For many, these are scary economic times as the value of homes and
investments declines. Adding to the anxiety, property tax bills are
arriving in mail boxes across the state.
Fortunately, as a direct result of Proposition 13, which limits
increases in a property’s assessed value to two percent annually,
most property owners have a good idea what their bill will be even
before opening the envelope. Still, the Howard Jarvis Taxpayers
Association recommends that taxpayers carefully examine their latest
property tax bill. Although not common, assessors do make mistakes.
Taxpayers should understand the various charges and make certain
that they are not being dunned for more than they are legally
obligated to pay. The best way to check a tax bill is to have your
previous year’s bill handy for reference.
Checking the bill is especially important for those who bought their
homes within the last five years at the height of the market. If the
current home value is actually lower than the assessed value shown
on the tax bill, the owner is entitled to file for a reduction in
the tax bill.
Typically, the property tax bill will show three categories of
charges. They are the General Tax Levy, Voted Indebtedness, and
Direct Assessments.
General Tax Levy
The General Tax Levy is what most people think of when talking about
property taxes. It is based on the assessed value of land,
improvements and fixtures. This charge usually makes up the largest
part of the tax bill and it is the amount that is limited by
Proposition 13.
Proposition 13, passed overwhelmingly by voters in 1978, established
a statewide uniform tax rate of one percent of assessed value at the
time of purchase and limited annual increases in assessed value to
no more than two percent. From a practical standpoint, this means
that once the base year value of your property is established, the
General Tax Levy cannot be increased more than two percent each
year. This allows all property owners to predict their property tax
bills into the future and budget accordingly.
The best way to check to make sure that your current General Levy of
Assessment is correct is to compare it with the previous year’s
bill. The increase should be no more than two percent unless there
have been improvements to the property like adding a room to the
house.
This bears repeating: Because of the current decline in property
values in California, many recent homebuyers are entitled to a
reduction in their property tax bill to an amount even lower than
their home’s Proposition 13 adjusted base value. Although the
reduction is temporary — taxes will go up again when the property
regains value — the savings are permanent.
If in doubt about the current value of your property, check sales of
comparable homes in your neighborhood. If homes like yours are
selling for less than the valuation on your latest bill, contact
your county assessor and ask that the value and resulting tax be
adjusted to reflect true current value.
Voted Indebtedness
Voted Indebtedness is made up of those bonds and per parcel taxes
approved by the voters.
Local general obligation bonds for libraries, parks, police and fire
facilities and other capital improvements are repaid exclusively by
property owners. Because a minority of the population is required to
pay the entire amount, the California Constitution of 1879
established the two-thirds vote for approval of these bonds. This
assures a strong community consensus before obligating property
owners to repay debt for 20 or 30 years.
Until the year 2000, local school bonds also required a two-thirds
vote, but the passage of Proposition 39 — backed by a small group
of wealthy Silicon Valley businessmen — lowered the vote to 55
percent. Because the 55 percent requirement guarantees that most
school bonds will pass, regardless of merit, many homeowners are
seeing a significant increase in the Voted Indebtedness column on
their tax bills.
Less common than bonds are per parcel taxes. These are taxes on
property ownership, not on property value. Under Proposition 13,
they require a two-thirds vote and are also listed either under
Voted Indebtedness if they are being imposed to repay bonds or under
"Other Levies" if they are for operational expenses of a local
government entity.
Direct Assessments
Ironically, under the system in place for over a century, property
taxes go into the general fund and are used for local services
unrelated to property. For services to property, such as sidewalks
and sewers, we pay extra. These charges are known as direct
assessments.
Because of Proposition 218 — the Right to Vote on Taxes Act, placed
on the ballot by the Howard Jarvis Taxpayers Association in 1996 —
property owners must be given a meaningful say in approving new
assessments. Before an assessment can be imposed, or increased,
property owners must be informed in writing and be given the
opportunity to cast a protest vote on the new assessment or
assessment increase.
If you have a question about your property tax bill you should
contact the office of your county assessor. It’s your money and you
have a right to be certain that your bill is correct.