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San Francisco Chronicle

 

October 14, 2007

 

Kathleen Pender

 

 

Kathleen Pender: Bay Area counties trim taxes as home prices fall

 

 

For the first time since the mid-1990s, some Bay Area counties are reducing property taxes for significant numbers of homeowners, mainly those who bought houses since late 2005 in areas where prices have declined.

 

Proposition 8, passed by California voters in 1978, amended Proposition 13 to allow for a temporary tax reduction when a property's market value as of Jan. 1 each year is below its base-year value. The base-year value is typically your purchase price plus an inflation factor, which can't exceed 2 percent per year. Room additions and other major improvements add to your base-year value.

 

Example: If you bought a house in January 2006 for $700,000, and by January 2007, comparable homes in the neighborhood were selling for $600,000, you could qualify for a $100,000 reduction in assessed value that would save you about 1 percent, or $1,000.

 

On the other hand, if you bought a house in 1985 for $200,000 and it was worth $900,000 in January 2006 but only $800,000 in January 2007, you won't qualify for a reduction because your base-year value (unless you greatly expanded the home) is much less than $800,000.

 

The reduction is temporary: When home values return to their preslump levels, property taxes will be raised to where they would have been without the reduction.

 

Homeowners who think they qualify for a Prop. 8 reduction can ask their county assessor to review their assessment. To request a review, simply call or write your county assessor's office. Many assessors have forms on their Web sites that property owners can fill out and send in. (Hint: Enter "Prop. 8" in the search box.)

Remember, the assessor will look at the value of your home on Jan. 1 to determine if you are entitled to a tax reduction for 2007-08. Although it's not necessary, you can bolster your case by providing prices for comparable homes sales in your area.

 

"The strongest comps are within 90 days" of Jan. 1, says Contra Costa County Assessor Gus Kramer.

 

You can find recent home sales in your neighborhood on sites such as Cyberhomes.com, Domania.com and Zillow.com.

 

If you request a review, you still must pay your property tax bill in full before the delinquent date to avoid penalties. If your assessor subsequently agrees to a tax reduction, it will be refunded to you.

 

Rather than wait for requests, assessors in some harder-hit counties automatically reduced thousands of 2007-08 property tax bills, which started arriving in mailboxes a few weeks ago. Homeowners in most counties can still request a review if they think they were overlooked.

 

In Alameda County, "We looked at 34,000 properties that had sold between June 2005 and January 2007," says Russ Hall, the county's chief deputy assessor.

It automatically reduced taxes on 6,135 of those, including 5,992 residential properties.

 

Since July 1, Alameda County has received 425 requests for reviews from property owners, compared with 300 in all of 2006.

 

Contra Costa County reviewed about 30,000 residential properties that had sold since June 2005 and reduced taxes on about 22,500 of them. The average reduction was around 8 percent, Kramer says. The county has roughly 275,000 properties.

 

Most of the reductions were in cities where a lot of subdivisions have been built in the past three years, such as Antioch, Pittsburg, Brentwood, Oakley and San Ramon, Kramer says.

 

This is the first time since 1995 that his office has proactively reduced property values.

 

Santa Clara County automatically reduced taxes on about 18,000 properties, compared with 6,000 last year. Most of the reductions were on mid- and lower-price homes and condos in cities with less-than-stellar school districts, says Santa Clara County Assessor Larry Stone. He says commercial properties and high-end homes have kept their values.

 

By comparison, "in 1996 we had about 98,000 properties in Prop. 8 decline," Stone says. Within three years, however, all but 300 of those properties had been restored to their previous values.

 

Other counties wait for requests before they consider cutting property taxes.

 

Solano County, which has about 109,000 residential properties, has received about 800 requests this year and has reduced property tax on about 700.

 

"It's surprising to me we don't have more requests," says Lance Houser, assistant assessor for Solano County.

 

He notes that property values in the county have come down 10 to 15 percent since the fourth quarter of 2005.

 

"There are a lot of properties that people really ought to contact us on," Houser adds.

 

In Marin, San Francisco and San Mateo counties, homes in general have held their values despite plummeting sales. These counties have had relatively few property tax reductions but expect more next year, when homeowners can ask for reviews based on price declines in 2007.

 

Marin County, which has about 90,000 parcels, has received about 150 requests for tax reviews this year, compared with 90 last year, says Bill Pierson, a principal appraiser for the county.

 

Terry Flinn, San Mateo County deputy assessor, says he gets a few requests a week but expects the number will increase next year.

 

San Francisco Assessor Phil Ting says, "At this time we haven't seen any more (property tax) reductions than normal ... but I think it's coming."

 

If a homeowner requests a property tax reduction and the assessor denies it, the homeowner can file a formal appeal with the county's assessment appeals board, a separate body normally appointed by county supervisors.

 

The deadline for requesting reviews and filing appeals for each tax year varies somewhat by county. Property owners should check with their county.

 

Homeowners who request a review don't have to worry about their property taxes going up as a result. Prop. 13 limits assessment increases to the inflation rate, not to exceed 2 percent, until it is sold, when it can be reassessed at the new market price.

 

Once a home is granted a property tax reduction, it goes into what is known as Prop. 8 status. The county assessor is supposed to monitor these properties every year and automatically decrease or increase the assessed value depending on market conditions.

 

Despite the increase in property tax reductions, most counties say their property taxes are still increasing, albeit at a slower rate.

 

"We had 64,000 Prop. 8s in 1996 or '97, and the tax roll was still up 3 or 4 percent," says Contra Costa's Kramer.

 

"The people who are getting the break are people who purchased in the last three or four years," he says. If those people represent 15 percent of property owners, that leaves 85 percent unaffected. Property taxes for the unaffected can go up as much as 2 percent a year.

 

In addition, when a home is sold, it is reassessed. If a person sells a home he has lived in for 30 years, the property tax might go up 500 percent or more, he says. A few of those can make up for a lot of temporary property tax reductions.

 

Also, in some counties, rising values for commercial property are helping offset falling home values.

 

In Santa Clara County, despite the sharp rise in Prop. 8 reductions, the net assessed value of all real and business property grew by 8.25 percent over the past year, reflecting an increase of $21.6 billion.

 

Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at kpender@sfchronicle.com.