether seismic retrofitting is required within five years, and to complete such retrofits within 25 years. Concrete buildings would have to meet the Basic Safety Objective of the American Society of Civil Engineers (ASCE) Standard 41 or an equivalent standard.
Is Retrofitting Assessable as New Construction?
As a general rule, new construction is assessable for property tax purposes in California. Consequently, the seismic retrofitting required under the plan would constitute assessable “new construction,” thereby raising property tax assessments on the retrofitted properties. However, under a law approved by California voters in 2010, seismic-retrofitting is excluded from property tax assessment.
The 2010 law exempts from property tax assessment “seismic retrofitting improvements and improvements utilizing earthquake hazard mitigation technologies.” In layman’s terms, this refers to reconstructing an existing building to remove falling hazards, such as parapets, cornices and building cladding that pose serious dangers. It also means strengthening an existing building to resist an earthquake and reduce hazards to the life and safety of building occupants exiting the building during an earthquake.
The new law also exempts from taxation new construction performed on an existing building that the local government has identified to be hazardous to life in the event of an earth-quake. Notably, the law excludes entirely new buildings or alterations to existing buildings that are made at the same time as the seismic-retrofitting, such as new plumbing or electrical systems.
Retrofitting Under LA’s Plan Will Likely Be Exempt
The Mayoral Seismic Safety Task Force did not take into consideration the possibility that seismic-retrofitting work performed under the task force’s proposed ordinances would be assessable as new construction, and therefore subject property owners to increased property tax assessments. The Task Force could have done so by incorporating the seismic retrofitting construction standards specified in the law approved by voters in 2010.
Nevertheless, some fairly broad language in the property tax exemption statute will likely permit the property tax exemption for seismic retrofitting to be extended to construction work that building owners perform in compliance with Mayor Garcetti’s proposed plan. It is also possible the city will amend the ordinances proposed by the Seismic Safety Task Force to incorporate the seismic safety standards referenced in the 2010 property tax exemption law.
Claiming the Seismic-Retrofitting Exemption
Although seismic-retrofitting work is generally exempted from property taxation, such exemption is not automatic. The 2010 law requires owners of properties who have carried out seismic retrofitting to submit a claim form to their county assessor to receive the property tax exemption.
The owner must submit the form prior to or within 30 days of completion of the seismic-retrofitting work. They must submit documents supporting the claim no later than six months after completing the seismic-retrofitting project. The property owner, his contractor, architect, or civil or structural engineer may complete the claim form and provide the supporting documentation.
Once the taxpayer has submitted the claim form and supporting documents, the city’s building department must identify the portions of the project that were seismic-retrofitting components. That will determine whether the property is exempt from a new assessment, or has undergone new construction unrelated to the seismic retrofit that will trigger a new assessment.