OC’s Assessed Property Tax Roll Reaches over $500 Billion

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OC’s Assessed Property Tax Roll Reaches over $500 Billion

That’s billion, with a “B.”  The OC Register is reporting (link here) that a 5.5 percent increase in assessments of real property tax citing a number of reasons, including the ongoing consequences of 1978’s Proposition 13.

In 1978, Proposition 13 changed the definition of taxable value of real property in California, defining it as the lower of “factored base year value, or the market value on January 1st of the year (with certain exceptions for special properties, like historical properties).  A fact sheet on Proposition 13 can be found at http://www.californiataxdata.com/pdf/Prop13.pdf.

Under Proposition 13, real properties have a “base year value” on which increases are limited. Unless your real property was purchased before 1975, the base year value, generally, will be determined as the fair market value at the time the real property was transferred.   For that reason, much of the controversy in property tax cases focuses on one of two things: (1) determining fair market value and (2) whether, under the sometimes complicated definitions and laws on the subject, a change in ownership constitutes a transfer or is subject to some exception (usually when more than one owner is involved or the transfer is to a related entity or family member).

Even without a transfer, the county can use the factored base year value to increase the assessment by up to 2% where there is inflation under the consumer price index.  Even without a change of ownership, the assessments can go up more than 2% if there is new construction or to equalize the impact of  low assessments that occurred during a temporary property value dip.

Here, the 5.5 percent can be attributed to a number of factors.  Part of it is the under-2% inflationary hikes.  Part of it is equalization of some of the dip assessments.  Also, some areas have seen growth in real estate development as high as about 8%.

As noted by the OC register, the two cities with the biggest impact on the county’s tax rolls are Irvine and Newport Beach, which account for more than 20% of the whole county’s rolls combined.  While Newport Beach is second behind Irvine, it is a substantially smaller city.  The good news is that all these property taxes pay for county services, including public schools and libraries.

Daniel Layton, the author of this post, is the principal of Tax Attorney OC.

 

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