Taxable Property Values Continue to Dive
Submitted August 23, 2010, 6:53 PM
Even after reducing the taxable value of hundreds of thousands of buildings and homes statewide, property assessors across California including in the Bay Area are drowning beneath an onslaught of appeals from commercial property landlords and home owners.
The deluge is challenging assessors, who are grappling with reduced funding even as their workloads are blossoming. It also bodes poorly for state, county and local governments, which share property-tax revenues.
The volume of appeals indicates that some four years after falling housing prices led the country into recession, many California property owners believe their values remain well below the price that they paid. One in two condominiums in Santa Clara County is now assessed at less than its purchase price, for instance, said Santa Clara County Assessor Larry Stone. That is up from one in three last year.
“The outlook for commercial and industrial properties is most troubling,” Stone said. “We won’t see the full effects on those values until this year, 2011 and 2012.” Thousands of commercial properties remain overassessed in Santa Clara County, he said, in part because his office does not have the capacity to lower commercial values as proactively as residential. Other assessors had similar observations about commercial properties in their counties.
Statewide, in 2009, the total value of taxable property fell 2.4 percent to $4.45 trillion. It was the first decline in the state’s taxable property value since 1933, when the state began to keep records. Taxable values are expected to fall again this year by another 2.2 percent, according to the governor’s revenue estimates.
In Contra Costa County, taxable property value fell 7 percent in 2009 compared to the year before, or not quite $10 billion. In Santa Clara and San Mateo counties, it was flat. In San Francisco County, taxable value was up 7 percent in 2009 compared to the prior year.
In Alameda County, in a typical year, about 3,000 appeals are filed annually questioning the taxable value his office has placed on a property, said Ron Thomsen, the county assessor and president of the California Assessors Association. Last year, 12,000 appeals were filed challenging values placed on properties for the 2009 tax year; that was after his office unilaterally lowered taxable value on more than 100,000 parcels countywide, Thomsen said.
Property owner appeals of 2010 taxable values may be filed until Sept. 15, so no count is yet available for total appeals in the current tax year. His office has already lowered taxable property values on 110,000 Alameda County parcels for 2010, Thomsen said.
Total taxable property value in Alameda County was $207 billion two years ago, Thomsen said. It is now $199 billion, and there is hope it will not fall further, but not confidence. “It seems like some property values are still going down,” he said.
In Santa Clara County, the volume of assessment appeals is also at an all-time high during his 15-year tenure, said Assessor Stone. Before now, the most appeals his office had ever seen in a single year was 7,300 in 1996, Stone said. But in 2009, nearly 12,000 were filed and that was after his office has unilaterally lowered taxable values on nearly 100,000 parcels countywide. This year, his office has unilaterally lowered values on 118,000 properties. Appeals for 2010 taxable values are due on or before Sept. 15.
Normally, assessed values are a function of a property’s purchase price or new construction value, plus annual additions of no more than 2 percent. But by state law, real property cannot be taxed at an assessed value that exceeds market value. Thus when market values decline as they have, properties are assessed at their current market worth.
Several assessors said they expected property tax rolls to be under stress for several more years. Homes that traded hands during the boom in San Diego County for $500,000 are now selling for $300,000, said Assessor Dave Butler. He does not expect that difference to be closed for some time.
“It is a lot tougher to restore [taxable property value]” than reduce it, Butler said. “People resist. Some of these properties, it may be 10 years before we get back” to their previous taxable value.
Annual appeals in San Diego County usually number about 3,000, Butler said. But in 2008, nearly 43,000 were filed. Last year, he unilaterally lowered taxable values on more than 216,000 properties, and the number of appeals fell by half. He hopes to see another drop to about 10,000 appeals this year, after lowering taxable values on nearly 200,000 properties countywide.
Conditions in Los Angeles County, the state’s most populous with a total property tax roll of more than $1 trillion, are also tough. More than 45,000 assessment appeals were filed in 2008 and more than 40,000 were filed last year, according to spokesperson Robert Knowles. The county’s taxable value fell $18 billion from 2009 to 2010, he said. That was on top of a $6 billion decline the year before.
