Filed 11/1/18; pub. order 11/30/18 (see end of opn.)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

NEXT CENTURY 

ASSOCIATES, LLC,

 Plaintiff and Appellant,

 v.

COUNTY OF LOS ANGELES,

 Defendant and Respondent.

 B284092

 (Los Angeles

 Super. Ct. No. BC569076)

APPEAL from a judgment of the Superior Court of Los 

Angeles, Robert L. Hess, Judge. Reversed and remanded with 

directions.

Moore & Associates, Kevin J. Moore and Debby S. Doitch 

for Plaintiff and Appellant.

Lamb & Kawakami, Michael K. Slattery, Shane W. Tseng; 

Mary C. Wickham, County Counsel and Richard Girgado, Senior 

Deputy County Counsel for Defendant and Respondent.

_________________________
2

Appellant Next Century Associates, LLC (Next Century)1

seeks a property tax refund for the 2009-2010 tax year. It 

purchased the Century Plaza Hotel, and the real property on 

which it is located, in mid-2008, for $366.5 million. As of January 

1, 2009, the property’s corrected enrolled assessed value, which 

we will refer to as the enrolled value, was $367,612,305. But, 

Next Century contends it was entitled to a reduction in the 

assessed value because the “global economic meltdown” of late 

2008 caused the property’s market value to drop significantly

between the date of purchase and January 1, 2009.

Next Century applied for a reduction in the property’s 

assessed value. The County of Los Angeles Assessment Appeals 

Board No. 4 (the Board) held a hearing on the application, at 

which both Next Century and representatives of the Los Angeles 

County Assessor presented evidence on the value of the property 

using similar discounted cash flow (DCF) analyses.

Both Next Century’s and the Assessor’s DCF analyses 

reflected a decline in value below the enrolled value. The 

Assessor did not attempt to defend the enrolled value of 

$367,612,305, and neither party offered evidence supporting that 

valuation.

Instead, the Assessor’s DCF analysis produced a valuation 

of $349,800,000, about $17.8 million below the enrolled value. 

The Board rejected the Assessor’s DCF analysis, however, 

1 For reasons unknown to us, Next Century was sometimes 

referred to as New Century in the proceedings below.
3

because it contained an admitted error: it overstated the hotel’s 

2006 NOI.

2

Next Century’s DCF analysis produced a valuation of 

$277,800,000, almost $90 million below the enrolled value. Also, 

Next Century asserts that if the Assessor’s analysis were 

corrected for the admitted mistake, it would generally support 

Next Century’s proposed value. While the Assessor does not 

agree, he concedes that correcting the error would not increase 

his valuation.

In any event, the Board also rejected Next Century’s

proposed valuation, stating without further explanation that the 

company’s “income growth rates do not justify a 22% decline in 

value from the 2nd quarter of year 2008 to the lien date3 of 

January 1, 2009, and do not justify a 29% decline in the subject 

property’s NOI from year 2008 to 2013.”

After concluding Next Century had not met its burden of 

proof, the Board denied the application and left in place the 

enrolled value, even though no party thought it correctly reflected 

the property’s value as of the lien date.

Next Century then brought suit for a property tax refund in 

the Superior Court. After reviewing the administrative record, 

2 Net operating income.

3 “ ‘Lien date’ is the time when taxes for any fiscal year 

become a lien on property.” (Rev. & Tax. Code, § 117.) All 

further statutory references are to the Revenue and Taxation

Code unless otherwise noted.
4

and remanding for clarification, the Superior Court entered 

judgment in favor of Respondent County of Los Angeles.

On appeal, Next Century contends the Board was required 

either to accept Next Century’s proposed assessed value, 

calculate its own assessed value, or direct the Assessor to 

recalculate the assessed value.

