COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Counsel

DATE:

August 17, 2007

BOARD MEETING DATE:

September 11, 2007

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

County Counsel

SUBJECT:

Claim for Refund by Korean Central Presbyterian Church of San Francisco for the Property at 50 Northridge Drive, Daly City (APN 008-191-630), for Tax Years 1999, 2001, 2002, and 2003

RECOMMENDATION:

Deny the claim for refund.

VISION ALIGNMENT:

The recommended action furthers the following commitment and goal:

Commitment Nine: Responsive, Effective, and Collaborative Government.

Goal 20: Government decisions based on careful consideration of future impact, rather than temporary relief or immediate gain.

BACKGROUND:

The Korean Central Presbyterian Church (the “Church”) purchased the property at 50 Northridge Drive, Daly City (the “Church Property”) in 1990, and was granted the religious exemption pursuant to Revenue and Taxation Code section 214 et seq. The exemption process requires a year by year review by the Assessor to confirm that the property continues to be used for exempt purposes.

The 1998 winter landslides destroyed city-owned property adjacent to the Church Property. In order to repair the damage, the City of Daly City entered into an agreement with the Church pursuant to which the Church vacated the Church Property and the City was granted a license for the demolition of the Church building and removal of dirt. The consideration paid to the Church by the City included a payment of $1,520,000, as well as title to a 2000 square foot parcel of property immediately adjacent to the Church Property.

In September 2002, the first permit in connection with the construction of a new Church building was issued and parking lot grading work began. Construction was halted during the winter of 2002 when another slide affected the area. Repairs were made and the building permit for construction of the new church was issued in January 2003.

The Assessor removed the property tax exemption beginning with the 1999 tax year. The exemption was reinstated for the 2003 tax year. The exemption was erroneously allowed in 2000, but the time period for correcting that error has now expired.

DISCUSSION:

The Church has submitted a claim for refund of the $64,059.42 it has paid in taxes and penalties for tax years 1999, 2001, 2002 and 2003.

When the Church granted a construction license to the City of Daly City the Church Property ceased to be used for exempt purposes. An exemption cannot be granted under the applicable sections of the Revenue and Taxation Code when the construction of the new church has not commenced as of the January 1 lien date. The mere intent to commence construction at a later date is not qualifying. The Church Property was not eligible for the Church, Religious or Welfare exemptions for tax years 1999, 2000, 2001 or 2002.

Further, the claimed refund amounts include special assessments that are due and payable even if the Church Property were exempt. For 2003, the exemption was allowed and the refund claim amount represents only special assessments and the penalties and fees associated therewith.

We recommend that the claim for refund be denied in its entirety.

FISCAL IMPACT:

There is no fiscal impact if the claim is denied.