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.