Sign Language 

When is a $2.5 million billboard worth a paltry $120,000? Why, when the owners' tax lawyers are talking, of course.

In May, Clear Channel Outdoor, one of the three largest billboard companies in the country, with $640 million in ad revenues during the last quarter alone, successfully won what amounted to about a $20,000 refund from Contra Costa County's assessor for overtaxing its billboards. Yep, $20,000 -- chump change for a subsidiary of the supercalifragilistic media conglomerate, which controls whether the public can obtain its daily recommended allowance of crunkness from KMEL.

Why the hell would such a giant company waste its time looking under the tax-man's sofa cushions for extra coin? It's not until you put that $20,000 into the context of an industry campaign to lower its property taxes across the state that you realize all that chump change adds up. Billboard companies have filed tax-assessment appeals from Los Angeles to Shasta County. Clear Channel and Viacom Outdoor and their offspring are pushing to lower the taxable value of their signs by a total of $124 million in Alameda County, which translates into roughly $1.24 million in property taxes. During the past year, Sacramento County has settled twelve billboard appeals covering several years, saving the companies $2.84 million. Most of that was for back taxes Sacramento's assessor claimed was owed after a routine audit, but in at least two of the appeals the billboard giants managed to get their annual tax bills cut almost in half, saving them $116,500 a year in that county alone.

In fairness, though, these companies aren't the only ones looking for tax breaks. Businesses appeal their property taxes all the time. But billboard companies perhaps have less shame than anyone else.

Like other media, the billboard industry has undergone major consolidation in the past decade. Companies have been sold and resold. Gannett Outdoor became Outdoor Systems, which became Infinity, which became Viacom. Three companies -- Clear Channel, Viacom, and Lamar Advertising -- now own 85 percent of all the billboards in the nation. Five years ago, Infinity bought Outdoor Systems for $8.3 billion, which gave billboard billionaire Arte Moreno the money to later buy the Anaheim Angels. Billboards are obviously a huge business. Yet you would never guess that by the comparatively paltry amount outdoor-sign companies pay in property taxes for their signs, even as they demand yet more tax breaks.

But most outrageous, in the eyes of us little people, is the double standard by which the billboard execs operate. On the one hand, they tell tax assessors their signs are wasting away and declining in value. But when a government agency wants to tear down a sign in a condemnation action, which occasionally happens during road widenings, billboard companies demand a small fortune. (The companies also bitterly fight condemnations because it's so hard to put up new signs -- cities all over have passed antibillboard laws. Just two years ago, San Francisco voters passed a moratorium.)

Consider this true story: Last year Caltrans paid Viacom Outdoor $2.5 million -- excluding interest and court costs -- to settle an eminent-domain action in which the transportation agency tore down a billboard at the I-5/805 interchange in San Diego County. And guess how much the property taxes on that same billboard were? Viacom's own expert witness estimated the annual property tax bill was $1,200, a figure gleaned from the steel structure's value -- for tax purposes -- of $120,000.

Can someone please explain how the same billboard can be worth $2.5 million in one instance and only $120,000 in another? Let's try Jeff Wright, an expert on billboard appraisals based in Scottsdale, Arizona. While he wasn't involved in the San Diego case, Wright is aware of the apparent contradictions. "In a way, it's talking out of both sides of their mouth," says Wright, who has represented both billboard companies and government agencies in condemnation proceedings over the past twenty years. "But in another way, it can be argued that the rules for determining value are different. Certain rules apply for valuation in condemnation, but other rules apply in valuation for property taxes. So if you've got two different sets of rules, you can come up with two different values."

Generally speaking, when the government condemns a business it must pay the owner a fair market price, which, in the case of billboards, means factoring in how much income it generates. The aforementioned two-sided billboard in San Diego grossed as much as $43,000 in ad revenue a month for Viacom -- $25,000 for one side, $18,000 for the other -- which is why Caltrans had to pay through the nose for it.

Yet, when it comes to taxing billboards, the simple real-estate axiom -- location, location, location -- doesn't apply. To most assessors, a billboard on a ghetto boulevard is worth the same as a comparably built sign next to the Bay Bridge. Why? Because location is considered a land value. And guess what? Billboard companies rarely own the land on which their signs stand -- they typically lease the space. The only thing most assessors appraise is the value of the billboard structure itself.

Not every assessor thinks it's a fair system that taxes a champagne product at Kool-Aid rates. Last year Bill Donegan, the tax appraiser in Orange County, Florida, called the billboard companies' bluff and jacked up their property taxes based, in part, on the lofty amounts they claimed their signs were worth in condemnation cases. Pulling a Donegan would be tough in California because of Prop. 13. Still, a handful of assessors, including Sacramento's, have tried in the recent past to tax billboards at a higher rate that better reflected the big bucks the signs generate. Feeder says "tried" because the industry predictably revolted against assessors using this so-called income appraisal method. Billboard lobbyists successfully pressured the state Board of Equalization two years ago to draw up guidelines recommending that -- surprise, surprise -- assessors not factor in advertising income when calculating a billboard's taxable value.

As the scores of assessment appeals pending around the state suggest, the billboard companies still aren't satisfied. A major point of contention is the economic life of a billboard -- a shorter one allows owners to write off their costs more quickly on tax returns. For instance, Los Angeles County imposes a fifty-year life on billboards, since they are usually made of steel and are well maintained. Billboard owners think that's way too long. A rep for a Clear Channel company argued in a January appeal in CoCo County that twenty years was a good number, one comparable to another outdoor fixture: a flagpole.

In any event, the companies are now paying for a so-called "lifing study" they hope will prove their point about their depreciating, wasting assets. Assessors in Alameda and Los Angeles counties have agreed to delay any decision on pending appeals until the companies complete their study. The assessors don't have to heed its findings, but, well, they've agreed to take a look.

And hey, if that doesn't pan out, the billboard moguls can start flying their clients' ads on huge flagpoles.

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