Real Estate

Property tax ups and downs hard to figure

There's the tax bill in the mail again. Hey! How come my tax bill still went up when property values are diving around here?

Stanislaus County Assessor Doug Harms is getting a lot of calls like that these days. The calls usually stem from a misunderstanding of how the tax system works, Harms said, although if the caller bought the home in the past year or two, a reassessment may be in order.

But for the vast majority of Stanislaus County's 121,135 home owners, the dropping home values have no effect on their tax bills.

Here's why:

Most people bought their homes more than a couple of years ago, and they were assessed at market value at that time. Since 1978, the homes have been lim-ited to a 2 percent rise in assessed valuation by Proposition 13, the California tax revolt measure.

Over the past 10 years or so, property values have risen far faster than 2 percent, so even with recent declines in home values, the market value of the home is still higher than its assessed value on the county books.

An example: A home purchased in 1998 for $167,000 in a northeast Modesto neighborhood increased in value to about $420,000 by the end of 2005. Its assessed value, however, rose only to $189,000. Since its peak, the value probably has dropped to about $350,000, but that's still far higher than the assessment on the books.

Another factor that may confuse taxpayers is that homeowners are thinking of their market value as they look at their tax bills in October, while the assessor's office, by law, assesses the property as of Jan. 1.

That's a matter of practicality as well as law, Harms said. His office can't reassess properties on a monthly basis as values change, so one date a year is chosen, Jan. 1.

The Stanislaus assessor's office is reviewing the assessments on many homes that were sold in the past couple of years, Harms said -- more than 20,000 homes since spring 2006. Assessors found 4,400 of them had declined in value, and that was reflected in the July 1 tax rolls used for this year's tax bills.

"We looked at everything that transferred (sold) after July 2005," he said.

San Joaquin County Assessor Gary Freeman said his office reviewed the whole county, and reduced the assessment on 23,000 properties for the current tax bills, which will be mailed in two or three weeks.

In Merced County, Assessor Kent Christensen reduced the assessment on 6,500 properties for bills mailed Monday.

There will be many more adjustments for the 2008-09 tax year, Harms said. "We will move back this January to (reviewing sales back to) July of 2003. We had 5 percent to 10 percent a month increases for a couple of years, so the decreases will have to be pretty substantial to get back to 2003."

Rapid drop in value

There will be many adjustments, however.

"It looks to us that the values have dropped at least as much in the last six months as they did the year before that," Harms said.

Sarah Watts, who lives in Modesto's Village I area, may benefit on her tax bill next year.

"We bought in March of last year, and we refinanced in December," Watts said. The home appraised for $480,000 each time, but Watts paid $460,000 for it in March 2006.

Since then, however, Watts has noticed a similar home in the neighborhood for sale for $439,000, and the eventual selling price may be lower.

"It's something to look into for sure," she said of a potentially lower tax bill next year.

Homeowners may be confused by how much their home value has declined, Harms said. They may read in the newspaper that the median home value in the county declined by 15 percent in August compared with August a year ago -- but that doesn't mean their house declined that much, he said.

Homes in some neighborhoods may have declined more, and some in other neighborhoods less, Harms said, and some neighborhoods haven't experienced a decline.

An example: the median home sale price in the 95350 ZIP code in Modesto declined more than 20 percent over the past year, while the median price in Mo-desto's 95356 ZIP code declined just 1.1 percent, according to figures from DataQuick Information Systems.

The process of establishing the market value of a home is difficult in a market with very few sales, Harms noted.

Some of the sales are made under duress, at less than true market value, because the sellers have to move, and there are so few buyers, Harms said. "It's not really a market transfer. The buyer is taking advantage of the seller's position," he said.

The property tax revenues go to the schools, the county, the cities and special districts, and they have been warned that the tax roll won't grow as rapidly as it has in the past, Harms said.

"Instead of the 17 percent increases, we may get 5 percent increases," Harms said of the county's assessment. "I've warned (the property tax recipients) not to count on the kind of revenue increases they have gotten in the past. But it's really hard to see a decline in revenues."

Freeman said his reassessments this year took $1.2 billion off the assessment roll in San Joaquin County, but the county still had 9 percent growth. Next year's San Joaquin County assessment roll may decline, he said. "Next year might be interesting. Zero might be good," he said.

Stanislaus County Chief Executive Officer Rick Robinson said the county gets 11 cents of the property tax dollar, which is a source of discretionary income.

"We are certainly mindful of the slowdown in the housing market, and we are seeing the slowdown in the growth of property tax," Robinson said.

Smaller increase in tax revenue

Stanislaus County's property tax revenue grew about $10 million from 2006 to 2007, to $39 million. The county estimates an increase of just $2.2 million for the next fiscal year.

But the overall county assessment will continue to grow, Harms said, despite the declining residential property values. That's because commercial and industrial properties continue to be built each year, and older homes that do sell jump in value from the artificially low Proposition 13 valuation to market.

Examples, he said, are the construction of a $40 million industrial building, a new shopping center, or farmland on the books at $2,000 an acre getting rezoned for a subdivision, boosting its value to $600,000 an acre.

Those kinds of economic boosts make up for a lot of $100,000 residential declines, Harms said.

And while some relatively recent home buyers will see their property taxes decline in the next year or two, most homeowners won't see much property tax benefit from declining property values.

Bee staff writer Tim Moran can be reached at or 578-2349.