When you start to see Jack-o-lanterns around the neighborhood, you know that something scary is about to arrive at your house. That’s right, it’s property tax season.
Fortunately, as a direct result of Proposition 13, which limits increases in a property’s assessed value to two percent annually, most property owners have a good idea what their bill will be even before opening the envelope. Still, every year at this time, the Howard Jarvis Taxpayers Association recommends that taxpayers carefully examine their latest property tax bill. Although not common, assessors do make mistakes.
Taxpayers should understand the various charges and make certain that they are not being dunned for more than they are legally obligated to pay. The best way to check a tax bill is to have your previous year’s bill handy for reference.
Checking the bill is especially important for those who bought their homes within the last five years at the height of the market. If the current home value is actually lower than the assessed value shown on the tax bill, the owner is entitled to file for a reduction in the taxes.
Typically, the property tax bill will show three categories of charges. They are the General Tax Levy, Voted Indebtedness, and Direct Assessments.
General Tax Levy
The General Tax Levy is what most people think of when talking about property taxes. It is based on the assessed value of land, improvements and fixtures. This charge usually makes up the largest part of the tax bill and it is the amount that is limited by Proposition 13.
Proposition 13, passed overwhelmingly by voters in 1978, established a statewide uniform tax rate of one percent of assessed value at the time of purchase and limited annual increases in assessed value to no more than two percent. From a practical standpoint, this means that once the base year value of your property is established, the General Tax Levy cannot be increased more than two percent each year. This allows all property owners to predict their property tax bills into the future and budget accordingly.
The best way to check to make sure that your current General Levy of Assessment is correct is to compare it with the previous year’s bill. The increase should be no more than two percent unless there have been improvements to the property like adding a room to the house.
This bears repeating: Because of the current decline in property values in California, many recent homebuyers are entitled to a reduction in their property tax bill to an amount even lower than their home’s Proposition 13 adjusted base value. Although the reduction is temporary — taxes will go up again when the property regains value — the savings are permanent.
If in doubt about the current value of your property, check sales of comparable homes in your neighborhood. If homes like yours are selling for less than the valuation on your latest bill, contact your county assessor and ask that the value and resulting tax be adjusted to reflect true current value.
Voted Indebtedness is made up of those bonds and per parcel taxes approved by the voters.
Local general obligation bonds for libraries, parks, police and fire facilities and other capital improvements are repaid exclusively by property owners. Because a minority of the population is required to pay the entire amount, the California Constitution of 1879 established the two-thirds vote for approval of these bonds. This assures a strong community consensus before obligating property owners to repay debt for 20 or 30 years.
Until the year 2000, local school bonds also required a two-thirds vote, but the passage of Proposition 39 — backed by a small group of wealthy Silicon Valley businessmen — lowered the vote to 55 percent. Because the 55 percent requirement guarantees that most school bonds will pass, regardless of merit, many homeowners are seeing a significant increase in the Voted Indebtedness column on their tax bills.
Less common than bonds are per parcel taxes. These are taxes on property ownership, not on property value. Under Proposition 13, they require a two-thirds vote and are also listed either under Voted Indebtedness if they are being imposed to repay bonds or under “Other Levies” if they are for operational expenses of a local government entity.
Ironically, under the system in place for over a century, property taxes go into the general fund and are used for local services unrelated to property. For services to property, such as sidewalks and sewers, we pay extra. These charges are known as direct assessments.
Because of Proposition 218 — the Right to Vote on Taxes Act, placed on the ballot by the Howard Jarvis Taxpayers Association in 1996 — property owners must be given a meaningful say in approving new assessments. Before an assessment can be imposed, or increased, property owners must be informed in writing and be given the opportunity to cast a protest vote on the new assessment or assessment increase.
If you have a question about your property tax bill you should contact the office of your county assessor. It’s your money and you have a right to be certain that your bill is correct. CRO
copyright 2009 Howard Jarvis Taxpayers Association
Jon Coupal is an attorney and president of the Howard Jarvis Taxpayers Association — California’s largest taxpayer organization with offices in Los Angeles and Sacramento.