Taxes Begin Rising for Homeowners
Tens of thousands of homeowners across Southern California who successfully won reductions in their property tax bills a few years ago when values plummeted are now being hit with the downside of the real estate boom: unusually hefty increases.
Residents in the region’s hottest housing markets, such as south Orange County, are seeing tax hikes exceeding 10%, and officials expect the trend to spread to other areas, such as Los Angeles and Ventura counties, over the next year.
The size of the tax hikes has come as a surprise to residents used to the protections of Proposition 13. The landmark 1978 tax-cutting measure capped the taxable value of homes at the purchase price plus a maximum yearly increase of 2%.
But the rule only applies when a home is at its maximum assessed value. So a homeowner whose property tax bill dropped 10% during the recession could see a 10% increase this year--plus another 2% on top.
In Orange County alone, which experienced a $10-billion jump in total assessed property values this year, 15,000 to 20,000 homeowners received a tax increase of more than 2%, totaling hundreds of thousands of dollars. A greater number of tax hikes are likely next year, given that more than 100,000 property owners won assessment reductions between 1993 and 1996.
In other areas of Southern California, however, such as Los Angeles and Ventura counties, where home prices have risen at a slower pace, fewer homeowners are seeing the tax spike this year. But officials expect tax increases to catch up by next year.
“We know this is going to be a big problem,” said Glenn Gray, Ventura County’s assessor. His office sent letters to homeowners who received property tax cuts in the early 1990s saying that their tax bills could rise more than 2% as values bounce back. “We are bracing for it.”
Assessors are required by state law to review the value of parcels if they have evidence that prices have changed. The rapidly rising real estate market in Orange County prompted officials to review more than a third of its 740,000 parcels.
Los Angeles County officials, however, reviewed just a small fraction of its 2 million parcels because home prices have been slower to rebound.
The median home price in Orange County was $270,015 in June, far surpassing its previous peak of $256,410 in May 1990. By contrast, the June median price in Los Angeles County, $201,280, is still well below it previous peak, $229,260 in May 1991.
The assessments for 1998 occurred in January. Gilbert Parisi, special assistant to the Los Angeles County assessor, said his office wasn’t convinced at the time that the market had improved enough to justify more reviews.
“We just didn’t have enough information to warrant the kind of restorations that we’d been hearing about in other counties,” he said. “But we see a trend. That’s why we are currently reviewing more aggressively.”
A new report by Orange County Assessor Bradley L. Jacobs shows a 5.6% jump in the county’s total tax roll, bringing the value of all parcels to about $188 billion. Jacobs attributed the increase to rising values of existing properties as well as a flurry of new construction. The county reported a 3% jump in roll value in 1997.
Los Angeles County reported a healthy 3.1% increase in the value of parcels this year after several flat years. San Diego County reported a 7.3% increase while Ventura County had a 4.9% bump. San Bernardino County had an increase of 2.8% while Riverside County had a 1.6% increase.
Homeowners, such as Alitta Kullman of Laguna Hills, whose property tax bill rose 9% more than a year ago, aren’t happy about the news. But given the rising value of their property, some residents are tempering their frustration.
“It feels very arbitrary to me as far as whose taxes were raised,” Kullman said.
Sherman Oaks resident Lawrence Glass was hit with a $600 tax increase--or 11%--this year as the value of his San Fernando Valley home rebounded after the recession of the early 1990s.
“Just because the economy gets better doesn’t mean you should be stuck with more property taxes,” he said.
But others, like Silverado Canyon resident Jim Swanek, said they are too giddy about their rising home value to fret about the tax hike.
The price of Swanek’s home rose from $190,000 last year to $245,000 for 1998, a number that is more important to him than the $700 increase in his tax bill.
“If [the assessment is] accurate, I have no objection to it,” he said.
The Orange County assessor’s office has received a few calls from taxpayers disgruntled with increases beyond the 2% Proposition 13 cap. But for the most part, officials said that property owners are grateful to have their values rising.
