TV Cable Firms Get Poor Reception as They Protest Twofold Tax Hike

By BOB SCHWARTZ

Dec. 6, 1989 12 AM PT

TIMES STAFF WRITER

SANTA ANA — Representatives of Orange County’s 11 cable television companies, hit with a more than a 200% increase in property taxes, took their case to the County Board of Supervisors on Tuesday but got little relief.

The companies promised that if the taxes are allowed to stand they would have to pass their higher costs on to subscribers in the form of rate hikes.

John Gibbs, vice president of Continental Cablevision in Tustin, said the county assessor’s “radical change in assessment practices” represented either “discrimination against the cable industry or a wholesale redefinition of business property tax in Orange County.”

Gibbs, speaking for all of the county’s cable companies, said 10 of the 11 companies had received property tax bills this year totaling $6.5 million--compared to $2 million last year. They also were slapped with $4.2 million in back taxes that the assessor’s office had failed to collect in previous years because of alleged undervaluation, Gibbs said.

The 11th company, Dimension Cable, the county’s largest cable concern, has not yet received its property tax bill, which was due last summer. Dimension Cable is owned by Times Mirror Co., parent company of the Los Angeles Times.

“We feel compelled to bring it to your attention,” Gibbs told the supervisors, adding that the companies already have begun the appeals process on the new bills. Those hearings probably will not begin until next spring, Gibbs said.

Continental Cablevision, Gibbs said, plans to increase its subscription rate $2 a month beginning in February to cover its increased property taxes, which shot up from $33,000 to $163,000 this year. Representatives of other companies said they were planning or considering similar rate adjustments.

County supervisors on Tuesday asked County Assessor Bradley L. Jacobs if he could meet with the cable companies to clarify his office’s position in raising the taxes.

Jacobs declined, although he said members of his staff already had outlined the county’s position.

“We ascertain value in Orange County on facts, data and analysis,” Jacobs said. “We don’t do it on personal dealings.”

At issue is what part of a cable TV business is real property and therefore fair game for the assessor in determining the correct value for taxation purposes.

The cable companies maintain that, besides taxing tangible assets, such as cable lines and amplifiers, the assessor should set a value only for the company’s franchise right, using a formula spelled out in a 1988 state law that had the support of the cable industry.

The new tax bills, Gibbs said, go beyond that and reflect the value of the entire cable business, including intangibles such as good will, company name, subscriber lists and employees.

Orange County and other counties in California have taken the position that cable franchises are de facto monopolies and that the fair market value established when they are sold derives almost entirely from the public land they use in providing service. The intangibles, according to this argument, enhance the value of the real property and permit the higher valuation for tax purposes.

“It’s like they (cable companies) have a store in front of every house to sell their service,” said Arnold Fong, a property appraiser with the State Board of Equalization. “If they closed tomorrow, another company could come in and do the same thing. . . . The value is all in the property.”

Fong said that there are other methods of valuing cable company property but that the method Orange County appears to be using is a valid one.

“The state’s position right now is that the assessor, in using this valuation approach, is within his jurisdiction,” Fong said.