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Under Prop. 13, the bulk of properties get reassessed as being worth 2 percent more annually in years when the market is rising. But another initiative, Proposition 8, allows for assessed values to decline in sync with the market.
That's spurred assessors to do mass reductions for homes that sold in recent years, using automated valuation models that look at recent nearby sales. All homes are assessed at their value as of Jan. 1.
Hundreds of thousands of Bay Area residents will receive a pleasant surprise in the mail this summer - a notice that their property taxes are being cut because real estate values have dropped.
But this boon for homeowners will mean the loss of millions of dollars in property tax revenue, a pot that gets divvied up among K-12 schools, counties, cities, redevelopment agencies, community colleges and special districts - all already squeezed by California's financial crisis and the economic downturn.
Every Bay Area county assessor is doing downward revisions for big swaths of homes. And for some counties, it will be the first time anyone can remember that property tax revenue has dropped from the previous year.
In Contra Costa County, 150,000 homes will have their property tax bills reduced. The county expects to take a tax hit of about 7.6 percent, meaning its total property tax receipts will be about $134 million less than last year's.
"I've been assessor for 15 years and never seen a hit this big," said Gus Kramer, Contra Costa assessor. "Everyone will get hurt. It's devastating to public services."
In Solano County, 60,000 homes, more than half of the county's 114,000 residences, are being assessed lower, said Marc Tonnesen, Solano assessor.
In Alameda County, 97,000 properties are being revised downward, said Russ Hall, chief deputy assessor. He estimated that property tax receipts will drop about 2.7 percent compared with last year.
"In statistics going back 50 years, we have not ever had a decline before," he said.
Contra Costa, Solano and Alameda counties all have been walloped by foreclosures, which wreak havoc on property values. But the Bay Area is also home to counties such as San Francisco and Marin, where foreclosures have had a lighter impact, and that's evident in their property taxes.
In San Francisco, 10,000 to 12,000 properties are getting tax cuts, slicing $1.2 billion to $1.6 billion off the tax roll, according to Assessor Phil Ting. (Property taxes are 1 percent of that assessed value, plus some extras for special assessments.)
A home that last changed hands in 1985, for instance, would not qualify for a reduction because its taxes are based on that 1985 value plus the Prop. 13 increase of 2 percent a year, so it's already taxed at less than market value. But a home that sold as recently as 2006, particularly if it's in an area where property values are sinking, would automatically get reassessed in many counties this year.
In Alameda County, the assessor reviewed all properties that had changed hands since Jan. 1, 2002, plus homes whose owners requested a review. Consider a home in east Oakland that sold in 2005 for $450,000 and is now worth $210,000. Because property taxes are 1 percent of assessed value, the homeowner's bill would now be $2,100, compared with $4,500 in the sales year.
In Santa Clara County, areas ravaged by real estate woes got more scrutiny, while affluent towns received less.
"For Gilroy, Morgan Hill and East San Jose, we went back as far as nine years to review all transactions and compare them to the current assessed value," said Larry Stone, Santa Clara County assessor. "In other areas, where we did not see that degree of erosion of property values, we went back only five or six years. To go back to (sales from) the year 2000 for Palo Alto was not worth spending resources on. We have not seen the kind of decline in property values in high-end, established areas that we've seen in the mid- and lower end of the market, particularly in those areas that were fastest growing and had the most multifamily units."
"The only thing that's saving municipal government is the World War II and Korean War veteran era folks who are either passing away or selling their homes," Kramer said. "Say they've owned their house for 20 years, and their base year value is $100,000. Even in this down economy, they're selling their house for $500,000, so their assessed value is going up $400,000. Just one of those sales can equalize the loss in value from a lot of other homes because it's such a windfall in revenue."
That was Prop 13 little secret for much of its existence- resi turnover (Cali's was the highest in the nation, averaging every 3.5 years) kept state revenue streams well stocked. The drought was on the commercial side of property taxes.
That's spurred assessors to do mass reductions for homes that sold in recent years, using automated valuation models that look at recent nearby sales. All homes are assessed at their value as of Jan. 1.
Hundreds of thousands of Bay Area residents will receive a pleasant surprise in the mail this summer - a notice that their property taxes are being cut because real estate values have dropped.
But this boon for homeowners will mean the loss of millions of dollars in property tax revenue, a pot that gets divvied up among K-12 schools, counties, cities, redevelopment agencies, community colleges and special districts - all already squeezed by California's financial crisis and the economic downturn.
Every Bay Area county assessor is doing downward revisions for big swaths of homes. And for some counties, it will be the first time anyone can remember that property tax revenue has dropped from the previous year.
In Contra Costa County, 150,000 homes will have their property tax bills reduced. The county expects to take a tax hit of about 7.6 percent, meaning its total property tax receipts will be about $134 million less than last year's.
"I've been assessor for 15 years and never seen a hit this big," said Gus Kramer, Contra Costa assessor. "Everyone will get hurt. It's devastating to public services."
In Solano County, 60,000 homes, more than half of the county's 114,000 residences, are being assessed lower, said Marc Tonnesen, Solano assessor.
In Alameda County, 97,000 properties are being revised downward, said Russ Hall, chief deputy assessor. He estimated that property tax receipts will drop about 2.7 percent compared with last year.
"In statistics going back 50 years, we have not ever had a decline before," he said.
Contra Costa, Solano and Alameda counties all have been walloped by foreclosures, which wreak havoc on property values. But the Bay Area is also home to counties such as San Francisco and Marin, where foreclosures have had a lighter impact, and that's evident in their property taxes.
In San Francisco, 10,000 to 12,000 properties are getting tax cuts, slicing $1.2 billion to $1.6 billion off the tax roll, according to Assessor Phil Ting. (Property taxes are 1 percent of that assessed value, plus some extras for special assessments.)
A home that last changed hands in 1985, for instance, would not qualify for a reduction because its taxes are based on that 1985 value plus the Prop. 13 increase of 2 percent a year, so it's already taxed at less than market value. But a home that sold as recently as 2006, particularly if it's in an area where property values are sinking, would automatically get reassessed in many counties this year.
In Alameda County, the assessor reviewed all properties that had changed hands since Jan. 1, 2002, plus homes whose owners requested a review. Consider a home in east Oakland that sold in 2005 for $450,000 and is now worth $210,000. Because property taxes are 1 percent of assessed value, the homeowner's bill would now be $2,100, compared with $4,500 in the sales year.
In Santa Clara County, areas ravaged by real estate woes got more scrutiny, while affluent towns received less.
"For Gilroy, Morgan Hill and East San Jose, we went back as far as nine years to review all transactions and compare them to the current assessed value," said Larry Stone, Santa Clara County assessor. "In other areas, where we did not see that degree of erosion of property values, we went back only five or six years. To go back to (sales from) the year 2000 for Palo Alto was not worth spending resources on. We have not seen the kind of decline in property values in high-end, established areas that we've seen in the mid- and lower end of the market, particularly in those areas that were fastest growing and had the most multifamily units."
"The only thing that's saving municipal government is the World War II and Korean War veteran era folks who are either passing away or selling their homes," Kramer said. "Say they've owned their house for 20 years, and their base year value is $100,000. Even in this down economy, they're selling their house for $500,000, so their assessed value is going up $400,000. Just one of those sales can equalize the loss in value from a lot of other homes because it's such a windfall in revenue."
That was Prop 13 little secret for much of its existence- resi turnover (Cali's was the highest in the nation, averaging every 3.5 years) kept state revenue streams well stocked. The drought was on the commercial side of property taxes.