Annual property tax rolls reported by county assessors are lower than last year, buoying homeowners with reduced property tax bills and producing revenue shortfalls for local governments.

For example, the total assessed value of property in Sacramento County dropped 2.2%, while El Dorado and Placer Counties suffered decreases over 6%. The dwindling tax rolls means local government reliance on past tax revenue will not translate into adequate current funding for programs and services, including employment. Counties can only hope they allowed for an accurate percentage of dropped assessed values and corresponding tax revenues in their fiscal year 2010-11 budgets.

The past two years have represented the first drop in tax rolls since 1978.  The approval of Proposition 13 in that year requires county assessors to temporarily lower the assessed value of homes to no more than their current fair market values until market values increase beyond the amount of the reduced assessment. As market values slide below current assessed values, county assessors must lower their assessments, which in turn lower the amount of taxes the tax collector receives.

County assessors have the right to raise a property’s assessed value up to 2% each year, limited to the lesser rate of consumer inflation, as occurred this past year.  Conversely, during times of property value deflation county assessors are required to lower assessed values to the lesser amount of the property’s current fair market value.

As counties adjust property assessments by the rate of inflation this year, even homeowners whose properties are still worth more now than when they bought it will see a difference as the increase will be less than in prior years.

The California State Board of Equalization (SBOE) has determined the loss due to reductions in assessed values will amount to $2.60 in taxes lost per $100,000 of assessed value for this demographic. [For more information regarding assessed property value, see the December 2009 first tuesday article, Frustrations high for homeowners seeking to reduce assessed property value.]

While many homeowners will see a smaller increase in their property taxes on receipt of their October tax bills, only those with reduced property assessments will see a decrease in how much they owe. Special assessments or levies voters approved in some areas will increase the tax bill this year.

County websites provide detailed information about the assessed value of properties. Appeals to dispute the assessed value can be filed to reduce property assessments to current fair market value through the end of November each year. [For more information regarding the assessed value appeal process, see the February 2009 first tuesday article, Reassessment and tax reduction assistance down on the farm.]

first tuesday take: Any reduction in property taxes is happy news for the homeowner, but comes at a great social cost. The drop in property tax revenue means less funding for local governments, which at first reaction many consider to be a good thing. However, that good thing translates directly into higher unemployment and a reduction in public services – a bad thing for many, but not all, state employees.

Now we have a lack of available jobs in California, a dynamic perpetuator of low home sales and lowering home prices, which is then reflected in reduced assessments. Lack of sufficient job opportunities continues to weigh down the buoyancy of California’s real estate recovery, part of the vicious cycle we find ourselves in.

Most importantly for California real estate, governments must be reminded they are the employer of last resort during recessions until businesses start to pick up the slack. Yet in this recession no federal, state or local government is doing anything near sufficient about job creation, very different conduct than the massive government work projects that employed millions of ready-to-work Americans and pulled this nation out of the last great depression.

This time far too many Californians will have to wait out this recession unemployed, and for some unemployment will be permanent. [For more information regarding current California home sales, see the August 2010 first tuesday article, California home sales data for June 2010; for more information regarding unemployment, see the July 2010 first tuesday Market Chart, Jobs Move Real Estate and the June 2010 first tuesday Market Chart, Reeling from California Unemployment.]

Brokers and agents can play a helpful role for homeowners whose properties’ assessed values are now greater than their current fair market value.  Many homeowners need to file with the county to get a reduction in the assessed value of their homes, but they will need documentation and therefore, assistance. Agents can provide a comparable market analysis (CMA) to support a homeowner’s argument that his current property value is below its assessed value, as well as information about the filing process.

Sending out a friendly FARM letter or email about this article is a great way to keep in touch with anyone looking to correct  their property’s assessed value, sell their property or simply refer others to the agent for assistance. [For more information regarding property reassessment, see the March 2009 first tuesday article, Property reassessments might save owners on taxes—but beware of scams.] [For guidelines for constructing FARM letters, please see the July 2010 first tuesday page, FARM letters.]

Re: “California tax assessments of homes to go down” from the Sacramento Bee