We conclude that the Board’s rejection of Next Century’s 

valuation, without sufficient explanation, and with knowledge 

that the Assessor’s valuation analysis—if corrected— would 

result in a valuation significantly lower than the enrolled value, 

was arbitrary, as was its decision to leave in place an enrolled 

value that had been repudiated by the Assessor and was 

unsupported by any evidence. We also conclude that the Board’s 

cryptic findings are insufficient to bridge the analytic gap 

between the evidence and the Board’s conclusions. (See Topanga 

Assn. for a Scenic Community v. County of Los Angeles (1974) 11 

Cal.3d 506, 515, 516 (Topanga).) And we conclude the record as a 

whole does not include substantial evidence in support of the 

Board’s order leaving the enrolled value in place.

We therefore reverse with directions to remand the matter 

to the Board for a new hearing and more detailed findings.
5

BACKGROUND

The material facts are undisputed.

A. Purchase and Initial Assessment

Next Century purchased the hotel property for 

$366,500,000.4 The transfer of ownership recorded on June 2, 

2008. Article XIIIA of the California Constitution—adopted by 

the voters as Proposition 13 in 1978—limits the ad valorem tax 

on real property to one percent of the property’s “full cash value.” 

(Cal. Const., art. XIIIA, § 1, subd. (a).) Thus, county assessors 

must “assess all property subject to general property taxation at 

its full value.” (Rev. & Tax Code § 401.) Generally, “full cash 

value” is “the appraised value of real property when purchased, 

newly constructed, or a change of ownership has occurred . . . .” 

(Cal. Const. art. XIIIA, § 2, subd. (a).)

The hotel purchase triggered a reassessment of the 

property. A purchase price in a transaction between unrelated 

parties generally is rebuttably presumed to be the full cash value, 

at least to the extent it is allocated to land and improvements 

subject to property taxation. (§ 110, subd. (b); Cal. Code Regs., 

tit. 18, § 2, subd. (b).) Here, the reassessment resulted in an 

initial enrolled base year value, as later corrected in October 

2010, of $350,000,000.5

4 The $366.5 million purchase price included the land, 

improvements, fixtures, and personal property.

5 The Assessor originally determined that the base year 

value was $331,500,000 for the land and $35,000,000 for 

improvements. The original valuation did not include any 

allocation for furniture, fixtures, and improvements because the 
6

The issue in this case is the assessed value for the 

2009−2010 tax year (July 1, 2009 to June 30, 2010), measured as 

of the January 1, 2009 lien date. The initial enrolled value of the 

property for 2009−2010 was $384,442,305. After amending the 

enrolled base year valuation of the property in October 2010, the 

Assessor revised the 2009−2010 assessed value to $367,612,305.6

This represented the maximum 2 percent annual increase in 

assessed value for land and improvements permitted under 

Proposition 13. (§51(a)(1)(D); see Cal. Const., art. XIIIA, §§ 1, 2.)

No one contends that the $367,612,305 enrolled value was 

incorrectly computed. Rather, Next Century contends that the 

property should be reassessed because it declined in value shortly 

after the purchase.

B. Initial Proceedings Before the Assessment Appeals 

Board

Section 1603 permits a taxpayer to seek a reduction in 

assessed value from the Board based on an asserted decline in 

value. In its verified Application for Changed Assessment filed 

December 1, 2009, Next Century did just that, contending that 

 

Assessor was under the impression that New Century intended to 

demolish the Hotel. The Assessor’s October 2010 revision 

allocated $250,000,000 to land, and $100,000,000 to 

improvements, for a total assessed value of $350,000,000. This 

corrected initial valuation is not in dispute in this litigation.

6 The valuation components were $255,000,000 for land, 

$102,000,000 for improvements, $2,501,540 for fixtures, and 

$8,110,855 for personal property.
7

the value as of January 1, 2009 was only $200,000,000.7 As the 

Superior Court later pointed out, “[t]his represented a decline of 

44% in the total value of the property, a decline of 33.3% in the 

value of the land, and a decline in the value of the improvements 

of 71.6%, from the purchase price in a period of less than seven 

months.”

By the time of the hearing before the Board on July 25, 

2013, Next Century had abandoned its contention that the 

property was worth only $200,000,000 on the lien date. Instead, 

it sought to reduce the enrolled value of $367,612,305 to 

$277,800,000 as of the January 1, 2009 lien date. The Assessor, 

on the other hand, argued the property was worth $349,800,000

on the lien date.

