Before Los Angeles County CEO Bill Fujioka sat down Monday to present his proposed budget for the next fiscal year, he let out a hearty laugh as he joked with reporters. The CEO is in a good mood these days as an improving economy produces more tax revenues.
Fujioka is projecting a four-percent increase in property tax revenues for the fiscal year that starts July 1. During the recession, hundreds of thousands of California homeowners asked for the value of their homes to be reassessed and for their property taxes to be lowered accordingly. Now, counties across the state are reassessing again and raising taxes as home values rise.
“In many cases, we had lowered the assessed value of a home by 10-to-12 percent less than base value,” said Orange County Assessor Webster Guillory. The base value is the price of the home when it was purchased by the current owner.
Normally, under Proposition 13, counties can raise taxes on homes and commercial properties by no more than two-percent annually or the amount of the consumer price index, whichever is higher. But if the assessed value drops below the base — as happened for many homes during the recession – taxes can go up at a faster rate as properties regain their value.
“If people weren’t paying attention to the fine print, they very well might be shocked,” said Chris Thornberg of Beacon Economics. “Many property tax bills will go back up at a sharper rate.”
Fujioka said about 345,000 homes in L.A. County need to be revalued. Homeowners are notified when their property is reassessed.
Most of the property tax increases will be in the four-to-eight percent range in Orange County, said Guillory. Like Fujioka in Los Angeles County, he’s projecting an overall increase of about four percent in property tax revenues.
Thornberg, who consults for L.A. County, believes the estimates are too conservative. He predicts property tax revenues will increase by seven percent in LA.
Last year, L.A. County brought in slightly more than $4 billion in property taxes.
Fujioka’s four-percent projected increase means another $164 million dollars for the county in the coming year. If Thornberg’s prediction is correct, the county will receive as much as $283 million. That's more money for needs such as additional social workers in the troubled Department of Children and Family Services.
L.A. County’s budget is massive — $26.1 billion. But about $20 billion of it comes from the state and federal governments, and laws dictate how the county can spend the money.
Property taxes, then, comprise the largest portion of discretionary spending for the Board of Supervisors — typically more than 80 percent. School districts and cities also rely heavily on property taxes. They comprise 20 percent of the City of L.A.’s $5.1 billion general fund.
It’s worth noting not all counties will enjoy the same increase in property tax revenues. Riverside County’s housing market, for example, saw more foreclosures and is not bouncing back as well as others. Base values also are lower.
“Their property tax base will be hampered for years,” Thornberg said. “That’s a big revenue source that is out of reach of local governments in the Inland Empire.”