First it was sales tax and development fees, now property tax
revenues will see a significant decline when the county and local
cities submit next year’s budgets.
First it was sales tax and development fees, now property tax revenues will see a significant decline when the county and local cities submit next year’s budgets.
Ongoing budget reductions grew Friday, as the tax assessor issued a bleak report noting that Santa Clara County will experience only the second decline in property tax rolls since the Great Depression.
Due to the rash of foreclosures during the last 18 months and the ongoing credit crisis resulting in free-falling property resale values, about 90,000 residential properties in Santa Clara County are worth less than their purchase price, county Tax Assessor Larry Stone said. As of Jan. 1, the value of about 20 percent of all homes and condominiums has fallen below their purchase price, Stone said.
Those properties are thus qualified for a lower assessment, and the homeowners may qualify for a reduced property tax bill.
And that means less revenue: about $29 million less for the county, which will have to cut at least $220 million out of the next fiscal year which starts July 1.
“More bad news,” Supervisor Don Gage said, predicting next year’s assessment will be even worse.
The city of Morgan Hill will collect nearly 4 percent less property tax revenue than it did last year due to declining residential values, City Manager Ed Tewes said. As a result, $360,000 in ongoing expenditure reductions will be added to next year’s budget cuts.
As of Monday morning, city staff will recommend a total of at least $3.2 million worth of ongoing budget cuts to the city council in May, Tewes said. Staff first announced the city should cut about $1.9 million in December, due to declining sales tax and development fee revenues.
The city has not seen a loss of property tax revenue in at least the last nine years. Tewes said in recent years, the city’s property tax revenues have grown “a minimum of 4 to 5 percent annually.”
Stone said the city of Gilroy will be hit hardest by the new assessment, as property values there are expected to fall about 11 percent when the assessor’s review is completed by June. The city will lose about $1.1 million of revenue as a result of the decline.
Property values in the city of San Jose will decline by about 4 percent, Stone said.
The assessor announced in February that his office would review about 200,000 residential properties, or about half the county, to determine which ones would be eligible for a reduction in property taxes. Friday’s follow-up is an estimate of how many are eligible.
“It is far more pervasive than I expected, and these preliminary numbers are far from final,” Stone said. “While incomplete, this data is valuable to cities and schools as they plan their budgets.”
The official assessment roll will not be completed until July 1, and Stone predicts even more reductions in property values. The total value of all properties in Santa Clara County is expected to decline by at least $18 billion from last year’s assessment roll of $303 billion.
Stone noted that county coffers have faced negative assessment roll growth only once since the Great Depression of the 1930s. That was in 1978, when Proposition 13, which caps the assessed value a property may grow in the positive direction, was introduced.
The 4 percent drop in Morgan Hill property values will likely impact the Morgan Hill Unified School District, but it is unclear by how much. Deputy Superintendent Bonnie Tognazzini could not be contacted before press time.
Santa Clara Valley Water District spokeswoman Susan Siravo said while the water district may still get a 1 to 3 percent increase in property tax revenues next year, in fiscal year 2010-2011 it will receive at least 1 percent lower revenues.
Public schools receive about 45 percent of county property tax revenues; the county itself receives 18 percent; the cities receive a 14 percent share; redevelopment agencies receive 10 percent; community colleges 7 percent; and special districts such as the SCVWD 6 percent.
“Everybody is affected by this downturn in the home market,” Crowell said.
