The Public Eye

Did the Sacramento County assessor and her staff get lower tax bills?

Sacramento County Assessor Kathleen Kelleher resigned Friday citing health reasons.
Sacramento County Assessor Kathleen Kelleher resigned Friday citing health reasons. Bee illustration

Sacramento County has ordered three investigations this year into the office of Assessor Kathleen Kelleher, who resigned Friday and cited health reasons, The Sacramento Bee has learned.

The county hired an outside law firm in January to investigate whether top officials in the Assessor’s Office benefited from lower tax bills, among dozens of other claims. The county also launched two internal probes on May 8 to examine issues that remain undisclosed.

Kelleher, who was first elected to the $168,000 post in 2010, denied all allegations of wrongdoing in an interview with The Bee. She pointed to a state review that found properties owned by her and others in her office were properly appraised.

She faces allegations that a friend on staff lowballed the value of her new pool and that managers in her office received generous appraisals. The Assessor’s Office determines property values in the county for tax collection.

In a Jan. 13 email, county personnel manager Cori Stillson summarized 50 allegations made by employees against Kelleher’s office, including impropriety, harassment, favoritism and management issues. Employees claim they were wrongly passed over for promotions and endured harassment as they pressed forward with complaints of “illegalities and corruption.”

“Some of these things are pretty serious,” said Don Nottoli, chairman of the Sacramento County Board of Supervisors. “We need to be thorough.”

Kelleher, 59, did not describe her health matter, saying it is a personal issue. She left in the middle of her second term, which runs through January 2019.

Supervisors were told that she cited “health issues,” an explanation Supervisor Phil Serna said lacks necessary detail for an elected official leaving 19 months before her term ends.

“I’m very concerned and I want to understand what the hell is going on,” Serna said. “To not fulfill your full term is a big deal.”

Kelleher said that she previously asked the state Board of Equalization to review appraisals of property owned by her and others in her department when she first heard allegations of impropriety. She made that request in December 2015, according to the BOE’s report.

Sacramento County has investigated the department 13 times in the past decade, according to county spokeswoman Kim Nava. Nine investigations closed without finding policy violations and one found a violation that Nava said is confidential.

The three current investigations do not overlap with one another, Nava said. The county hired Sacramento law firm Ellis Buehler Makus in January to investigate the 50 allegations in the Stillson email because the list involves a mix of old and new allegations, Nava said. Firm partner Eli Makus did not respond to a request for comment.

“Bringing in an outside investigator would give the complainants an opportunity to present any new information they had regarding allegations that had already been investigated,” Nava said in an email.

That indicates the county executive wants to ensure “we don’t leave any stone unturned,” Serna said.

The low appraisal allegations are only a piece of the outside investigation, based on the Stillson email. Other claims include whistleblower retaliation, undeserved promotions, sexual harassment and employees taking long lunch breaks.

Seth Jarrett-Lee, a union steward in the Assessor’s Office for United Public Employees, said he has met with an investigator from the Sacramento County District Attorney’s Office. Shelly Orio, the DA’s spokeswoman, would not say whether an investigation is taking place.

Jarrett-Lee said he and other employees in the office are frustrated by what they consider the county’s failure to thoroughly investigate their allegations. He said county investigators did not interview him or other employees who made the claims.

On April 26, Jarrett-Lee and other employees in the office sent an email to a manager in the Assessor’s Office, saying they had reported allegations of “fraud, malfeasance, or wrongdoing” to outside government authorities.

Kelleher announced her retirement to county employees in an email on April 27. The county didn’t notify the public for 12 days, when it issued a press release explaining how supervisors would replace Kelleher. That release did not say why she left.

Assistant Assessor Christina Wynn will run the office until the Board of Supervisors chooses Kelleher’s replacement. The county is accepting applications for the job until the end of next week, and the board will interview qualified candidates in a subsequent meeting.

According to Stillson’s email, employees allege that four pieces of property were undervalued for tax purposes. That includes a pool owned by Kelleher and property owned by two supervisors in her office. The email also refers to a “Mohammad Property” whose connection to the Assessor’s Office was unclear from the document.

Kelleher added a pool and spa that cost $46,000 at the Natomas home she owned in 2013, according to Sacramento building records. The same year, the Assessor’s Office valued the addition at $19,000. That amount was added to the assessed value of her home and was used to determine her property tax bill. She sold the home last year for $496,000.

Kelleher disputes the pool allegation. She said the full cost of a pool cannot be recouped when a home is sold, so her office always sets the assessed value below the construction cost.

She said she implemented a policy when she became assessor in 2011 to have appraisers from other counties conduct assessments for property owned by employees in her office. But Kelleher said her own pool assessment was done by Joanne Knauer, a friend who works in the office. She said the addition did not require an outside appraisal because it was done through a standard formula.

A copy of the Board of Equalization report, provided to The Bee by Kelleher, says she eventually provided the state agency with records for 38 properties. The state report concludes that the pool assessment was “reasonable” but provides no detail about that conclusion.

Board of Equalization spokeswoman Venus Stromberg said such a report would be confidential, and she could neither confirm nor deny the existence of the report provided by Kelleher.

A longtime employee of the Assessor’s Office, who asked not to be identified out of fear of retaliation, said the appraisal of the pool and spa, which represented 41 percent of the construction cost, goes against the office’s general practice of assessing pools at 82 percent of construction cost. If true, the lower estimate would have saved Kelleher nearly $200 a year in property taxes.

Knauer did not return a message seeking comment about her evaluation.

A document that Kelleher provided The Bee mentions the 82 percent of construction cost method, but it also provides a different formula based on the estimated sales price (ESP) of the home. According to a 2013 email thread that Kelleher provided, Knauer calculated the $19,000 pool value based on 7 percent of a $271,043 sales price – nearly $225,000 less than the home sold for three years later.

In the same “Kathy’s pool” email chain, Barbara Boyce, a supervising appraiser, says “the value just seems kind of low but I guess the pool is a little of an over improvement based on the ESP.”

Under state law, additions such as swimming pools are assessed at their market value when they are built and can increase in value up to 2 percent each subsequent year. Market value, though, can differ from the cost of construction.

“If it costs $50,000 to install, it doesn’t mean that someone is going to come in and pay an extra $50,000” for a house with a swimming pool, said Ryan Lundquist of Lundquist Appraisal Company.

Much depends on the neighborhood, Lundquist said. In neighborhoods where pools are common and even expected, a home with a pool adds a lot of market value. By contrast, adding a pool where they are rare may add less value.

Another property under investigation by the outside law firm is a commercial building on Watt Avenue in Antelope previously owned by Chief Appraiser Larry Grose.

Grose co-owned the land, which was vacant until he and his partner added commercial buildings in 2007, giving the property a base-year value of $760,000, according to the Board of Equalization review. The property was sold in May 2008 for $1.7 million, although Grose maintained an ownership interest until 2013.

The property received regular reductions in value and in 2015 was assessed by Sacramento County at $576,000, according to the state review.

Noting that the property had been subject to a state law allowing for recessionary reductions in property value, the Board of Equalization found that the assessments were “reasonable.”

Grose said the property sold for more than it was worth because he guaranteed the buyer rental income for a certain period. He said the reductions in values were warranted because the market was tanking.

Also under investigation is an Orangevale lot that was split and developed with a home on one part by William Silva, who until recently worked as a manager in the Assessor’s Office. The development was approved in 2010. It is not clear why the property is under investigation.

Silva said he was not aware of any allegations about the property and nothing improper was done in its assessment. The Board of Equalization found the property was properly assessed.

Phillip Reese contributed to this report.

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