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mercurynews.com

 

October 7, 2008

 

By Sue McAllister

 

 

More homeowners request reduction in property taxes

 

 

Hoping to take advantage of one of the few benefits of the dismal real estate market — a smaller tax bill — some 5,000 Santa Clara County property owners appealed their assessment this year, 35 percent more than in 2007.

 

Santa Clara County Assessor Larry Stone sends out notification cards to all residential and commercial owners in May, listing properties' assessed values for this tax year; property taxes are based on the value listed there. Owners had until Sept. 15 to appeal Stone's findings.

 

Last year, 3,233 people filed appeals. The higher number this year didn't surprise Stone — in fact, he had anticipated a bigger increase.

 

"In a down market you're going to have more residential assessment appeals filed," Stone said.

 

Home values have fallen in nearly all Santa Clara County neighborhoods this year, with differing degrees of severity. In areas hardest hit by foreclosures, values have fallen more than 30 percent from their peaks, while in towns with top-notch school districts near technology jobs, home prices have barely budged.

 

But declining prices alone don't guarantee property owners a tax break.

 

Under a 1978 law known as Proposition 8, if the market value of a property falls below the county's assessed value, its owner can receive a temporary tax reduction. In the case of a home, for example, the assessed value is usually the purchase price plus increases of no more than 2 percent a year.

 

Many longtime homeowners therefore do not qualify, because despite widespread declines in property values, the assessed values upon which their taxes are based are less than the market values. But many homeowners who bought their properties in the past few years have qualified for the Proposition 8 reduction.

About two-thirds of the appeals are eventually withdrawn each year, Stone said, mostly because the filers misunderstood eligibility requirements.

 

Another aspect of Proposition 8 that confuses homeowners is that assessed values are based on properties' worth as of the first day of each year. That means that to qualify for a tax break this year, a home's market value on Jan. 1, 2008, must have been less than its previously assessed value. A home may have dropped in value as the summer progressed, for example, but for assessment purposes, only its market value on Jan. 1 is significant.

 

The cards sent out in May spelled out the formal appeal process, but urged owners who disagreed with their assessed values to ask for an informal review by June to potentially avoid filing a formal appeal.

 

Nearly 42,000 owners learned via the cards that they had already gotten a Proposition 8 reduction from Stone's office. Stone said that by mid-June, about 8,700 owners had asked for informal reviews, and about half of them received reductions.

 

Maria Marinos, clerk of the board of supervisors — whose office oversees the appeal process — reported receiving more than 1,000 phone calls from taxpayers upset that they had missed the deadline for filing an assessment appeal for this year. Some reported that they learned of the deadline only when they received their tax bills, and in some cases it was too late.

 

Official tax bills were mailed in mid-September, said Joan Kirkpatrick of the County Tax Collector's office, which is when they have gone out for the past six years. By law, the tax collector must mail bills by Nov. 1. The county says it sends the postcards in May so that people will know of their assessed value before the deadline.

 

Officials in San Mateo County are seeing an even steeper increase in requests for property reassessments. Warren Slocum, the county's assessor-clerk-recorder, said he had received 4,400 requests so far this year, up from 900 in 2007.

 

Not all of the approximately 5,000 appeals in Santa Clara County have been electronically logged. Until they are, Stone said, it's "almost impossible to draw any accurate conclusions as to what the impact is" of the big increase in assessment appeals. If they were heavily weighted toward high-value commercial and industrial properties — unlikely, Stone said — then the potential for lost tax revenue would be greater than if most of the appeals came from homeowners.

 

Gary Graves, assistant county executive, said that an increase in appeals, while a concern, was less worrisome than the worsening health of the real estate market in general, which is prompting county budget executives to revisit their projections for the fiscal year that starts July 2009.

 

"Everyone is going to have to be adjusting their expectations for the next year," he said. "It's a real possibility we're going to be even worse off than we thought."

Contact Sue McAllister at smcallister@mercurynews.com or (408) 920-5833.

 

  • You bought your home years ago, and its assessed value is $250,000. Last year its market value was $800,000. On Jan. 1, 2008, it was worth $700,000. The market value has dropped, but you don"t qualify for a property tax reduction, because your assessed value was less than the market value on Jan. 1.
  • You bought your home in 2006, and its assessed value last year was $650,000. As of Jan. 1, 2008, its market value was only $550,000. You qualify for a tax break of about $1,250 because the market value of your home is less than its assessed value.