California Prop 13 Property Tax Limits – Update

South San Francisco, CA    August 30, 2017  

Property Tax

Prop 13 is ‘under attack’ and many neighbors would like to understand this issue better so here is an attempt to give some information with the intent it gets a discussion going amongst us. Prop 13 was approved by voters in 1978 which allowed the State of California a limit on property tax increases.  While Prop 13 has stabilized property taxes, local government agencies have added bond measures to the ballots allowing voters to approve monies for specific local needs such as Measure J for our South San Francisco School District. In addition our taxes have recently increased to cover the cost of updating our sewage infrastructure. Those costs are added to the property tax.

*Other Taxes

SALES TAX: The California Board of Equalization shows South San Francisco residents actually have one of the highest tax rates at 9.25% compared to Marin County at 8.25%  CLICK HERE

GAS TAX: The State Board of Equalization lists the additional excise/gas tax at $0.278/gal and there is concern this money will be diverted to other purposes so expect to see this issue on the June 2018 ballot. The Sacramento Bee shows a break down of these costs including $100 million to increase the number of trips by bike and on foot, $25 million for sustainable communities planning grants to local governments, $7 million total for transportation-related research and education at UC ($5 million) and CSU ($2 million)
CLICK HERE for article 

Currently Sacramento is working to remove Prop 13 stating it has reduced monies to the State coffers with the State Supreme Court ruling voter-initiated tax measures can be passed by a simple majority, no longer requiring a 2/3 vote.

While Prop 13 has not yet been overturned, that is the intent of many in our State Capital. While those on fixed incomes would be hit the hardest, everyone would feel the increase including renters as housing costs would go up.

The argument that Prop 13 has put a financial hurt on our schools and city services is met with a greater discussion about the 30+ year Redevelopment Agencies (RDA) ‘siphoning’ money from those entities to be used for new development infrastructure, etc. Menlo Park resident Jennifer Bestor explains how this worked CLICK HERE   “Circumventing post-Proposition 13 apportionment of local revenue, RDAs were able to take any increase in property taxes in their coverage areas — whether that appreciation was due to improvements, inflation, real-estate bubbles, or blight reduction.” South San Francisco started with one area of the City, the ‘Industrial East 101’ , which attracted new businesses and giving the area a foot hold for a new purpose: Biotech.We then moved onto including ‘Transit Corridors’ in the RDA.  At the time Governor Brown overturned the RDA, 2012, our City had 5 areas included in this special agency. <**see below for more info on the dissolution of the RDA> The City of South San Francisco RDA is now the ‘Successor Agency’ and more information can be found on the City website CLICK HERE.

 

Below is more information with the hope this helps neighbors with a better understanding on this complex issue and an overview of *some of the taxes* we are paying.

 

Your comments (and any corrections) are welcomed.

 

What is a tax?

A tax is a mandatory financial charge or some other type of levy imposed upon a taxpayer by a state or the functional equivalent of a state in order to fund various public expenditures. A failure to pay, or evasion of or resistance to taxation, is punishable by law

 

What is Prop 13:

California Proposition 13 (1978) Proposition 13 (officially named the People’s Initiative to Limit Property Taxation) was an amendment of the Constitution of California enacted during 1978, by means of the initiative power. It was approved by California voters on June 6, 1978.

 

Update:

State Supreme Court rules that voter-initiated tax measures can be passed by a simple majority and no longer require a 2/3 vote
August 28, 2017

Sacramento –  Senator Scott Wiener (D-San Francisco) offered the following statement after the California State Supreme Court ruled today in the Cannabis Coalition v City of Upland that voter-initiated tax measures can be passed by a  simple majority, and no longer require a 2/3 vote:

“The California Supreme Court just issued a profoundly important and positive ruling: going forward, when local communities place tax measures on the ballot via voter signature, the measures can pass with a simple majority, rather than a 2/3 vote. It’s hard to overstate how important this ruling is. Communities will now have a much easier time funding schools, transportation, and other critical needs. The ruling begins to undo the damage that Prop 13 inflicted on basic government services.”