At such a hearing, “[a]n assessor is generally entitled to the 

presumption affecting the burden of proof provided in Evidence 

Code section 664 that he or she has properly performed his or her 

duty to assess all properties fairly and on an equal basis. 

[Citations.] ‘Thus, the taxpayer has the burden of proving the 

property was improperly assessed. [Citations.]’” (Farr, supra, 

187 Cal.App.4th at pp. 682−683.) This is reflected in California

Code of Regulations, title 18, section 321, subdivisions (a)–(b), 

which provide:

7 The $200,000,000 proposed valuation was comprised of 

$170,000,000 for land, $29,000,000 for improvements, and 

$1,000,000 for furniture, fixtures, and equipment. Section 

51(a)(2), which codifies Proposition 8, passed by the voters in 

1978, allows for reductions of assessed value due to “factors 

causing a decline in value.”
8

“(a) Subject to exceptions set by state law, it is presumed 

that the assessor has properly performed his or her duties. The 

effect of this presumption is to impose on the applicant the 

burden of proving that the value on the assessment roll is not 

correct or, where applicable, the property in question has not 

been otherwise correctly assessed. The law requires that the 

applicant present independent evidence relevant to the full value 

of the property or other issue presented by the application.

“(b) If the applicant has presented evidence, and the 

assessor has also presented evidence, then the Board must 

weigh all the evidence to determine whether it has been 

established by a preponderance of the evidence that the 

assessor’s determination is incorrect. The presumption that the 

assessor has properly performed his or her duties is not evidence 

and shall not be considered by the Board in its deliberation.”

After the hearing, the Board issued written findings of fact. 

These findings reflect (and the parties do not dispute) that Next

Century and the Assessor agreed on the physical description of 

the property to be assessed, the financial statements for the years 

1999−2011, that the property should be valued using the DCF 

approach, and agreed on certain valuation factors, such as the 

appropriate capitalization rate, for use in their respective DCF

analyses.

The Board characterized the central dispute as the 

predicted net operating income for the hotel for the five-year 

period following January 1, 2009. Next Century assumed “a nogrowth rate for the subject property’s first two years and an 

inflationary rate for the following years,” while “[t]he Assessor 
9

utilized reasonable RevPAR8 growth estimates” with most years 

not being much higher than the inflationary rate. The Board’s 

findings described various similarities and differences with 

respect to the parties’ DCF analyses.

Next Century noted, and the Assessor conceded, that the 

Assessor made an error in the assumed 2006 NOI (expressed as a 

percentage of gross revenue) used in the Assessor’s DCF analysis. 

As noted above, Next Century contended that if that error were 

corrected, the Assessor’s DCF analysis would support Next 

Century’s proposed value. The Assessor conceded that correcting 

the error would not increase his valuation. The Board, however, 

rejected the Assessor’s proposed valuation because of the 

admitted error.

Ultimately, the Board concluded Next Century’s projected 

income figures did not justify the reassessment value it sought. 

The Board’s key finding appears on the last page of its decision:

“E. The Applicant has the burden of proof pursuant to State 

Board of Equalization Rule 321 [Cal. Code Regs., title 18, § 321], 

and all of [its] evidence and contentions were considered by the 

Board. The Applicant’s income growth rates do not justify a 22% 

decline in value from the 2nd quarter of year 2008 to the lien 

date of January 1, 2009, and do not justify a 29% decline in the 

subject property’s NOI from year 2008 to year 2013.”

For its “Value Conclusion,” the Board stated:

“The Board finds the Applicant did not meet [its] burden of 

proof in refuting the legally presumed correctness of the 

8 Revenue per available room, or RevPAR, requires a 

prediction of occupancy and room rates.
10

Assessor’s enrolled value. Therefore, the Board finds that the 

Application is denied and directs that the $367,612,305 enrolled 

assessment value of the Assessor be sustained.”

