PROPERTY TAX REVENUEGOT YOU DOWN?

CSMFO Conference Los Angeles – February 18, 2009

The HdL Companies 909.861.4335

Sales Tax Property Tax

Municipal Software

BUDGETING PROPERTY TAXESIN THIS REAL ESTATE MARKET

CSMFO Conference Los Angeles – February 18, 2009

The HdL Companies 909.861.4335

Sales Tax Property Tax

Municipal Software

VALID PROP 8 REDUCTION If the market value of property as of January 1st

(lien date) is determined to be lower than the factored Prop. 13 value (usually the purchase price factored by 2% per year) the assessed value will be lowered to the market value.

The lower adjusted value will be reflected on that year’s annual tax bill, which is mailed by the Tax Collector in September.

IMPORTANT: A Prop 8 reduction is a temporary reduction and does not change your base year value.

VALID PROP 8 REDUCTION

INVALID CLAIM FOR A PROP 8 REDUCTION

Proposition 8 Reductions Huge wave of Prop. 8 reductions impacting

2009-10. Estimated at over $250 billion state-wide. Hardest hit counties saw 7%-12% AV

reduction. Merced 15.9%, Riverside 11.9%, Solano 11.4%,

San Joaquin 10.9%, San Bernardino 9.4%, Yuba 8.6%

All communities not created equal. Expect 2010-11 Prop. 8 reductions to be less

severe. While reviewed annually-reinstatements will

take time.

Proposition 8 Value ReductionsChange between 2008-09 and 2009-10 – Largest % Decline

Source: HdL Coren & Cone

The little understood elements of Property Tax

Apportionment (AB-8)

Shared (pooled) Revenue Sources-General Fund Supplemental Revenues Assessment Appeal - Tax Payer

Refunds Roll Corrections between tax years Redemption allocations in Non-Teeter

Cities

Property Tax Issues to consider as you Prepare your Agency’s Budget

CPI for 2010-11 has been set at a negative .237%. Properties that have not already been reduced per Prop. 8 will receive a reduction.

With a continued decline in SFR sales prices, year over year, Proposition 8 reductions are still likely in 2010-11 in some jurisdictions.

Commercial and Industrial appeals have started to be filed, reductions will lag 1-2 yrs.

The VLF in Lieu allocation is tied to year over year assessed value change. This will be lower in 2010-11 for most cities.

LOOKING FORWARD TO 2012-13

For many agencies, property tax receipts will be lower in 2010-11 than those received in 2009-10.

While economists are suggesting that the economic recovery has begun, it won’t be fast enough to impact property values and the related taxes for 2010-11.

The next year of measurable property tax growth for most cities will be 2012-13.

REAL ESTATE MARKET UPDATE

CSMFO Conference Los Angeles – February 18, 2009

The HdL Companies 909.861.4335

Sales Tax Property Tax

Municipal Software

Home Sales The median price of an existing single

family detached home in December 2009 was $306,820.

The median price increased by 8.4% from December 2008.

Homes sales have increased on a year-over-year basis for the last 17 months.

41% of all homes sales in December 2009 were properties that were in foreclosure, down from 57% in December 2008.

Orange CountyDetached Single Family Sales (January 2000 to December 2009)

-25.4%

Source: HdL Coren & Cone

Solano CountyDetached Single Family Sales (January 2003 to December 2009)

67.9%

Source: HdL Coren & Cone

Foreclosures Hardest hit sub-markets represent 25%

of the state’s housing stock and account for more than 50% of the default activity in 2009.

Number of mortgage default notices filed in 4Qtr 2009 fell by 24% from the prior quarter.

Federal actions not providing much relief.

NODs peaked in the 1st quarter of 2009. Highest default counties were Merced,

Stanislaus & Riverside.

Negative Equity Drives Foreclosures

California Foreclosure ActivityJanuary 2006 – December 2009

Source: RealtyTrac

SB 1137

California ForeclosuresPercent of Households – 20 Largest Counties

Source: RealtyTrac

Unsold Inventory Unsold inventory index for existing,

single-family detached homes in Dec. 2009 was 3.8 months, compared to 5.6 months in Dec. 2008 and 13.4 months in Dec. 2007.

Long-term average of unsold inventory is 7.2 months.

Greatest supply is in the high end of the market $750,000 to $1,000,000+.

Many homeowners without an urgent need to sell are keeping homes off the market amid falling prices.

Unsold Inventory IndexJanuary 1988-July 2009

0

2

4

6

8

10

12

14

16

18

20

Jan-88

Jul-88

Jan-89

Jul-89

Jan-90

Jul-90

Jan-91

Jul-91

Jan-92

Jul-92

Jan-93

Jul-93

Jan-94

Jul-94

Jan-95

Jul-95

Jan-96

Jul-96

Jan-97

Jul-97

Jan-98

Jul-98

Jan-99

Jul-99

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Source: California Association of Realtors

Long Term Avg. 7.2 months

Impact on Redevelopment Agencies

Source: HdL Coren & Cone

Questions to Ask When were my project areas adopted? How much new development occurred

during the development “boom”? What is the mix of commercial,

residential, etc…? What is the current vacancy rate for

commercial, industrial uses? How much vacant land is in the RDA?

Recovery ain’t what it used to be! Recovery will vary significantly by

region. Prop. 8 reductions will continue to have a

negative impact on revenues. Commercial property appeals will

increase and value reductions will occur through 2011-12.

Impact on VLFAA - property tax in-lieu of VLF.

Many economists do not expect property values to fully recover until 2014.

Contact InformationPaula Cone

pcone@hdlccpropertytax.com

Andy Nickersonanickerson@hdlccpropertytax.com

www.hdlcompanies.com909.861.4335

Rob K. Braulikrbraulik@ci.fairfield.ca.gov