Skip to comments.CA: Property taxes to increase despite falling home values
Posted on 03/16/2009 10:16:16 AM PDT by NormsRevenge
With home values in free fall in many places, it might follow logically that property taxes would go down as well.
Not so in San Diego County.
The county assessor's office predicts that property taxes will increase this year for 75 percent of homes and other properties. That would produce a projected $91 million in additional revenue to the county, cities, school districts and other jurisdictions.
We don't have a choice, said Jeff Olson, chief of county property assessment services.
The mandate comes from Proposition 13, the 1978 tax-limitation measure, and subsequent regulations. The state initiative, passed when skyrocketing inflation on home prices pushed property taxes beyond many household budgets, sets the tax at roughly 1 percent of the purchase price and increases it by up to 2 percent annually.
The increase is based on a measure of overall inflation, excluding real estate. While home prices dropped 24.4 percent last year, Olson said the inflation rate was 3.5 percent.
So the 2 percent increase will kick in again this year. We've only had a handful of years in the past 20 where we didn't go up 2 percent, Olson said, the lowest being 1.11 percent in 1998.
Olson said the Franchise Tax Board, which is conducting its usual audit of the assessor's office, does not allow individual assessors to vary from the official adjustment.
With an overall 2 percent increase, county Treasurer-Tax Collector Dan McAllister expects to send out bills totaling about $4.6 billion this fall, $91 million more than last year. The increase last year was 4.6 percent, higher than 2 percent because of reassessments on properties that changed hands.
I think we are on autopilot as per Proposition 13, McAllister said. Until that is overturned in part or in whole, we're bound by it. I think, frankly, in our lifetimes, that's not likely. It's just not going to go away.
There is an exception for properties whose assessed valuations have fallen below market value. Such owners receive a temporary tax decrease that will reverse once values pick up again. Olson estimated that about 140,000 properties will get tax cuts this year.
Property owners who disagree with assessed valuations can plead their case before the county Assessment Appeals Board.
That's where Gaye Stennett, 74, found herself this month. A resident of the downtown Meridian condo tower, she appeared before the five-member board to ask that all upward assessments be frozen because of economic conditions facing many owners.
I felt it was my civic duty to go down there, she said. We're not one of those seniors who have lost everything in their retirement funds. But there are thousands who have, and there are many in this building who had it all in stocks . . . I'm arguing not on our behalf but on everybody's behalf.
Stennett lost her appeal, but some board members encouraged her to pursue her cause.
Stennett, who used to sell real estate, acknowledged that she and her husband did not have much to complain about. They bought their 13th-floor unit for $351,240 in 1988, but were able to retain their $95,225 assessed valuation from a previous East County home under a tax provision benefiting owners 55 years or older.
The annual Proposition 13 cap has lifted their assessed value on their condo to the present level of $138,746, still far below its $800,000 market value.
Her tax bill last year was $1,657, after deducting the standard $7,000 homeowner's exclusion and adding on special fees and charges. Another 2 percent increase will boost the tax bill by $28 this year.
Olson said that if the Stennetts did not qualify for the senior tax exclusion, their bill would be $5,600. If Proposition 13 weren't in effect, it would be $8,600.
But Stennett said she tried to convince the appeals board that it should be able to invoke the calamity clause in state law that allows for taxes to be reduced.
Certainly this housing collapse is a calamity just ask the president of the country, she said.
However, Olson said calamity applies only to physical damage, as in the 2003 and 2007 firestorms, not economic downturns.
I always say I'm not a policymaker, I'm a policy follower we just follow the rules, Olson said.
Critics of Proposition 13 have long complained that its provisions make for unfair and uneven tax bills. But cities, counties, schools and the state itself say it helps keep revenue stable and predictable, in good times and bad.
Richard Rider, chairman of San Diego Tax Fighters and a Proposition 13 defender, said Stennett has a point in tying taxes to the economic doldrums.
Any economist will tell you raising taxes in the depth of a recession is ludicrous, he said. I think she's got a great cause. But politically, it's going to be very difficult to gain traction.
As for trying to get the law changed by circulating petitions and marching on Sacramento, Stennett begged off any further activism.
