Dan Walters: California property values soar

08/02/2013 12:00 AM

08/02/2013 6:51 AM

In the half-decade before California was clobbered by its worst recession since the Great Depression, taxable property values – those of land, homes, apartments and commercial buildings – exploded.

Between 2003 and 2009, values increased by a whopping two-thirds, from $2.7 trillion to $4.5 trillion, much from new construction, and local governments enjoyed a nearly $20 billion increase in annual revenue from the boom.

We all know what happened next. The real estate market went into a tailspin and local governments that had banked – literally – on ever-increasing revenues felt the pinch. It contributed heavily to two cities' bankruptcies.

Actually, taxable values didn't go into the tank.

They just stopped growing and shrank a little, falling to $4.3 trillion in 2011. And as the state's economy began to improve, so did property values, rising slightly in 2012.

This year, they are poised to register a sharp gain, based on reports from local assessors that are being compiled by the state Board of Equalization.

Gov. Jerry Brown's 2013-14 budget assumes a 2.8 percent increase, but it's more likely to be in the 4 to 5 percent range.

Los Angeles County, which has a quarter of the state's taxable property, is up 4.66 percent, and in some of the counties experiencing economic booms, such as those in the San Francisco Bay Area, the gains are higher. They're up 6 percent in San Mateo County, for example, and 5.17 percent in Alameda County.

Each percentage point of property value increase generates about a half-billion dollars in additional revenue statewide, so overall, the increase could be well over $2 billion for local coffers, and indirectly for the state treasury.

Under the state constitution, schools are guaranteed certain amounts of revenue, with the first increment coming from property taxes and the state providing the remainder. Thus any unanticipated increase in local property values and taxes decreases what the state must pay schools.

It's not another property bubble, at least not yet, but with the housing construction industry beginning to pick up again, California could see strong growth in property taxes in the years ahead, and the state is also seeing a surge in sales and income taxes, $2 billion over estimates already this year.

These revenue jumps, however, create another challenge for state and local politicians, who have overspent previous windfalls, leading to huge budget deficits and, as mentioned earlier, the bankruptcies of two cities.

Those who want more spending, whether it's for government services or public employees' salaries, will be pressing politicians hard.

Brown has said he wants to resist that pressure and redirect any windfalls into debt reduction and reserves.

But as the money piles up, the pressure will grow.

Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters. Follow him on Twitter @WaltersBee.

Editor's Choice Videos

Join the Discussion

The Modesto Bee is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Terms of Service