As any reader of this column knows, voters will be confronted come election day with billions and billions of new tax hikes and bond measures (which, of course, result in their own tax hikes). But let’s not forget that there is another reason for taxpayer to experience a heightened sense of anxiety over the next few weeks.
For many the real scare this time of year is not the monsters at our doors on Halloween but the property tax bill in the mail box. But, while the “tax and spend” lobby increases its influence in Sacramento, homeowners have still been able to count on Proposition 13 for some degree of protection. Because Proposition 13 limits increases in a property’s assessed value to two percent annually, most property owners have a good idea what their tax bill will be even before opening the envelope. But homeowners still need to examine carefully their property tax bill because mistakes can happen.
Taxpayers should understand the various charges and make certain that they are not being assessed 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 a few years ago at the height of the market. If your home value is actually lower than the assessed value shown on the tax bill, you should consider applying for a reduction in taxes. (Sometimes called a “Prop 8 reduction”).
For most California counties, 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 and it 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 a house or if you previously received a Prop 8 “reduction in value.” This bears repeating: Because the real estate market in many parts of California is recovering many homeowners who previously received a temporary reduction in “taxable value” from their assessment may now see an increase in their tax bill more than two percent from last year. But in no case will the taxable value be more than the initial Prop. 13 base year plus two percent annually from the date of purchase. Although that may seem unfair, keep in mind that while the reduction was only temporary, the savings you received when your property was worth less 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
Voted Indebtedness charges reflect the repayment cost of bonds 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 lowered the vote to 55 percent. (Of course this did very little to improve schools as was promised). 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.
In some counties, parcel taxes may appear under this second category of property exactions even though parcel taxes are rarely used to repay debt. Parcel taxes are taxes on property ownership but are not imposed as a percentage of taxable value. Although there is no upper limit to amount of parcel taxes you have to pay (HJTA is working to change that) the good news is that under Proposition 13 they still require a two-thirds vote.
Direct Assessments
The third type of levy one finds on the typical property tax bill is for direct assessments for services related to property such as street lighting, regional sanitation, flood control, etc. 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.
For more information regarding your property tax bill go to HJTA.org and click on Frequently Asked Questions then scroll down to “About Property Tax Assessments”. If you have a question about your property tax bill you can contact your county assessor, county tax collector or, in many instances, the phone number of the levying agency for each levy that is reflected on your bill. It’s your money and you have a right to be certain that your bill is correct.
By Jon Coupal
President of the Howard Jarvis Taxpayers Association
Jon Coupal is president of the Howard Jarvis Taxpayers Association. California’s largest grass-roots taxpayer organization, dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.
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