At my age, I just don't feel quite up to it, she said. Jon Coupal, president of the Howard Jarvis Taxpayers Association, named for the co-author of Proposition 13, said the Legislature would have to pass a law to freeze taxes.
Because it's raised taxes on everything else, perhaps they should indeed waive the 2 percent inflation factor this year, Coupal said. It's never going to happen, given the thirst for taxpayer dollars these guys have.
We don’t have a choice,
LOL - The usual statement from one of the usual suspects. The words “Cut Spending” are not in their vocabulary.
the Prop 13 system is ok. It locks the property tax into 1% of the purchase price and goes up a max of 2% a year.
At least you know going in what the tax will be so that you can make your decision. The POls don’t like it, becuase it is a firm system. In these times, the 2% increase is a given, but not unexpected.
“That would produce a projected $91 million in additional revenue...”
Perhaps, but maybe not, as some people will just walk away if they don’t have any equity. Not sure what the banks would do.
Check Florida, specifically Fort Meyers area.
Property taxes in Cali are so far below what they should be because of this cap law, that property values would have to fall 75% before most homes would see their tax rates not go up in a given year. You can’t lock tax increases at 2% while the values are going up 40%, and think that when things start to go down taxes will too, you’ve set yourself up to where taxes are so far behind values that it doesn’t matter that values are falling, they are still far more than the value they are being taxed at.
Even if ya elect some butt head who says they plan on reducing taxes and insurance they get elected and poof, so much for those promises.
Right there Chrlie Crist?
Ya lying p.o.s.
Hahahaha.. its also part of the reason why California schools are ranked DEAD LAST in the nation.
You create an artificial taxing structure, that doesn’t tie remotely to reality, and then the services funded by it are woafully underfunded and continue to deteriorate.
While I hate pols, the prop 13 system is laughable, its not sustainable and never was.
If the values of homes has gone down, taxes should also go down. Taxes are based on the value of the homes. People need to contact their counties and demand that they lower their taxes.
“That would produce a projected $91 million in additional revenue to the county, cities, school districts and other jurisdictions.”
Property taxes should be zero.
Either you have the ability to own your house, or you don't. The Property tax system sets up the Government as your landlord. Miss a payment, and the landlord evicts you... That is why Proposition 13 passed in the first place. Elderly homeowners could no longer afford to pay the Property taxes that the government was assessing on their houses.
The government can gouge what they want from Income taxes and/or sales taxes - but they should leave the primary home of residence alone.
Well, arguing what should be may make you feel good, but it isn’t going to change anything.
I’ve had 10% increases on my home in TX for the past dozen plus years. It’s not slowing down.
Basically Prop 13 was that you tax property at 1% of value starting with purchase price and you cannot clime the tax more than 2% of what was taxed last year.
One home I have was bought back when things were $45k.
Today if I bought it my yearly taxes would be $7000, but under Prop 13 they are going to be about $1100.
The $1100 next year goes to maybe $1140 and that would be the increase spoken of in this article.
I think you were the one arguing what taxes "should be."
Property taxes in Cali are so far below what they should be...
I'll be going back to get another reassessment this Spring. I'll probably have to see “Mr. Wonderful” again who couldn't hold a job down outside of being a government jerk.
It would be interesting to see the value he placed on his own property. Besides, how do they come to a value on your property? Even if it took a year, go ahead and file a protest. I would bet they would reduce your property value so they don’t have to face you in public.
Disagree—Prop 13 was sustainable. The spending in California is what’s 1—unsustainable, 2—killing California.
I’m glad someone straightened that out.
Property taxes in California have nothing to do with current value, unless you just bought your home. The taxes are set on the purchase price. When I bought a home there in 1985, my taxes were $1750 a year while everyone around me was paying $340. Shortly thereafter they pushed thru the Proposition that let you carry your lower tax bill with you if you were 55 or over. What Prop 13 did was basically screw the newcomers. Of course if I owned the house now my $1750 + 2% increases would be much lower than the $9950 the guy who owns it now pays.
It’s also one of the reasons why I left. I took a job in NH making $3/hr LESS than what I was making in CA. I ended up taking home more, and it went farther. Go figure.
