By Matthew Hirsch

Each year when the San Francisco Assessor-Recorder's Office sends out its tax bills, the city's largest property owners routinely ask for some portion of their money back, claiming there was an oversight in the assessment. The San Francisco Giants, for example, is asking for a tax reduction, saying its waterfront stadium, one of the nicest venues in all of sports, lost about $100 million in value since opening in 2001, as reported in the San Francisco Chronicle.

Mirant Corp., the Atlanta-based energy company that owns the Potrero power plant, claims its property has lost value as well. Mirant says its power-generating facility and bayside property, which had an assessed value of $210 million in 1999, are now worth about $40 million.

Mirant's claim might seem like just another greedy attempt at scamming the city, only in this case the state Board of Equalization seems to be backing the company's claims. The board, which assumed responsibility for assessing power plants in 2003 as part of the lingering fallout from the California energy crisis, decided the Potrero plant was worth $49 million in 2003 and $43 million last year.

Ironically, the switch to state oversight of assessments – which could cost San Francisco millions of dollars in tax revenue – was enacted by legislation sponsored by then-state assembly member Carole Migden, who went on to chair the BOE before moving to the California senate this year. Her spokesperson Eric Potashner defended the change, saying the state assessments would generate more tax revenue over the long haul.

The Mirant case demonstrates how California cities like San Francisco continue to suffer from the reactionary decisions elected officials made in response to the energy crisis – a crisis largely created by a cabal of out-of-state power companies, including Mirant, which profited mightily from deregulation and later sought bankruptcy protection in the face of state efforts to recover ill-gotten gains from the gaming of the California energy market. Mirant has reportedly agreed to pay California $750 million to settle claims that it manipulated prices.

Migden and the lawmakers who backed her bill expected to generate higher tax revenues for cities by giving control of power plant assessments to the BOE – which would seem to have more resources than cities do to fight unfair claims for reduced assessments – but so far state assessments have proven a much better deal for merchant generators such as Mirant.

Mirant is using the state ruling in appealing San Francisco's property assessments from 1998 through 2002. If its appeal is successful, the company could win back as much as $8.5 million in tax revenues.

"It put San Francisco at a disadvantage," Assessor Mabel Teng told the Bay Guardian when asked about the state assessments. "We have noticed as a trend any time assessments go to the state, they have decreased in value."

Since Teng wasn't the assessor five years ago when San Francisco did its last baseline evaluation of the Potrero plant, she's asking an outside consultant to come up with a detailed appraisal of the facility. But she's already confident the value will exceed the state assessment.

"We felt the land alone was worth more than $43 million," Teng said. "How could the whole plant be worth only that much?"

Betty Yee, the city's representative on the BOE, told us that each year the board has to determine a fair market value for the power plant, and because the California energy market has performed so poorly, Mirant's assessments were lowered.

But the state assessments shouldn't affect the San Francisco appeals, said Yee, who was appointed in December to succeed Migden. Before 2003, county assessors were allowed to appraise power plants using a cost approach, which doesn't include potential income the plant operator expects to generate.

"We don't believe it should have any impact, because the board is required to evaluate the fair market value each year, and the county assessors are not," Yee said. Before voting on the Mirant assessment, Yee added, she made sure it wouldn't add weight to the San Francisco appeals.

In fact, the San Francisco assessments should have been higher, because market conditions were more favorable for Mirant before 2003, Yee said. Energy prices were higher, and the government hadn't yet imposed price caps limiting what energy companies could charge for electricity. Meanwhile, there was little threat of competition, and the state's energy conservation plan wasn't in place.

This won't prevent Mirant from trying to use the state assessments to influence the San Francisco appeals, though. Last month at an Assessment Appeals Board prehearing conference, Mirant representative Randy Burns said he thought the valuation methods the BOE used were "fairly accurate."

"We're sharing some of that [information] with the Assessor's Office," Burns said, "and we're asking them to consider using the methodologies established by the state rather than starting from scratch."

The next Assessment Appeals Board prehearing conference on Mirant is Feb. 4, 10 a.m., City Hall, 1 Dr. Carlton B. Goodlett Pl., S.F. (415) 554-6778, www.sfgov.org/site/assessment_index.asp.

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