San Diego, Orange Counties OK Tax Break on Homes

Two of the state’s most populous counties, San Diego and Orange, agreed Tuesday to give large, voter-approved property tax breaks to homeowners over 55 years of age who sell their property and move elsewhere in California.

But Los Angeles County officials, faced with a bleak budget picture, remained divided over whether to implement the special allowance that won overwhelming voter approval as Proposition 90 last November.

Strongly supported by retirees and Realtor organizations, Proposition 90 passed with more than 69% of the statewide vote. The measure enables homeowners over 55 to transfer the assessed value of a home they are selling to a new home in another county, thus permitting them to pay property taxes at lower rate. A homeowner meeting the age requirement could, for example, transfer his old low rate set under Proposition 13 to a new residence, unlike other buyers who pay higher taxes based on purchase price.

However, the allowance applies only if the county where the new property is located approves the tax break.

4 Counties Participate

On Tuesday, supervisors in Orange and San Diego counties voted such approval and joined Kern and San Mateo as the only counties in the state, so far, to participate in the Proposition 90 plan. The tax break has encountered stiff resistance from some counties opposed to the program because it reduces the amount of possible property tax revenues generated by home sales.

Five counties--Monterey, Sacramento, Santa Cruz, Sonoma and Tulare--have already rejected the plan, and others have indicated that they intend to let the program die by simply ignoring it.

“A number of counties have said they don’t plan to implement it,” said Cary Jung, a legislative analyst for the County Supervisors Assn. of California, which has been surveying the 58 counties.

The resistance to Proposition 90 is troubling news for older homeowners who had planned to sell their homes in one county and buy a retirement place in another at no increase in property taxes. (On transactions within the same county, persons 55 and over automatically get the tax break because of another initiative, Proposition 60, passed in 1986.)

“I’m all alone in the world, and I want to buy a smaller home,” said a 73-year-old Hollywood Hills woman. “But I can’t do it unless I can keep my Proposition 13 savings.”

Proposition 90, which was backed by the American Assn. of Retired Persons and the California Board of Realtors, was designed to allow older homeowners to maintain their property tax savings, said Assemblyman Dave Elder (D-Long Beach). Elder, a supporter of the measure, added that it also could benefit younger home buyers by increasing the stock of older homes that owners leave behind when they move.

Under the Proposition 90 program, a homeowner qualifying for the tax break must:

- Be over 55 years of age.

- Buy or build a replacement home within two years of selling the previous dwelling.

- Buy a home of equal or lesser value than the sale price of the dwelling being replaced.

Under the measure, a homeowner with a $100,000 house in Orange County who bought a $200,000 house in Los Angeles County would be able to transfer that $100,000 assessed value to his new home--provided that Los Angeles is a participant in the program.

The problem for the county is the loss of property tax revenue, which would amount to about $1,250 a year in taxes for each $100,000 difference in assessed value.

Although officials are still estimating the volume of revenue that might be lost in Los Angeles County, Assessor John J. Lynch said he still favors implementing the plan.

“We should carry out the mandate of what the people voted for,” said Lynch who estimated that the revenue losses would be only in the “hundreds of thousands of dollars.”

But Treasurer-Tax Collector Sandra Davis, citing the possibility of even a minimal revenue loss, said she would recommend that the board oppose the plan. Auditor-Controller Mark Bloodgood has made a similar recommendation to county Chief Administrative Officer Richard B. Dixon.

Next week, the Board of Supervisors is expected to set a public hearing date in the next few weeks to discuss Proposition 90, and Supervisor Deane Dana said any final decision will be influenced by the county’s precarious financial situation.

“I am alarmed at the county’s financial situation, and if we face any substantial loss in revenues, we may have to defer implementing this until next year,” Dana said.

Gerald D. Hedden, chairman of the California Legislative Committee for the American Assn. of Retired Persons, said his group is hoping that counties act quickly in deciding whether to implement a program. He added that, meanwhile, that some homeowners may think Proposition 90 is already in place.

“We are concerned that many of our constituents assume just because Proposition 90 passed, it would become law and be applicable throughout the state,” Hedden said, “but that’s not the case.”

In San Diego County, where supervisors voted 4 to 0 Tuesday to join the program, Assessor Greg Smith said he expected the financial benefits to the county from older homeowners selling their homes will offset the impact of any new property owners who arrive in San Diego with their old property tax rates.