#1 - California is not dead last in schools.
California is certainly lower than it should be based on spending, but it is not last either. It’s an absurd statement completely unsupported by any meaningful data. Check the national report card, the census data for education attainment, or any number of widely used statistical compendiums and you will find CA near the 40-43 rank - low yes, dead last, certainly not. Capitalizing it doesn’t make it true.
#2 - Prop 13 works - anything that limits how much $$ the politicians can squeeze out of the public is a good thing.
Californians are not under-taxed by any means. The State doesn’t need more money, it needs to get a handle on spending. Pet projects and political wish list programs are the hallmark of the CA state budget, perhaps even more so than the federal budget.
I really truly and honestly get very tired of people who look for reasons to bash California without having any real knowledge of the people or the place.
(You may or may not be one of those people, I don’t know, so apologies in advance if my vent offends.)
The company that was hired to do the reassessment by our county holds hearings along with the reassessment board. The guy that I was assigned to looked to be 6 mos. out of college, maybe. I asked for documentation for their comparable property used to assess my property, he had none. I asked if anyone had actually visually inspected the property and who it was that did so, he couldn't tell me.
This went on for 15 minutes or so. Each question I asked, he had no answer. The only answer he had was that the reassessment takes upwards of 18 months to complete, and mine must have been completed before the current real estate collapse. Unfortunately for him, I was well prepared, and had facts and pictures, so he really couldn't answer any question.
The only property in our district to sell last year that was anywhere near comparable to mine was a 110 acre tract with a very old (almost falling down) house that sold...get this... for $9,000.00 per acre. A goober Yankee from Philadelphia...no offense to northern freepers, who had lived in an apartment not big enough to swing a cat in most of his miserable life, thought 9k an acre was a hellva deal. They put a modular home on it!!
As a result, my 130 acres of rocky pasture land gets jacked up to 7k per acre because this particular goober was too afraid to live up north anymore now that he's retired.
Anyways, after the thrashing I gave the reassessment guy, I figured they'd raise it even more, but they knocked 40k or .05% off the land value. Not very much, but at least it was something.
Actually, ever home owner can ask to have the value of their home reassessed. If your house has gone down then the base rate will reflect that and your tax bill will be lower. This is the libtards effort to gut prop13 amd keep draining our life’s blood.
Yoiu have know understanding of prop 13. Your entire argument is flat out wrong. The tax increase is only locked if one owned the house last year ( or whenever you purchased). The new owner’s tax basis is what they paid for it.
No, the quality of the schools in California is because of incompetent teachers and massive corruption (read unions) and waste.
Schools run by religions and homeschooling spend considerably less per student and the quality of the education is far above that of government schools.
Dan Walters wrote an article on school spending in CA that discusses the points that you make.
Sorry, but when you relocate to rural Missouri and your kid has to spend 2 years catching up, like a few adults I know can vouch for, don’t tell me Cali isn’t dead last. When Cupertino schools are considered some of the best in the state, your school system is a joke. Show me any other state that spends as much and performs as poorly, by that measure Cali is indeed absolute dead last.
I know Cali is taxed, rediculously so, but when your schools are funded by prop taxes and you limit tax increases to levels below inflation, enjoy the crap joke of a system you have.
I’m proud to have voted FOR Prop. 13! Thank you Howard Jarvis and Paul Gann!
That was my first voting after getting out of the Army, I was out less than a month. It helped my parents, immensely. Their home was being re-assessed higher and higher every year, and they were at the point of having to sell because they wouldn’t be able to afford the taxes.
It allowed them to remain in their home until their passing. That, in and of itself, was a blessing.
My county in PA has been dealing with reassessment nonsense like this for well over a deceade, so I’m familiar with it, I also spent a year in Cali and can tell you the property taxes there are a joke. Your house has a market value of 600k and its property taxes are 1400 a year... which is less insanely than a 100k house where I live.
Cali voters locked in property taxes at a rate far below inflation, so this is nothing more than payback for that decision. Voters decided they could institute artificial price controls, and they are finding that it no more works than when the government does it.
