Too Low to Assess: Properties with Less than $5,000 in Assessed Value
Where state law allows, the Assessor’s Office has regularly sought out efforts to eliminate property taxes for those businesses where the cost to assess and collect property taxes exceeds the property tax revenue generated.
In 2016 the Assessor’s Office recommended, and the Board of Supervisors passed, an ordinance permitting the Assessor’s office to automatically exclude properties with an assessed value below $5,000, eliminating the ad valorem property taxes for those properties. Fees and other non-ad valorem property taxes will remain on the tax bill.
As part of a continuous effort to seek out increased efficiencies, the Assessor’s Office conducted a formal cost study that demonstrated that the Assessor, Tax Collector and Controller’s total costs to assess and collect diminumus assessments of $5,000 or less, exceeds the $50 in property tax revenue that would have been generated from the assessment.
Typically these parcels consist of vacant property in remote locations with limited utility and marketability. In 2016, it was estimated that there were approximately 2,000 parcels that will benefit from low value ordinance. The ordinance will not apply to properties under the California Land Conservation Act (CLCA), Mills Act (historical) contracts, timber production zone designation (TPZ), non-profit golf courses, and low-value properties that are component parts of larger total property economic units.
The “too low to value” ordinance that passed in 2016 applied to real properties with $5,000 or less in assessed value, as well as business owners with machinery and equipment and businesses on government property. Combined, it was estimated that the annual cost to assess and collect taxes for these low value properties was approximately $1,895,000, which was far in excess of the projected property tax revenue of $602,000. Every employee in the Assessor’s Office use daily a cost accounting system which enabled the assessor’s office to provide the Board of Supervisors with these estimates. Additionally, the Assessor’s Office will be able to reallocate an estimated 11,000 hours towards more complicated assessments and customer service.
The Santa Clara County Board of Supervisors unanimously approved County Assessor Larry Stone’s recommendation to dramatically increase the number of property owners eligible to receive a “too low to assess” exclusion, benefitting mostly small business owners. (See today’s Board Agenda, Item: 125 http://sccgov.iqm2.com/Citizens/Detail_Meeting.aspx?ID=7206)
The new ordinance not only doubles the amount of the exclusion (from $5,000 to $10,000) for business personal property, it also adds two new categories of property eligible for the exemption.
“This low value ordinance is a ‘win-win’ for both the County and some taxpayers. For every $10,000 of assessed value, the county sends a tax bill of $100. The ordinance will eliminate property tax bills of $100 or less,” Stone said. In a formal cost study, Stone’s office demonstrated that the costs to the Assessor, Tax Collector and Controller to assess and collect diminumus assessments, exceeds the revenue generated.
“When I was first elected, I promised that the Assessor would not spend a dollar to collect a dime. I guess I need to update that; the Assessor’s office will not spend $100 to collect $100 dollars or less!” The new ordinance is effective January 1, 2017, The expansion of this ordinance to $10,000 for taxable personal property will primarily benefit business owners of property like business equipment, computers, fixtures and small boats. The Assessor’s Office estimated that 7,600 owners have total business property valued between $5,000 and $10,000, which would now be excluded from taxation. There are approximately 70,000 business property accounts filed in Santa Clara County each year.
“This is a perfect example of how we continue to do things differently,” said Stone. As Assessor I have implemented a sophisticated, at least by government standards, cost accounting system which has enabled the assessor’s office to utilize data to continuously review opportunities for making the department more efficient and smarter. Stone’s recommendation to the Board of Supervisors estimated that the cost to assess and collect these low value properties was approximately $1,895,000, which is far in excess of the projected property tax revenue of $602,000. Moreover it enables the assessor’s office to reallocate approximately 11,000 hours of staff time toward more significant assessments such as commercial and industrial assessment appeals, changes of ownership, and new construction activities.
While business property owners must continue to file a Business Property Statement (Form 571) each year detailing the cost of all supplies, equipment, improvements and land owned at each location within Santa Clara County, they will not have to pay the tax if the assessed value of their property is less than $10,000. “The real benefit is customer service and maintaining public confidence that government can run efficiently,” said Stone. Assessor’s