Poor economy delivers tax break to property owners

Property owners will catch a small tax break next year thanks to the weak economy.

The amount of the levy on properties is adjusted each year based on an inflation factor, but the state announced a negative rate Monday, leading to a statewide decrease.

A reduction has not occurred since the 1978 passage of Proposition 13, which established property tax rules in California. Under the measure, property taxes are adjusted each year by an inflation factor. In all but five years, the adjustment for the year was capped at a 2 percent increase.

The negative inflation, or deflation, announced Monday by the California Board of Equalization triggers the first across-the-board statewide property tax decrease in 2010. The 0.237 percent deflation rate issued by the board means property taxes will dip about
$2.60 per $100,000 in assessed value.

“This is the first time such a broad scale reduction in property tax base year values has occurred,” said a statement from Betty T. Yee, chairwoman of the Board of Equalization. “Since the passage of Proposition 13, the inflation factor has never before been negative, and in all but five years the annual adjustment has been capped at 2 percent.”

Property owners will experience the tax break when tax bills are sent out in October. Some properties are exempt from any decrease — including recently purchased properties, new construction and properties that have received a recent value reduction.

The board’s announcement Monday is considered a “preliminary estimate,” based on U.S. Bureau of Labor Statistics Consumer Price Index numbers released in mid-November. The official CPI factor will be released in official letters to state assessors in December.

The tax break for property owners means bad news for San Francisco coffers. The City is projecting a deficit of $522.2 million for the upcoming fiscal year that begins July 1.

The revenue hit The City will take from the deflation is small compared to the hit from the number of property owners who have appealed their assessed values. The City is projecting a property tax hit of about $35 million this current fiscal year alone from the appeals. The total appeals represent a property value of about $29 billion, which is 20 percent of the property tax base for The City.

jsabatini@sfexaminer.com

 

Small savings in lowered levy

Based on a San Francisco home valued at $800,000 for 2009, residents will save $21 on their 2010 property tax thanks to the projected 0.237 percent deflation rate announced by the Board of Equalization on Monday.

 

Year Property value Avg. tax rate Property tax owed
2009 $800,000 1.098% $8,784
2010 $798,104 1.098% $8,763

 

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