I am no fan or property taxes, I believe they should be abolished, but they are there, and trying to force a restrition on a revenue source below the rate of inflation means the services funded by that source will deteriorate and be sub par, and Cali’s school system is an ample example of it.
That is true of schools in every state not just Cali.. Sorry, Cali schools are indeed a joke, and no doubt there is union cronism and corruption just like everywhere else, but that’s not the soul reason, not even close.
If the values of homes has gone down, taxes should also go down. Taxes are based on the value of the homes.
It’s a sweet deal for the old-timers to be paying a lot less than the newcomers, but that extreme advantage diminishes as values have declined.
My property taxes in a semi rural area, south of Atlanta, Ga, were $816 in 1998, when we bought, now they are $1830.
Our County projects they will go down to approx. the $1500-$1600 range come this next year.
I’ve been wondering how that fares with others around the Country?
Should be being taxes based on value, you can play semantics but the meaning was quite clear. You lock down taxes below the rate of inflation then gripe that they don’t go down? hahahah, for decades now Property taxes have been locked at 2% increases a year in Cali, while Home prices were jumping 20-40% a year.. guess what? That means your house can drop a hell of a lot before the 2% increase will catch up to be what it should be for your home, even as its value declines.
Again, you cannot artificially create price controls, whether you are voter or a government bureaucrat, the same result happens either way. The availability or quality or both of the product/service attempting to drops.. in this case Cali public schools.
That’s not exactly correct. California does not include real estate prices in determining the rate of inflation for assessment purposes.
As well, California has other taxes that make up the difference. Therefore, it is a fair system, for it’s intended purpose of keeping people in their homes.
Under the former system, one could be forced out of the home they’ve had for many years, due to rising taxes. Under the former system, the onus was placed on property taxes to fund everything from libraries, to spraying for fruit fly abatement.
It’s the beauty of Prop 13. Revenues still increase in a downturn. And the homeowners already know it will.
In other words, you oppose a system of generally lower taxes — which is what Prop. 13 produced.
What the story doesn’t emphasize is how property taxes did not increase nearly as quickly as home prices during period of skyrocketing home prices.
Again, you cannot artificially create price controls, whether you are voter or a government bureaucrat, the same result happens either way.
Price controls? Not taxing a change in market value is hardly a "price control."
Shall we start taxing your stock portfolio at the market value, too?
You're not a politician, are you?
That is an asinine comment.
I'll let people figure it out for themselves; if you chart inflation vs increases in expenditures for education, the result speaks for itself.
What does the prosperity of the peasants have to do with the amount of tribute they owe the nobility? ;)
Hahahah, I wish, house value 150k, total annual property taxes about 6k.
Now County taxes aren’t that bad, under 1,000 of that, the rest is all School District tax, oh and the school district also gets another .5% income tax as well.
I pay less that 1/2 of my school tax bill every year to send my child to a private school, to be better educated than I pay in taxes to the public school, that is among the top 20% in terms of spending per student, and among the bottom 20% in terms of performance among comparably sized schools in my state. Oh, and just so you know 30%+ of the entire school districts budget is simply for benefits for teachers who are no longer even working.
Never ever live in a Commonwealth folks... State government is generally far far far more cost effective.
I don't really blame the guy from PA. I can't imagine the freedom he now feels to be out of a hell hole. But, as a result of his insane purchase price, he just cost me an extra 3k a year in taxes. That's 3k in less cattle feed, fencing, vet bills, etc. that I have to work with. It just sucks.
We inherited most of this particular property, we had to buy the cousins out. It has been the “homeplace” for 5 generations for DH’s family. My mother lives there now, and has made pets of the cattle to the point of naming her favorites.
It's not a place we would ever consider selling, as we have generation #6 at 17 & 14 years old, respectively. They'll have to decide if its worth the hassle of keeping it.
6k on 150K? Crap!
BTW, I stayed in Pittsfield, Ma. for a short time, a very short time! I moved across the line to Canaan, NY real quick. LOL
Man is a reasoning rather than a reasonable animal. - Alexander Hamilton
Are you proud of your state, at #26? [I guess not, you don't flag the flag on your FR page]
BTW, California isn't "dead" last, but all government schools are substandard.