Woodside billionaire Larry Ellison will get an estimated $3.06 million refund from property taxes he's paid since 2004 on his 23-acre Mountain Home Road estate, while local schools and the town of Woodside will see their share of annual tax revenue drop as a result of a recent 60 percent reduction in the assessed value of the lavishly developed property.

The reassessment will hit the Portola Valley School District the hardest: The district estimates a drop of $250,000 to $300,000 in tax revenue beginning this year because of the change.

Mr. Ellison had appealed a determination by the San Mateo County assessor's office of the value of his 745 Mountain Home Road property, which includes a main house, a two-bedroom guest house, three cottages, a barn converted into a gym, a five-acre man-made lake, two waterfalls and two bridges.

In a decision last December, the San Mateo County Assessment Appeals Board reduced the property's assessment from $173 million in 2007 to an estimated $69.7 million in 2008.

As a result, taxes on the property -- billed at about $1.86 million in 2007 -- are estimated to be $751,041 in 2008, according to Terrence Flinn, deputy county assessor. This represents an estimated $1.1 million reduction in property taxes for this year.

The dispute

The appeal, filed by Mr. Ellison's Octopus Holdings LP, challenged the method of assessment used by the county, which was based on reproduction cost of the buildings and other improvements to the property.

Octopus Holdings, represented by attorney William R. Bennett of Bennett & Yee in San Francisco, argued that the assessment should be based on "the cost to replace an existing property with a property of equivalent utility as of a particular date" <0x2014> an assessment that allows for discounting the value of many exotic features on the property, which is based on a Japanese emperor's 16th century estate, because they would have limited appeal to another buyer. (See related story.)

Mr. Bennett did not return the Almanac's phone calls seeking comment.

Mr. Flinn, the deputy county assessor, said the reduction in the property's assessment and tax bill is retroactive to May 1, 2004. The appeals board set the assessed value of the property for that date at $64.4 million, as opposed to the county's $163 million assessment.

The reductions in assessed value amount to $100 million in 2005, $102 million for 2006, and $104 million for 2007, Mr. Flinn said.

Although local school and special districts, and the town of Woodside, will be affected by the future decline in tax revenues, they won't bear the brunt of the $3.06 million refund due Mr. Ellison. Instead, the refund will be deducted proportionately from the future tax revenues disbursed to all governmental districts in San Mateo County, said Kanchan Charan, the county's deputy controller.

That's the sanctioned method for such a refund under Assembly Bill 8 -- a "share the pain" approach that spreads out the impact of large tax refunds among a larger base, according to Mr. Charan and Mr. Flinn.

Local impact

The Woodside property is located in the Portola Valley School District, although children from that area have the option of going to either Portola Valley schools or Woodside School.

Tim Hanretty, assistant superintendent of the Portola Valley district, calculates the impact as a $250,000 to $300,000 loss to the district in the 2008 tax year. The $300,000 figure translates into the cost of almost three teachers.

The revenue loss is significant because the elementary school district faces a $1 million shortfall for 2008, zero property revenue growth, and an increase in enrollment from 714 students to 750.

About 87 percent of the district's budget comes from property taxes, parcel taxes, the Portola Valley Schools Foundation, grants and contributions.

Susan George, Woodside town manager and director of finance, said the town received about $130,000 in tax revenues from Mr. Ellison's property in 2007. Because of the reassessment, that figure is likely to drop to under $53,000, she estimated.

The Sequoia Union High School District will lose approximately $62,000 in revenue this year because of the reassessment, said Ed LaVigne, the district's assistant superintendent for administrative services.