But while the banks are getting their due, the Assessor's Office and city taxpayers seem to be getting stiffed.
Lembi has been on the radar of city officials for quite awhile, but he is still managing to avoid getting some of his recently purchased properties reassessed, according to a Guardian investigation of city records. For example, one Lembi-controlled corporation Trophy Properties X snatched up a Russian Hill parking garage for $4.7 million in 2007.
Under Proposition 13, that property should have been reassessed when it was purchased, but it wasn't. The current taxable price tag on the property is still slightly more than $443,000, a gap that costs the city upwards of $50,000 a year in taxes.
In general, property is reassessed at fair market value when there is a change in ownership, increasing the taxes owed on the property. According to the California Board of Equalization, the purchase price is the basis for reassessed value in most cases, although officials can also take into account comparable sales and other factors to increase value even more.
Yet nearly three years later, this property still hasn't been reassessed.
Assessor-Recorder Phil Ting told the Guardian the reason for the delay is because Lembi hasn't been cooperative in providing the information needed to do a reassessment. We obtained an October 2007 letter sent out by the Assessor's Office requesting Lembi's limited liability corporation provide information on the acquisition of the property and statistics on the garage itself. That letter and others went unanswered.
Common sense suggests that the sale price be used to reassess the garage and be done with it. Yet Ting said he fears that using that price would result in an inaccurate reassessment, which in turn might screw up the amount of taxes the city could ultimately collect. Then again, simply waiting on the unresponsive Lembi enterprise has resulted in less taxes being collected on the parking garage last year and again this year, according to public tax records.
"We try to get it right the first time. If we don't get it right the first time, then oftentimes it creates a lengthier appeals process and a much lengthier, more adversarial [relationship] between us and the taxpayer," Ting said. "We absolutely don't want to reassess that property too low because of Prop. 13. You only get one chance, so you have to be high."
Ting told us that the only recourse he has with an uncooperative taxpayer like Lembi is to reassess using information from similar properties in the same area. Once this is done, the negligent taxpayer can either agree with or challenge the new market value, a move that would switch the burden to Lembi. But that wasn't done for the Russian Hill parking garage.
"That's the only recourse we have, meaning that we can't fine them; we can't subpoena them; we can't force them to give us the information," Ting said. "By law, they're supposed to give us the information. But there are no real enforcement powers behind it."
According to Section 480 of the Revenue and Taxation Code, the assessor does have an option and can levy a penalty if a property owner fails to file a change in ownership statement, which can be up to 10 percent of the taxes due on the newly appraised value.
Several other Lembi-controlled properties have been reassessed recently after a delay, including 19,650-square-foot apartment building down the street from the parking garage at 2238 Hyde St. Before the reassessment, the property was valued at a little over $1 million. The current value is $11.7 million, which amounts to a tax bill of more than $137,000 this year.
Lembi bought the building in December 2005, and the Assessor's Office got in just under the wire of the four-year statue of limitations for reassessments.