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The first negative inflation recorded in over 30 years will
bring slightly lower property taxes for most California
businesses and homeowners this year. It will also cut property
tax revenues for schools, cities and redevelopment agencies at a
time when they are already straining from the effects of the
recession.
The California
Consumer Price Index (CCPI) decreased from 226.572 in October
2008 to 226.035 in October 2009. Rounded to the nearest
one-thousandth of 1%, this is a decrease of 0.237%.
One for the Record Books
Proposition 13,
which was approved by voters in 1978 requires real property to
be taxed on the basis of its fair market value as of the most
recent change in ownership. Once a base year value is
established, it must be adjusted each year.
This is the first
time a broad-scale reduction in property tax base year values
has occurred. Since the passage of Prop 13, the inflation factor
has never before been negative. In all but five years, the
annual adjustment was capped at 2%.
Bad Timing for Tax Jurisdictions
The drop in
property tax revenue will hurt some counties more than others.
In Santa Clara County, for example, officials say deflation will
cost them about $70 million. Assessor Larry Stone was quoted as
saying, “People are going to see a reduction in the level of
service that’s provided. This is the perfect storm for local
governments.”
San Jose is facing
the largest loss in Santa Clara County – as much as $3 million.
It comes at a time when the city is already scrambling to close
a $100 million deficit.
Exceptions to the Rule
Even with
deflation, some property owners may not see a reduction in their
properties’ assessed values. For example, if the assessed value
has already been reduced due to recent market declines, owners
could actually see an increase in the annual assessed value and
resulting tax bill.
The savings for
2010 will be minimal for most taxpayers – about $2.60 for every
$100,000 in assessed value. The base-year adjustments will be
reflected on tax bills sent out in October 2010, which are due
by December 10, 2010 and April 10, 2011.
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