C. Initial Proceedings at the Superior Court

As noted above, Next Century then brought suit in the 

Superior Court to obtain a refund of the property taxes it paid.9

After considering the evidence submitted by the parties and 

hearing argument, the trial judge issued his “Order Regarding 

Appeal of Property Tax Valuation.”

In that order, the trial court observed that it “had two 

significant problems in connection with analyzing the issues 

before it. The first is that in their briefs the parties have given 

the court very little in terms of explanation of the supposed 

significance of the numbers they presented to the [Board] or how 

precisely those numbers lead to their respective conclusion. . . .

The second problem is that [Next Century] focuses almost 

entirely on the evidence it contends supports its position. This 

does not comply with the requirement that when asserting there 

is a lack of substantial evidence on a point, all the material 

evidence must be set forth.”

More significantly, the trial court concluded that the 

Board’s key finding, quoted above, communicates three things: 

“First, it constitutes an adverse credibility finding on the 

evidence, particularly the analysis, presented by [Next Century]. 

Second, it expressly rejects [Next Century’s] analysis that the 

9 A refund suit generally may be brought only after first 

seeking relief from the Board. (Sunrise Retirement Villa v. Dear 

(1997) 58 Cal.App.4th 948, 958.)
11

pertinent income history of the Hotel substantiates a 22% decline 

in value from June 2008 to the January 1, 2009 lien date. Third, 

it also expressly rejects the five-year projection of NOI 

(2009−2013) which underlay [Next Century’s] DCF analysis.”

Next Century had complained about the adequacy of the 

Board’s findings, but the Court concluded that the key finding:

“sufficiently sets forth the basis for the rejection of [Next] 

Century’s analysis; it does not need to be a specific exposition of 

all the evidence and analysis.” Moreover, the trial court ruled 

that the Board “was permitted to reject as not credible the claim 

that the value of the Hotel’s land and improvements had 

decreased over 20% in seven months. [Next Century’s] analysis 

and projections were analogous to an expert’s opinion in a trial 

court, which the trier of fact was free to accept or to reject. See

CACI 219.”

The trial court remanded the matter to the Board for 

clarification of one issue, however. As noted above, California

Code of Regulations, title 18, section 321, subdivision (b) provides 

in part: “The presumption that the [A]ssessor has properly 

performed his or her duties is not evidence and shall not be 

considered by the Board in its deliberations.” The court was 

concerned that the Board may have run afoul of this provision by 

relying on the presumption as a basis for upholding the enrolled 

value. It therefore remanded the matter to the Board “to 

reconsider that portion of its decision establishing the enrolled 

assessment value as of January 1, 2009, of $367,612,305. To the 

extent the [Board] rejects the assessor’s value articulated at the 

hearing (as well as [Next Century’s]), it should state why it has 

done so. If the [Board] determines that its prior analysis and 

conclusion were correct, it is requested to amplify on the legal 
12

basis for that determination. If the [Board] determines that some 

different enrolled assessment value should apply, it should 

articulate the reasons supporting the figure it chooses.”

D. Proceedings on Remand Before the Board

On remand, after a hearing, the Board issued its 

Addendum to Findings of Fact. In the Addendum, the Board 

reiterated its conclusions that Next Century had not met its 

burden of proof, and that the Assessor had not presented a 

reliable valuation because of the admitted error. The Board 

stated it therefore left the existing enrolled value in place. The 

Board also stated it did not rely on the presumption that the 

Assessor had properly performed his duties. Rather, it stated it 

left the existing roll value in place because it believed Next 

Century had failed to carry its burden of proof. Moreover, it

asserted it is not its responsibility to correct mistakes made by 

either party or to develop conclusions that are not based upon 

evidence or testimony presented during a hearing. It again 

denied the Application. (The Board did not provide any further 

explanation of why it rejected Next Century’s valuation analysis

or why it affirmed the enrolled value even though the Assessor 

believed it was too high.)