“If they want to sell their house or borrow against it, their personal balance sheets look better,” said Jacobs, Orange County’s assessor. “A lot of people are as happy as they can be.”
This rising real estate market is not confined to Southern California. In Santa Clara County, the assessor’s office reports a 10.47% jump in assessed home values over last year.
“People know the values are coming back,” Assessor Larry Stone said. “While they have to pay a little more property tax as a result of that, it’s a good time because it’s restoring lost equity. There’s nothing more stressful for a person than to buy a home and watch it decline in value below the purchase price.”
Sharon and Roger McErlane of Laguna Beach know the feeling.
They were tethered to a $750,000 house that devalued during the lagging real estate economy a few years ago. “We bought at the height of the market, and then it [the value] dove down and stayed down,” Sharon McErlane said.
The couple won a reduction in their tax bill a few years ago to match the drop in their home’s value. McErlane said she’s relieved that their property values are rising, even if it means paying more than $500 extra in taxes this year.
“It doesn’t make me happy, but I’m not sure it’s unfair.”
The rising values are good news for local school districts, cities and other government agencies, who depend on property tax revenue for operations. Schools, for example, will get 64% of the $10-billion rise in Orange County’s tax roll.
“It’s the taxes that pay for roads and schools and everything else,” McErlane said. “So, what are you going to do?”
Times staff writer Renee Tawa contributed to this report.
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Hitting the Ceiling
With prices skyrocketing, homeowners could see a sizable increase in 1999 property tax assessments. A look at a typical home in Irvine’s Northwood neighborhood:
*--*
Year Market value Ceiling value 1989 $300,000 $255,000 1990 $302,000 $260,200 1991 $295,000 $265,400 1992 $285,000 $270,700 1993 $280,000 $276,100 1994 $250,100 $281,600 1995 $247,600 $284,900 1996 $247,600 $288,100 1997 $247,600 $293,900 1998 $252,500 $299,700 1999* $307,000 $305,700
*--*
*projected
Ceiling value: refers to the maximum taxable property value under Proposition 13, which is 2% per year.
Taxable Property Values
Rising property values and new construction have increased the value of Orange County’s total assessed properties for fiscal 1998-99 to $188 billion, up 5.6% from the previous fiscal year. Percent increase in net taxable property values from fiscal 1997-98 to fiscal 1998-99:
City: % increase
Anaheim: 4.46%
Brea: 5.88%
Buena Park: 2.85%
Costa Mesa: 2.31%
Cypress: 5.50%
Dana Point: 7.78%
Fountain Valley: 4.38%
Fullerton: 1.53%
Garden Grove: 3.48%
Huntington Beach: 4.34%
Irvine: 7.26%
Laguna Beach: 7.23%
Laguna Hills: 6.91%
Laguna Niguel: 6.16%
La Habra: 2.20%
Lake Forest: 7.34%
La Palma: 6.26%
Los Alamitos: 3.08%
Mission Viejo: 6.72%
Newport Beach: 8.12%
Orange: 4.26%
Placentia: 7.66%
San Clemente: 5.24%
San Juan Capistrano: 9.12%
Santa Ana: 3.61%
Seal Beach: 3.48%
Stanton: 4.22%
Tustin: 9.33%
Villa Park: 4.99%
Westminster: 4.19%
Yorba Linda: 6.63%
Unincorporated areas: 10.07%
Countywide: 5.6%
Note: Includes all residential and commercial properties, except churches, schools and other exempt properties.
Total Assessment Rolls
The taxable value of property in Orange County increased by $10 billion this year, to $188 billion. Officials said the increases are attributed to rising values of existing properties as well as new construction. Here is a breakdown for other counties.
*--*
County 1998* $ change* % change Orange $188.2 $10.0 5.6% Los Angeles $503.0 $15.0 3.1% Riverside $75.7 $1.2 1.6% San Bernardino $74.0 $2.0 2.8% San Diego $161.0 $11.0 7.3%
*--*
* in billions
Source: Orange County Assessor Bradley L. Jacobs: counties listed
