Businesses on Gov't Property

Private businesses on public properties, under certain circumstances, are assessed and subject to property taxation. For assessment purposes, these businesses are referred to as Possessory Interests and occurs when there is possession or the right to possession of real estate and fee title is held by a tax exempt public agency.

The definition of a taxable possessory interest under California Law is as follows:

The term "possessory interest" as it is used for property taxation purposes in California includes either the possession or the right to possession of real estate whose fee title is held by a tax exempt public agency.

Examples of possessory interests include, the right to graze livestock on public lands, the possession of public property at an airport such as an airplane hanger or a car rental company counter and service facilities, a booth at a convention center or a concession stand at a fairgrounds.

Regardless of the type of document evidencing the right to possession, a taxable possessory interest exists whenever a private person or persons have the exclusive right to a beneficial use of tax exempt publicly owned real property. The fact that only verbal agreements have been made and that no written document exists does not mean that a taxable possessory interest does not exist.

Too Low to Assess

Where state law allows, the Assessor’s Office has regularly sought out efforts to eliminate property taxes for those businesses where the cost to assess and collect property taxes exceeds the property tax revenue generated.

In 2016 the Assessor’s Office recommended, and the Board of Supervisors passed, an ordinance permitting the Assessor’s office to automatically exclude properties with an assessed value below $10,000, eliminating the ad valorem property taxes for those properties. Fees and other non-ad valorem property taxes will remain on the bill.

As part of a continuous effort to seek out increased efficiencies, the Assessor’s office conducted a formal cost study that demonstrated that the Assessor, Tax Collector and Controller’s total cost to assess and collect diminumus assessments of $10,000 or less, exceeds the $100 in property tax revenue that would have been generated from the assessment.

The Assessor’s Office estimates approximately 1,200 businesses and/or individuals with a full value of $10,000 in assessed value as a result of property they are renting from a government agency will automatically receive property tax relief. Examples of possessory interests that typically have low assessed values include the rental of an airplane hanger at Reid Hillview, a booth at a convention center, or a concession stand at the fairgrounds.

The “too low to value” ordinance that passed in 2016 applied to real properties with $5,000 or less in assessed value, as well as business owners with machinery and equipment and businesses on government property. Combined it was estimated that the annual cost to assess and collect these low value properties was approximately $1,895,000, which is far in excess of the projected property tax revenue of $602,000. Every employee in the assessor’s office uses daily a cost accounting system which enabled the assessor’s office to provide the Board of Supervisors with these estimates. Additionally the assessor’s office will be able to reallocate an estimated 11,000 hours towards more complicated assessments and customer service.


Low Value Ordinance The Assessor introduced the low value/minimum assessment ordinance adopted by the Board of Supervisors which provides property tax relief to thousands of small businesses. The ordinance exempts from taxation all business property where the aggregate assessed value is less than $10,000. The ordinance is aimed at assisting taxpayers in which the cost to assess and process tax collection exceeds the total revenue generated by the tax.
Silicon Valley Business Journal 2016 Santa Clara County tax break will primarily benefit small businesses.