Thanks to Proposition 13, property tax bills are less scary in California than they are in a lot of other states. Homeowners in Illinois and New Jersey, just to cite two examples, have been known to let out a blood-curdling scream when they open the tax collector’s envelope that would be right at home on the soundtrack of a Jamie Lee Curtis movie.
Proposition 13 limits increases in a property’s assessed value to 2 percent per year and provides property owners with a pretty good idea of what their tax bill will be before they open the envelope.
Still, there can be some surprises. Taxpayers should understand the various charges and check the tax bill to make sure they’re not being assessed for more than they’re legally obligated to pay. It’s a good idea to compare each year’s tax bill to the previous year’s bill.
For most California counties, the property tax bill will show three categories of charges. They are the General Tax Levy, Voted Indebtedness and Direct Assessments.
The General Tax Levy is what most people think of when talking about property taxes. It is based on the assessed value of land, improvements and fixtures. This charge usually makes up the largest part of the tax bill and it is the amount that is limited by Proposition 13.
The annual increase in the General Levy of Assessment should be no more than 2 percent, unless there have been improvements to the property, like adding a room to the house. However, if a property received a “reduction in value” reassessment under Proposition 8, the taxable value may go up more than 2 percent to reflect the recovery in the market value. But in no case will the taxable value be more than the initial Prop. 13 base year plus 2 percent annually from the date of purchase.
If homes like yours are selling for less than the valuation on your current bill, contact your county assessor and ask for an adjustment to reflect the actual market value.
The second category of charges is Voted Indebtedness. These are charges that reflect the repayment cost of bonds approved by the voters. Local general obligation bonds for libraries, parks, police and fire facilities and other capital improvements are repaid exclusively by property owners. Because a minority of the population is required to pay the entire amount, the California Constitution of 1879 established the two-thirds vote for approval of these bonds. This assures a strong community consensus before obligating property owners to repay debt for 20 or 30 years.
Until the year 2000, local school bonds also required a two-thirds vote, but the passage of Proposition 39 lowered the vote requirement to 55 percent. Because it is now easier to pass school bonds, many homeowners are seeing a significant increase in the Voted Indebtedness column on their tax bills.
In some counties, parcel taxes may appear under this second category of property exactions even though parcel taxes are rarely used to repay debt. Parcel taxes are taxes on property ownership but are not imposed as a percentage of taxable value. Although there is no upper limit onto the amount of parcel taxes you have to pay, the good news is that under Prop. 13 they still require a two-thirds vote.
The third type of levy found on the typical property tax bill is for direct assessments. These are charges for services related to property such as street lighting, regional sanitation, flood control, etc. Because of Prop. 218 — the Right to Vote on Taxes Act placed on the ballot by the Howard Jarvis Taxpayers Association in 1996 — property owners must be given a meaningful say in approving new assessments. Before an assessment can be imposed or increased, property owners must be informed in writing and must be given the opportunity to cast a protest vote on the new charge. If a majority of property owners protest, the charge may not be imposed.
Finally, in order to control how much bond debt and direct assessments appears on your bill, pay close attention to your ballot in the upcoming election. There are literally hundreds of bond and tax proposals throughout local governments in California. Some may be worthwhile. Most are not.
For more information regarding property tax bills go to HJTA.org and click on Frequently Asked Questions (FAQ), then click the “About Property Tax Assessments” tab on the right. If you have a question about your property tax bill you can contact your county assessor or county tax collector, or call the government agency responsible for each levy that is included on your bill. It’s your money and you have a right to be certain that your bill is correct.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.