What’s your house worth?
County recalibrating assessed values as real-estate prices drop
In the largest such effort ever undertaken, the Butte County Assessor’s Office is currently reappraising the market value of all 12,000 residential parcels that changed hands countywide during the four-year period from Jan. 1, 2004, to Dec. 31, 2007.
The mammoth sweep was prompted “because so much more has occurred in downward movement” in the real-estate market, reported long-time Assessor Ken Reimers. His team of 16 appraisers has been at work since last December and hopes to complete the job by the end of July. The appraiser expects sweep results to show a loss of close to $500 million in assessed value from the $19 billion county property-tax rolls—and with it a corresponding loss of an estimated $5 million in property-tax revenue.
“We simply must do this on a proactive basis,” Reimers said, “in order to reflect the best information on the tax bills that go out this coming autumn.”
County Auditor Dave Houser expects the impact of the plunging assessed valuations to be grim. “I wish we had a better crystal ball,” he said, “but beginning with this year we will start finding out how much suffering there will be” for the many county entities that receive property-tax money.
These entities range from all manner of special districts—such as lighting, drainage, recreation, and mosquito abatement—to cities like Chico and Oroville as well as county and city schools plus Butte College.
Official records show a steady increase in total assessed valuation through 2006-07 before a precipitous decline in the rate of increase began in 2007-08. That decline is projected to reach only 1 percent for 2009-10 (see chart).
Last November, Reimers attended a conference of all 58 county assessors in the state to look at the bleak picture. He said that five counties were already in the “red,” meaning negative revenue growth, and “a lot more will be this year.” Butte County is in better shape for the moment than many counties because Reimers is projecting an increase of close to 1 percent.
Houser pointed out that the fires that burned 80,000 acres in the foothills last summer delivered another blow to the tax roll. He said his office removed $17 million from the 2008 tax bills for owners of the 160 houses that were destroyed and the 87 that were badly damaged.
The key to understanding the sweep action is Proposition 8, passed in November 1978. Its purpose was to amend famous Proposition 13, passed six months earlier, in June 1978.
Proposition 13 directs that an annual tax of 1 percent of a home’s value be levied when it is built or when it changes hands, usually through sale. The tax cannot go up from that initial amount more than 2 percent per year, as long as the Consumer Price Index (CPI) rises 2 percent or more, which it has traditionally done. If the CPI should be less than 2 percent—say, 1 percent—the property tax could rise by only 1 percent.
If property values decline, however, as in the present market, Proposition 8 comes into play. The parcel is reappraised at a new, lower value and thus lower property tax.
Take, for example, a house that sold for $300,000 in 2005, at which time the property tax was pegged at 1 percent of $300,000, or $3,000. That’s its Proposition 13 level. But in the declining market, the house sells again in 2008 for $200,000, so its tax is then $2,000—a loss of $1,000 to the tax rolls.
The assessor could not say at this point how much the sweep results will be skewed by the many foreclosure sales and so-called short or discount sales that have taken place during the sweep period. Such distressed sales are not good value indicators, as are the so-called arm’s-length transactions where there is no pressure to sell or buy.
“The best value indicator we can get is a house that sold in 2004 selling again in 2007,” Reimers said. “That way we have a true indicator for the drop in value for that type of parcel, especially if there have been no upgrades.”
Proposition 8 also provides that a homeowner has the right to request a reappraisal if he or she thinks the assessed value of the property no longer represents its market value.
About 100 to 150 such appeals are filed with the assessor in a normal year, Reimers said. However, 2008 was anything but a normal year because homeowners filed 934 appeals. Of these, 50 percent were resolved by a mutually agreed-upon figure without going through the expensive and time-consuming route of an appearance before a three-person appeals board.
The opinion of the applicants was that their properties, taken together, were worth only $95 million in today’s market as opposed to the original $205 million in assessed value on the tax roll. Official records show that settlement for the 436 appeals was for $185 million, a drop of only 10 percent.
“I think you would expect that figure to be higher,” Reimers said, “but people come in without much or any evidence to back up their appeals. They may just know, for example, that a house on their block or nearby sold for so much without maybe taking into account lot size, upgrades, or other differences.”
Pointing out he’s not a “revenooer,” as many people think, Reimers said his job is to fairly reflect property values, not maximize revenue for the county.