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Property Tax Revenue Got you down?

Property Tax Revenue Got you down?. CSMFO Conference Los Angeles – February 18, 2009. BUDGETING property taxes IN THIS REAL ESTATE MARKET. CSMFO Conference Los Angeles – February 18, 2009. VALID PROP 8 REDUCTION.

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Property Tax Revenue Got you down?

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  1. The HdL Companies 909.861.4335 Sales Tax Property Tax Municipal Software Property Tax RevenueGot you down? CSMFO Conference Los Angeles – February 18, 2009

  2. The HdL Companies 909.861.4335 Sales Tax Property Tax Municipal Software BUDGETING property taxesIN THIS REAL ESTATE MARKET CSMFO Conference Los Angeles – February 18, 2009

  3. VALID PROP 8 REDUCTION • If the market value of property as of January 1st (lien date) is determined to be lower than the factored Prop. 13 value (usually the purchase price factored by 2% per year) the assessed value will be lowered to the market value. • The lower adjusted value will be reflected on that year’s annual tax bill, which is mailed by the Tax Collector in September. • IMPORTANT: A Prop 8 reduction is a temporary reduction and does not change your base year value.

  4. VALID PROP 8 REDUCTION

  5. INVALID CLAIM FOR A PROP 8 REDUCTION

  6. Proposition 8 Reductions • Huge wave of Prop. 8 reductions impacting 2009-10. • Estimated at over $250 billion state-wide. • Hardest hit counties saw 7%-12% AV reduction. • Merced 15.9%, Riverside 11.9%, Solano 11.4%, San Joaquin 10.9%, San Bernardino 9.4%, Yuba 8.6% • All communities not created equal. • Expect 2010-11 Prop. 8 reductions to be less severe. • While reviewed annually-reinstatements will take time.

  7. Proposition 8 Value ReductionsChange between 2008-09 and 2009-10 – Largest % Decline Source: HdL Coren & Cone

  8. The little understood elements of Property Tax Apportionment (AB-8) • Shared (pooled) Revenue Sources-General Fund • Supplemental Revenues • Assessment Appeal - Tax Payer Refunds • Roll Corrections between tax years • Redemption allocations in Non-Teeter Cities

  9. What to consider as you budget property tax revenues in this real estate Property Tax Issues to consider as you Prepare your Agency’s Budget • CPI for 2010-11 has been set at a negative .237%. Properties that have not already been reduced per Prop. 8 will receive a reduction. • With a continued decline in SFR sales prices, year over year, Proposition 8 reductions are still likely in 2010-11 in some jurisdictions. • Commercial and Industrial appeals have started to be filed, reductions will lag 1-2 yrs. • The VLF in Lieu allocation is tied to year over year assessed value change. This will be lower in 2010-11 for most cities.

  10. LOOKING FORWARD TO 2012-13 • For many agencies, property tax receipts will be lower in 2010-11 than those received in 2009-10. • While economists are suggesting that the economic recovery has begun, it won’t be fast enough to impact property values and the related taxes for 2010-11. • The next year of measurable property tax growth for most cities will be 2012-13.

  11. The HdL Companies 909.861.4335 Sales Tax Property Tax Municipal Software REAL ESTATE MARKET update CSMFO Conference Los Angeles – February 18, 2009

  12. Home Sales • The median price of an existing single family detached home in December 2009 was $306,820. • The median price increased by 8.4% from December 2008. • Homes sales have increased on a year-over-year basis for the last 17 months. • 41% of all homes sales in December 2009 were properties that were in foreclosure, down from 57% in December 2008.

  13. Orange CountyDetached Single Family Sales (January 2000 to December 2009) -25.4% Source: HdL Coren & Cone

  14. Solano CountyDetached Single Family Sales (January 2003 to December 2009) 67.9% Source: HdL Coren & Cone

  15. Foreclosures • Hardest hit sub-markets represent 25% of the state’s housing stock and account for more than 50% of the default activity in 2009. • Number of mortgage default notices filed in 4Qtr 2009 fell by 24% from the prior quarter. • Federal actions not providing much relief. • NODs peaked in the 1st quarter of 2009. • Highest default counties were Merced, Stanislaus & Riverside.

  16. Negative Equity Drives Foreclosures

  17. California Foreclosure ActivityJanuary 2006 – December 2009 SB 1137 Source: RealtyTrac

  18. California ForeclosuresPercent of Households – 20 Largest Counties Source: RealtyTrac

  19. Unsold Inventory • Unsold inventory index for existing, single-family detached homes in Dec. 2009 was 3.8 months, compared to 5.6 months in Dec. 2008 and 13.4 months in Dec. 2007. • Long-term average of unsold inventory is 7.2 months. • Greatest supply is in the high end of the market $750,000 to $1,000,000+. • Many homeowners without an urgent need to sell are keeping homes off the market amid falling prices.

  20. Unsold Inventory IndexJanuary 1988-July 2009 Long Term Avg. 7.2 months Source: California Association of Realtors

  21. Impact on Redevelopment Agencies Source: HdL Coren & Cone

  22. Questions to Ask • When were my project areas adopted? • How much new development occurred during the development “boom”? • What is the mix of commercial, residential, etc…? • What is the current vacancy rate for commercial, industrial uses? • How much vacant land is in the RDA?

  23. Recovery ain’t what it used to be! • Recovery will vary significantly by region. • Prop. 8 reductions will continue to have a negative impact on revenues. • Commercial property appeals will increase and value reductions will occur through 2011-12. • Impact on VLFAA - property tax in-lieu of VLF. • Many economists do not expect property values to fully recover until 2014.

  24. Contact Information Paula Cone pcone@hdlccpropertytax.com Andy Nickerson anickerson@hdlccpropertytax.com www.hdlcompanies.com 909.861.4335 Rob K. Braulik rbraulik@ci.fairfield.ca.gov

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