LOS ANGELES - Assessed property values in California are growing strongly in the state's larger counties.
Such tax roll increases bode well for the state budget and for local bonds backed by property taxes.
Property tax assessments in the Golden State are heavily regulated under the 1978 state constitutional amendment known as Proposition 13, which limits California's property tax collections by setting a base property tax rate of 1% of a property's assessed value and capping increases in assessed value for individual properties at no more than 2% annually unless that property changes hands or improvements are made on the property.
Enough properties have changed hands at high enough prices to generate solid growth in the 12 largest counties.
Gov. Jerry Brown's May revised budget estimated that California's property tax revenues would increase 5.9% in fiscal 2016 and 6.2% in fiscal 2017, levels that most Southern California counties appear to have come close to but which big Northern California counties left well in the dust.
A significant chunk of this money (some 42%, according to Brown's revision) will go to public schools.
Strong growth can be important from the state perspective, said S&P Global Ratings analyst Gabriel Petek. The state's Proposition 98 requires the state to increase spending on K-12 education based on a formula system, but strong local property tax revenues can reduce what the state needs to use from its general fund to reach the legally mandated spending total.
"When the property tax base increases it can actually provide general fund relief," Petek said. "It's an important source of education funding at the state level."
Strong growth in the tax roll can also strengthen the credit of local general obligation bonds backed by ad valorem property taxes. Though the general tax rate specified by Prop. 13 is 1%, in practice the actual tax rate for most properties is higher because voters can authorize additional levies for bonds, often for local schools.
Los Angeles County assessor Jeffrey Prang said that the gross assessed value for the county reached $1.4 trillion, a 5.6% increase over last year. Neighboring Orange County reported an overall assessed valuation of $526 billion, up 5.4% from the previous year. San Diego County reported a property tax roll of $483.1 billion, a 5.6% year-over-year increase.
"This is the fourth consecutive year that the County has experienced growth in the assessment roll," said San Diego assessor Ernest J. Dronenburg, Jr. "This is a testament to the strength of our local real estate market and a sign that our County continues to recover from the prior market downturn. For the third straight year, each of the County's 18 cities experienced positive assessed value growth. The City of Imperial Beach realized the highest growth rate at 8.5%. The City of San Diego had the largest value increase, adding $12.5 billion."
Riverside County's property assessment roll eclipsed the previous record set in 2008, reaching $255 billion, 5% percent more than last year's total, Assessor-County Clerk-Recorder Peter Aldana announced.
San Bernardino County reported a tax roll of $194.7 billion, which was a 4.2% increase from last year. Ventura County experienced very modest growth at a $123.1 billion total: 3.7% above the prior year. Ventura County assessor Dan Goodwin focused on the continuing trend of increases.
"This year's roll adds $4.44 billion in assessed value, which is the fourth consecutive significant increase after a four-year period during the recession when the county's roll held steady at about $104 billion each year," Goodwin said in a release.
Up north, property values appear to have spiked much more sharply. While the City and County of San Francisco's roll is awaiting certification by the City Controller's office, preliminary information shows that the total roll has surpassed the $200 billion mark for the first time. At a cumulative value of $208 billion, that represents a jump of almost 9% over the prior year.
Santa Clara County reported a value of $419 billion, a sharp 7.9% year-over-year surge. Alameda County reported a $262.6 billion tax roll, a 7% increase over last year. Contra Costa County reported a net value of $181.7 billion, up 6%. San Mateo County posted a $191 billion figure, a 7.6% jump. The assessors in these strong growth counties trumpeted their economic strength in public statements.
"Silicon Valley's strong economy has erased most of the losses in property values incurred during the 'Great Recession'," said Santa Clara County Assessor Larry Stone. "That's great news for all property owners, as the largest single asset that most people own is their home. Santa Clara County is once again leading the region, and the state."
Multiple counties experienced historical property tax growth, their assessors said.
"The 2016-2017 assessment roll is the highest to date in Contra Costa County's history," Contra Costa County assessor Gus Kramer wrote to the County Board of Supervisors.
"Contra Costa County's economic recovery is beginning to instill value back into the real estate market," he wrote.
"This is the fifth year in a row that a new historical high has been set, and the sixth consecutive year the roll has moved in a positive direction, reflecting the county's thriving economy," said San Mateo County assessor Mark Church. "As home to industry leaders in the fastest growing sectors of the world economy, business expansion within San Mateo County again created significant growth of new construction, high job growth and increasing real estate prices, resulting in another record roll value."
Sacramento County's increase was closer to the levels seen in Southern California; its total assessed value of $134.7 billion represents a 4.6% increase from the previous year.
Even among the big counties that experienced more sluggish growth, the numbers are a far cry from the brutal totals of the recession and the real estate market crash that drove it.
Even though the Bay Area counties fared unusually well in those tough times, for example, in 2009 Alameda County's tax roll was down 2.24% and Contra Costa County was down more than 7%.
Under California's Proposition 8, assessed values should be lowered temporarily if recession or other factors reduce a property's value below its Prop. 13 value on Jan. 1 of each year. As economic recovery increases market value, valuations previously lowered because of Prop. 8 must be increased to match the subsequent upswing. In those cases, property tax increases are allowed to exceed the standard 2% annual cap set by Prop. 13.
"The point is, it's growing," Petek said. "And it might even be growing faster than the budget assumed."
The California State Board of Equalization will provide a final statewide tally of all 58 counties in late August.