E. Proceedings at the Superior Court Postremand

After the Superior Court received the Addendum to 

Findings of Fact, it issued a written decision indicating it found 

the addendum responsive to its remand order. The court’s order 

states, “The Addendum to Findings of Fact reduces to this: the 

Assessor’s enrolled value for 2009−2010 was not accepted by the 

[Board] because of a presumption of correctness, but rather 

because neither [Next Century] nor the Assessor proved by a 
13

preponderance of the credible evidence that their alternative 

calculation was correct. This is known in civil litigation is a 

failure of proof by the party with the burden of proof. [¶] [T]he 

court is persuaded that substantial evidence supports the 

[Board’s] determination that the roll value for 2009−2010 should 

be $367,612,305.”

DISCUSSION

A. Standard of Review

“ ‘ “ Where a taxpayer challenges the validity of the valuation 

method used by an assessor, the trial court must determine as a 

matter of law ‘whether the challenged method of valuation is 

arbitrary, in excess of discretion, or in violation of the standards 

prescribed by law.’ [Citation.] Our review of such a question is 

de novo. [Citation.]” ’ ” (Time Warner Cable Inc. v. County of Los 

Angeles (2018) 25 Cal.App.5th 457, 463 (Time Warner).) Here, as 

noted above, both Next Century and the Assessor used similar 

DCF analyses, and no one challenges that method of valuation.

It is expressly permitted by regulation. (Cal. Code Regs., title 18, 

§§ 2, subd. (b), 3, subd. (e), 8.)

But where, as here, “ ‘ “ the taxpayer challenges the 

application of a valid valuation method, the trial court must 

review the record presented to the Board to determine whether 

the Board’s findings are supported by substantial evidence but 

may not independently weigh the evidence. [Citations.] This 

court . . . reviews a challenge to application of a valuation method 

under the substantial evidence rule. ” ’ ” (Time Warner, supra, 25 

Cal.App.5th at p. 463.) Other factual determinations by the 

Board also are reviewed under the substantial evidence standard. 
14

(Farr v. County of Nevada (2010) 187 Cal.App.4th 669, 679−680 

(Farr).)

Of course, to the extent our analysis involves interpretation 

of statutes or administrative regulations, or other questions of 

law, our review is de novo. (Robles v. Employment Development

Dept. (2015) 236 Cal.App.4th 530, 546; Farr, supra, 187 

Cal.App.4th at pp. 679−680.) Finally, “[a] board’s ‘arbitrariness, 

abuse of discretion, or failure to follow the standards prescribed 

by the Legislature’ are legal matters subject to judicial correction. 

[Citations].” (Farr, supra, 187 Cal.App.4th at p. 679.)

B. The Board’s Decision to Maintain the Existing Roll Value 

Was Arbitrary and Unsupported by Substantial Evidence.

Next Century purchased its hotel on the eve of an economic 

meltdown the likes of which had not been seen in decades. By 

January 1, 2009, the housing and stock markets had imploded 

and the economy had entered a recession. Business activity, 

including business travel had declined precipitously. When, and 

in what fashion a recovery would come was anyone’s guess.

Against that backdrop, Next Century had the burden of 

proving the reduced value of its hotel as of the January 1, 2009 

lien date.10 No party sought to support the existing enrolled 

value. Next Century provided survey data indicating hotel 

values across the country declined “at a dizzying pace” following 

the dramatic stock market declines of September 2008. The 

Assessor conceded the enrolled value was too high, and sought to 

10 Section 1601.8 states, “[t]he applicant for a reduction in an 

assessment on the local roll shall establish the full value of the 

property by independent evidence.” 
15

prove a value between the roll value and the value asserted by 

Next Century. The parties agreed the hotel’s value had declined, 

but disagreed about by how much. The real question was how 

long, and how severe, the recession would be.

Although the Assessor’s analysis contained an error, if the 

error were corrected, it would not increase the Assessor’s 

valuation conclusion (per the Assessor) and might (per Next 

Century) result in a value consistent with that advocated by Next 

Century. In other words, if anything, the error made the 

Assessor’s proposed valuation too high.

