This is the third year in a row of gradual, declining assessment roll growth from 9.07 percent in 2006; 8.25 percent last year and 6.98 percent this year. Led by the national recession and the economic “meltdown” in the residential real estate market, the decline in the growth rate was more gradual than experienced by most counties in California, and has been buoyed by Silicon Valley’s strong technology sector. “While this may be the third year in a row of declining roll growth in Santa Clara County, it is a far cry from the crisis facing other counties where both the residential and commercial sectors are in financial turmoil,” said Assessor Larry Stone.
In neighboring Stanislaus County, the assessment roll actually went negative dropping 6.87 percent. This perilous decline is especially remarkable when you consider that Proposition 13 provides for an automatic 2 percent increases in the assessed value for all property that did not change ownership or complete new construction during the prior calendar year. “It is an awful situation, and it is my understanding that Stanislaus is not alone. Numerous counties have experienced steep declines. In more than 75 years, the Santa Clara County assessment roll declined below zero only four times: immediately following Proposition 13 in 1978, and in 1932, 1933, and 1936, during the great depression,” said Stone.
While Santa Clara County has remained insulated from much of the national fallout in housing, growth in the assessed value of the County’s residential sector has slowed to 5.5 percent. The Assessor’s Office has responded proactively to the decline in the housing market by voluntarily reducing the assessed value of 25,109 single family residences, 8 percent of all homes, for a temporary reduction of $2.3 billion from what it would have been had the Assessor’s Office not recognized the declining market. The condominium and town home sector, which typically provides entry-level housing, was impacted to a greater degree with 21 percent of all of these properties receiving temporary relief. The Assessor’s Office reduced the value of 16,182 condominium and town home properties for a reduction of $916 million.
Proposition 8, passed by California voters in November 1978, requires property to be assessed at the “lower” of the fair market value as of January 1, 2008, or the base year assessed value as determined at the time of purchase or construction, and increased by no more than 2 percent annually. Overall, the Assessor’s Office temporarily reduced the assessed value on 41,866 properties for a total reduction of $5.05 billion.
The vast majority of 41,866 properties are residential. 575 commercial and industrial properties however, account for just over one third of the total assessed value reduction. San Jose was hardest hit with 61 percent of all properties impacted. When the real estate market rebounds, the Assessor will “restore” the assessed value to what it had been without the temporary reduction.
In contrast to the residential sector, the growth of assessed values of commercial and industrial properties remained strong. For example, office buildings increased in value by $2.66 billion, (18.5 percent) and retail increased $1.4 billion, (11 percent). In addition, the number of commercial and industrial properties with temporary reductions declined by one-third over the last year. “Silicon Valley is fortunate that our economy is sufficiently diversified to moderate the impact of the national recession,” said Stone.
The other major contributor to the total net assessment roll is business personal property and equipment, which experienced a 9.96 percent growth rate, substantially larger than prior years. “Much of this increase may be related to a change in procedures that enabled us to improve compliance and assess more business that had been failing to file their annual business personal property statements mandated by state law. Hopefully these businesses will get the message and file their property statement on time,” said Stone. (For more information concerning this change in procedures see the media release issued on July 2, 2008.)
The county, cities, schools, redevelopment agencies and special districts – all taxing jurisdictions – benefit from increased property tax assessments. Schools receive 52 percent of all property tax revenue, while the 15 cities and the County itself, receive only a fraction of the total property tax revenue.