Some Sacramento area homeowners face big property tax hikes

Published: Tuesday, Jul. 9, 2013 - 12:00 am | Page 1A
Last Modified: Sunday, Nov. 17, 2013 - 11:50 pm

Thanks to the resurgence of the real estate market, many homeowners in the Sacramento region will see property tax increases as high as 30 percent this year.

The hikes will come as a surprise to people who think property taxes in California cannot rise more than 2 percent annually, as voters approved 35 years ago in Proposition 13.

The 2 percent limit doesn't apply to homeowners who received a significant tax cut under a separate 1978 law intended to protect them in a downturn – and whose home value still remains below their inflation-adjusted purchase price.

About 300,000 homeowners in the region received so-called Proposition 8 reductions tied to falling home values during the fallout of the housing market, some seeing their property taxes slashed more than 50 percent. As the market rebounds, so will tax bills for those homeowners.

The Sacramento County Assessor's Office plans to post new 2013-14 tax assessments on its website Friday and send bills in October.

Rising values have resulted in fewer Sacramento area residents being underwater and helped others grow wealthier on paper. A March report by real estate data firm CoreLogic found that more than 22,500 homeowners in the four-county region gained enough equity to rise above water the last few months of 2012.

And local governments, which suffered deep budget cuts because of lower property tax revenue in the last five years, will benefit from higher assessments. Sacramento County projects a slightly greater than 4 percent increase in the assessed value of property.

But Linda Bennett of the NeighborWorks HomeOwnership Center in Sacramento, which provides financial counseling, feared that suddenly higher tax bills will hurt residents who struggled to hold onto their homes during the market downturn.

"For people who hung in there, paid their debts, didn't default and didn't walk away, this is going to be a slap in the face," Bennett said. "I imagine there will be a huge uprising at the assessors' offices."

Dr. Gabe Runner worries about higher property taxes on his home in Tahoe Park. He and his wife bought their 913-square-foot home in 2007 for $276,500 because he was going to the University of California, Davis, School of Medicine in the neighborhood.

In 2008-09, the county assessed their property's value at $267,927, records show. A year later, the county said it was worth $140,957.

That resulted in a tax bill reduction from $2,955 to $1,560, a 47 percent drop, according to real estate website Zillow.

Runner eventually plans to move out of his two-bedroom, one-bath home because of work or having more children. He said higher property taxes could force him to sell instead of renting out the home.

"It's upsetting," he said. "If we were to stay here, it would mean saving less money for retirement and for the kids' college fund. It's money disappearing for taxes."

County assessors said they expect an increase in appeals of valuations, much like they had when the market soured several years ago.

Still, some homeowners may see higher taxes as a welcome tradeoff for a stronger economy, said Jeff Michael, an economist at University of the Pacific.

"Some of them will gladly pay a little more on their property taxes so they won't be underwater on their mortgage," Michael said.

Most of the Proposition 8 residential properties in Sacramento and Placer counties will receive higher valuations in the fiscal year starting July 1, county assessors there say. Counties determine housing values by looking at the sale of similar homes in the same communities.

In Sacramento County, the biggest increases are in the areas of Oak Park, the Florin area, North Sacramento including Del Paso Heights, and the Parkway area, said Assessor Kathleen Kelleher. Those areas saw some of the biggest home price declines in the region.

Approximately half of the Proposition 8 residential properties in Yolo County will increase in value, Assessor Joel Butler said.

El Dorado County, which has had a more stable real-estate market than other counties in the region, expects very little change with its Proposition 8 residential properties, said Assessor Karl Weiland.

The Proposition 8 increases will vary by area: In Placer County, they will range from 2 percent to 30 percent; in Sacramento County, from 8 percent to 25 percent; and in Yolo County, most will fall in the 15 percent to 20 percent range.

Under Proposition 8, property values can increase without limit until they reach their base value, often called the Proposition 13 value and typically set at the time of purchase. Once a home reaches that value, the assessment is once again capped at 2 percent annual increases.

About a third of the Proposition 8 residential properties in Sacramento County will reach that value in the coming fiscal year, while a much smaller percentage of those properties in other counties will return to their base values.

That means homeowners will continue to face similar increases in coming years if the market continues to improve.

The recent recovery of the housing market marks one of the few times since the passage of Proposition 13 that the state has had widespread and large property tax increases, said Jon Coupal, president of the Howard Jarvis Taxpayers Association, which is named after the man who helped get the law passed.

Proposition 8 was pushed the same year as Proposition 13 by taxpayer groups that wanted to further protect homeowners from downturns in the real- estate market, Coupal said.

"The law is working exactly as it's supposed to," he said.

But Bennett of the NeighborWorks HomeOwnership Center said it wasn't protection enough.

"I can't believe they didn't put a trigger in there, a cushion," to phase in property tax increases when market values go up, she said.

Call The Bee's Brad Branan, (916) 321-1065. Follow him on Twitter @bradb_at_sacbee.

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