Local Property Values May Plunge $1.3 Billion : Assessment: Owners of 42,000 properties have filed tax relief forms as a result of damage from the Northridge earthquake.

Los Angeles County officials estimate damage from the Northridge earthquake may slice $1.3 billion from local property values, most of it in the San Fernando Valley, and enough to threaten the first countywide assessed value decline in 20 years.

That also translates into an expected $17-million drop in property tax revenues in the coming year for the county and local governments.

Already, county officials have received tax relief filings for about 42,000 quake-damaged parcels and expect to get another 6,000 by the July 17 deadline. Scores of storage boxes packed with the green-colored sheets have been piling up in the assessor’s downtown Los Angeles office awaiting processing.

The likely decline in assessed values is good news for property owners with earthquake damage, since many will pay somewhat less in property taxes.

But the task of processing and recording the tax changes for the tens of thousands of properties damaged in the January earthquake is further straining an already overburdened county tax assessment system, officials said.

“This is a time like no one in this department has ever seen before,” said county Assessor Kenneth P. Hahn, citing the combined effects of the recession and the earthquake to drive down property values. “It’s a new time for all of us.”

About half of those filing don’t have to pay their property taxes--originally due in April--until they get new assessments. To clear the backlog, Hahn recently rehired about 40 retired assessor employees. He hopes to get those quake-reduction claims processed by September.

County officials hope federal disaster relief funds will reimburse most of the expected $2-million cost of hiring temporary employees. But the hiring still is ironic because it comes at a time when the assessor’s office is facing a $21-million county budget cut that would eliminate 419 jobs, one-fourth of its regular staff.

The overall estimated $1.3-billion reduction in property values stems from a state law that allows owners of disaster-damaged property to seek temporary tax relief. Owners of a record 48,000 parcels are expected to file, with devaluations averaging $28,000 apiece. That equals an average tax savings per property of about $350 a year.

Generally, owners pay property taxes of about 1.25% of the assessed value of their homes or other properties. The 1% portion goes to the county and then is distributed to various government entities. The remainder, which varies by area, pays off voter-approved debt.

The county plans to give owners who bought during the past couple of years a reduction in property valuation that would roughly match every dollar spent on repairs. But an owner of a house purchased 15 years ago, for example, would get a valuation reduction equal to only about half of the quake repair bill.

People often mistakenly believe reductions in assessed value translate into an equal amount of tax savings, even though the tax rate is only about 1.25%. “Don’t anticipate getting a large enough tax refund to pay for the repairs,” cautioned John Crowner, who heads the assessor’s appraisal section.

A sampling of the filings showed about 61% are from the San Fernando Valley and 17% are from the Santa Clarita Valley, officials said. Originally, county officials had figured they might receive 200,000 earthquake relief filings with a much larger valuation and tax loss.

Based on lowered assessments from the earthquake filings, and even more from the recession and the steady decline in most property values, Hahn expects that the total value of taxable property in Los Angeles County will suffer a year-to-year decline in 1994-95 for only the second time since World War II.

Even through past economic downturns, except for 1973-74, the total assessed value of property in the county always rose from year to year. The annual change reflects new construction, property sales, tax adjustments and inflationary increases.

For the coming year, Hahn is forecasting a tiny decline, about $240 million out of a total $490-billion countywide valuation. The largest reason is billions in recession-induced property value declines, although the expected earthquake losses also helped contribute.

Hahn said the county could have received more of the so-called misfortune and calamity filings. They are offered to owners who sustained at least $5,000 in disaster damage to taxable property. But he said many people decided the paperwork involved was not worth the financial return.

Another factor is the disaster-related property tax reductions are only temporary, since the valuations will be restored if and when property owners make repairs. The claims are just one part of a complicated web of tax provisions that affect earthquake victims.

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A house with an assessed value of $200,000, minus a $7,000 homeowners exemption, normally would pay about $2,400 a year in property taxes. But the amount of earthquake relief that owners can expect will vary widely depending on whether they purchased in recent years or longer ago.

For owners who filed a claim with the assessor, a house purchased in 1993 that suffered $30,000 in earthquake damage should get a $30,000 reduction in its assessed value, officials said. For the owner, that would mean a tax savings of about $375 a year until repairs are made.

But the same damage to a house bought in 1978 would yield only a $15,000 value reduction and a $187 annual tax savings. The county is using the sliding scale for tax relief because under Proposition 13 recent purchasers have higher assessed values and corresponding tax burdens.

The figures on damage and potential devaluations are only estimates for now based on an early sampling of earthquake relief filings. The assessor’s office, with its new staff on board, is only now beginning to wade into processing the tens of thousands of tax relief requests.

The new workers are being divided among the assessor’s Downtown Los Angeles, Van Nuys and Newhall offices, where they soon will begin telephoning owners who filed requests, seeking to verify damage information and sometimes obtain documentation.

The task is an unprecedented one in the county, officials said, surpassing tax changes made after the 1971 Sylmar earthquake, the Los Angeles riots and other disasters over the years. The assessor’s office hopes to complete the bulk of the changes before tax bills are mailed this fall.

In other wrinkles, about 21,000 owners with earthquake damage who met a separate April 10 deadline to defer their spring tax payment will not have to pay until they get a revised assessment. Other owners who have sought relief, but must prepay taxes through impound accounts, can expect refunds this fall.

Then there is another level of tax relief. Under Proposition 8, passed by state voters in 1978, owners who believe their property is being assessed by the county at a higher amount than its market value can seek to reduce their assessed value and corresponding property tax burden.

Those decline-in-value petitions have accounted for most of the increase in filings to the county assessment appeals boards, which hit a record nearly 58,000 parcels in the current fiscal year, five times the historic average. That case backlog now is about 65,000 parcels.

Although they had no firm count, county officials said they expect many earthquake damage victims may also seek future decline-in-value reductions. This year, those and other appeals boards cases accounted for an estimated $11.6 billion in valuation declines countywide.