Under these circumstances, it was incumbent on the Board 

to explain in far more detail the deficiencies it perceived in Next 

Century’s analysis so that the parties and the court could 

understand why the Board rejected Next Century’s analysis, and 

its rationale for affirming the discredited enrolled value. Clearly, 

the Board has the power to disregard a valuation analysis it 

determines for good reason is unpersuasive, and to reject expert 

testimony that is speculative, unsupported, or otherwise 

unpersuasive. But it must tell the parties, and reviewing courts, 

why it rejects the evidence in other than conclusory terms. The 

orderly process of judicial review requires that administrative 

agencies must “set forth findings to bridge the analytic gap 

between the raw evidence and ultimate decision or order.” 

(Topanga, supra, 11 Cal.3d at pp. 515, 516; see also, Young v. 

City of Coronado (2017) 10 Cal.App.5th 408, 420−422.) This 

requirement applies with equal force to local Assessment Appeals 

Boards. (Farr, supra, 187 Cal.App.4th at p. 686.)

“Among other functions, [the] findings requirement serves 

to conduce the administrative body to draw legally relevant 

subconclusions supportive of its ultimate decision; the intended 
16

effect is to facilitate orderly analysis and minimize the likelihood 

that the agency will randomly leap from evidence to conclusions. 

[Citations.] In addition, findings enable the reviewing court to

trace and examine the agency’s mode of analysis. [Citations.]

Absent such roadsigns, a reviewing court would be forced into 

unguided and resource-consuming explorations; it would have to 

grope through the record to determine whether some combination 

of credible evidentiary items which supported some line of factual 

and legal conclusions supported the ultimate order or decision of 

the agency.” (Topanga, supra, 11 Cal.3d at p. 515.)

Here, the Board stated that Next Century’s “income growth 

rates” do not justify the decline in value it sought, nor do they 

“justify a 29% decline in the subject property’s NOI from year 

2008 to year 2013.” But the Board did not indicate (1) how it 

reached these conclusions or (2) what value it believes the income 

growth rates do support and why.

In any event, no party put forth evidence that the existing 

roll value remained valid. On the contrary, the parties agreed it 

was too high. Thus, there was no substantial evidence 

supporting the continued validity of that valuation and any 

presumption in favor of the existing roll value was rebutted.

The Board was not limited to choosing between the 

valuation advocated by Next Century, the Assessor, and the 

existing roll value. Instead, the Board “shall make its own 

determination of value based upon the evidence properly 

admitted at the hearing.” (Cal. Code Regs., tit. 18, §324, subd.

(b).) If desired, the Board could have continued the hearing to 

allow the Assessor to correct the defect in his valuation analysis, 

so the Board would have the benefit of the Assessor’s opinion.

(Cal. Code Regs., tit. 18, §323, subd. (c).) But it was not entitled 
17

to uphold an enrolled value that the Assessor agreed was too 

high, and was unsupported by any evidence.

DISPOSITION

The judgment of the trial court is reversed and the trial 

court is directed to enter a new judgment vacating the findings of 

fact and decisions of the Board and remanding the matter to the 

Board for a new hearing. Next Century is awarded its costs on 

appeal.

CURREY, J.*

We concur:

ROTHSCHILD, P. J.

BENDIX, J.

* Judge of the Los Angeles Superior Court assigned by the Chief 

Justice pursuant to article VI, section 6 of the California Constitution.
18

Filed 11/30/18

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

NEXT CENTURY ASSOCIATES, LLC,

Plaintiff and Appellant,

v.

COUNTY OF LOS ANGELES,

Defendant and Respondent.

 B284092

 (Super. Ct. L.A. County 

 Nos. BC569076, BC594802)

 ORDER CERTIFYING 

 OPINION FOR PUBLICATION

THE COURT*:

Good cause appearing, it is ordered that the opinion in 

the above entitled matter, filed November 1, 2018, be 

published in the official reports.

____________________________________________________________

________________________ _____________________ 

_____________________

 *ROTHSCHILD, P. J. BENDIX, J. 

CURREY, J.**

** Judge of the Los Angeles Superior Court assigned by the Chief 

Justice pursuant to article VI, section 6 of the California Constitution.