County Property Assessment-Proposition 8
admin | Nov 14, 2009 | Comments 0
Pre Proposition 8
Before Proposition 8 (California property taxes measure) was adapted in late 1978 the voters passed Proposition 13 which held that only a 2% increase in the assessed value could be enrolled by the County assessor for any given year despite the actual amount of increase in the real property value. California property tax payers were very happy with this property tax measure as it limited their property taxes they have to pay each year in the face of an ever appreciating real estate market. But what would happen if the values actually fell?
County property tax payers understood real quick that they had painted themselves into a corner. They had a piece of legislation that said the value of Real property could be raised to more than 2% a year; now they needed something to address property tax values in a declining market.
In 1978, California voters passed Proposition 8, a constitutional amendment that allows a temporary reduction in assessed value when a real property suffers a “decline-in-value.” A decline-in-value occurs when the current market value of real property is less than the current assessed value as of January 1 of a given year.
As an example for California property tax purposes, say your property has a value of $200,000 on January 1. The assessor needs to prepare the property tax value for the upcoming fiscal year, which runs July 1 through June 30 of each year. January 1, prior to the beginning of the fiscal year is the date of valuation for each fiscal year. So on January 1 your property was worth $210,000. But under Proposition 13 the California property tax assessor can only place an assessment $202,000, even though the market value is $210,000.
Taking the same example for California property tax purposes, say your $200,000 property has a value of $190,000 on January 1. Under Proposition 13 your property would still be valued at $202,000. But under the new Proposition 8 the assessor is allowed to enroll the lower of the factored base year value ($202,000) or the current fair market value ($190,000). The assessment should rightfully be $190,000. But is it?
Problems with the System
We’ve shown how the California property tax payer tried to deal with an unfair property tax system. Both Proposition 13 and Proposition 8 attempted to regulate the value of the assessment so that real property owners pay the right California property taxes in both an appreciating and a depreciating market. But notice the wording in the paragraph about Proposition 8:
In 1978, California voters passed Proposition 8, a constitutional amendment that allows a temporary reduction in assessed value when a property suffers a “decline-in-value.”
Notice that the amendment “allows” a temporary reduction. Some County assessor’s have held they are not required to reduce values. Others have been very forthcoming in recognizing the value declines and have been very proactive. But they can never do the job of recognizing individual property valuation changes. So they are held to doing mass appraisal for the most part on housing tracts and across very similar properties. Invariably, some are too high and some are too low. And still there is another problem.
Once the property taxes and the value have been reduced under Proposition 8, the County assessor is charged with raising the California property tax value when the value increases. Once again this is very subjective. The assessor enrolls a value of $195,000 for the coming year. Should it have stayed at $190,000? Should it have dropped further? Should it have been $193,000. All of these answers are dependent upon one person’s opinion of value. Are you content to let the assessor’s office make that determination?
Let’s look at some bigger numbers. In one of our examples of a recent reduction achieved on a property in central California, a $36 million property was reduced to $15 million. That’s an annual property tax savings of $226,000 for our client. Maybe next year the California property tax assessor wants to raise the assessment up to $25 million. Will that be correct? Maybe it should be $22 million. The difference is some $30,000 in California property taxes paid. That’s a lot of money for one man’s opinion.
So there you have it. Under Proposition 13 the value can only be raised 2% per year. Assuming the annual property tax values appreciate greater than 2% there is no dispute. But if the values depreciate there is only one thing to do: fight!
Go to PREPARING THE APPEAL
If this is enough information and you wish to have your property taxes reduced, please call us immediately at (888) 678-9TAX or fill out the simple form below and we will contact you at your convenience.
Comments or questions are welcome.
Filed Under: Property Tax Process