 

WHAT DO YOU TELL A NEW NEIGHBOR ABOUT PROP. 13?

from Howard Jarvis Taxpayers Association (more info CLICK HERE)

From time to time, HJTA members write and ask what to tell a new neighbor who just doesn’t understand Proposition 13.Those who have owned their homes for a while, easily see the value of Proposition 13. Many of us remember that before Proposition 13 the average property tax rate in California was three percent of assessed value and there was no limit on annual increases.

In those days, if a house on your block sold for much more than you paid for your house, you shuddered in fear when you received your next property tax bill. Chances are, your new taxes would be based on what your new neighbor was willing to pay for his home. Things got so bad in the late 1970s that people were actually losing their homes because of uncontrolled tax increases.

Thanks to Howard Jarvis, Paul Gann and Proposition 13, the assessment rate is now only one percent for all California property and annual tax increases are limited to no more than two percent. When property is sold it is then reassessed at market value, but the rate remains at one percent and the new owner is then protected by the two percent cap on annual increases.

However, to a new neighbor who is from out of state, or new to the housing market, Proposition 13 may still be a mystery.

Here are some questions commonly heard from newcomers to the neighborhood and some answers you may find helpful.

NEW NEIGHBOR. What good is Proposition 13 to me? I’m not covered!

ANSWER. Every owner of property in the state is covered. Proposition 13 is Article XIII A of the California Constitution.

NN. Then how come I’m paying more in property taxes than some of my neighbors who have similar houses?

A. Under Proposition 13 you determine how much your property taxes will be. Your taxes are not based on your neighbors’ taxes, but are based on the price you voluntarily agreed to pay for your new home.

NN. We all get the same services, but I pay more. How can this be fair?

A. In California, just like other states, services have never been related to the amount you pay in property taxes. If services were tied to what you paid, you might see four fire trucks assigned to a costly home while only one would protect a less expensive residence.

In fact, property taxes are not allocated for specific services. They go into the general fund along with other taxes and it is local public officials who determine how the money will be spent.

NN. Well, it still seems like I’m paying too much. Don’t you agree?

A. We all feel that way, but in fact, thanks to Proposition 13, the tax rate for all Californians is only a third of what it was. If you think things are bad now, multiply your tax bill by three and see what you get.

NN. That’s easy for you to say, you’re still paying less than I am.

A. That may be true, but I’ve been paying for years. It’s the neighbors that were here ahead of you that paid for all these local improvements you now enjoy.

NN. I still don’t see what good Proposition 13 is to me.

A. Well, besides your lower tax rate, it makes your taxes predictable. In a few years when new houses sell in the neighborhood for two or three times what you paid, you will be protected. Under Proposition 13 your property taxes can’t go up more than two percent a year. You are going to find that very important when you get around to planning your retirement. If you ever find yourself on a fixed income, chances are, because of Proposition 13, you’ll be able to keep your home.

 

Where Do Your Taxes Go? The San Mateo County Treasurer and Tax Collector explain CLICK HERE

As a property owner in San Mateo County, you may have wondered how your tax dollars are distributed. This chart provides some helpful tax distribution and service information. The chart illustrates the distribution of the 1% ad valorem tax (based on the assessed value), and reflects percentages as of the 2014-15 Fiscal Year.

Although schools continue to receive the largest portion of your tax dollars, changes in State laws have reduced their share. The County provides health, welfare, human services and criminal justice programs with its portion. Cities provide fire, police and other community services. Special Districts, such as Flood Control and Sequoia Healthcare District provide other services to the community

 

 

 

**Redevelopment Agency Dissolution

Welcome to the Department of Finance’s (Finance) Redevelopment Agency (RDA) Dissolution webpage. This site will serve as the primary conduit for Finance to share information related to the redevelopment dissolution legislation and communicate with Successor Agencies (SAs), who are responsible for overseeing the winding down at the local level, and County Auditors-Controllers, who are charged with property tax distribution. Please visit this website frequently as information is regularly updated.

As part of the 2011 Budget Act, and in order to protect funding for core public services at the local level, the Legislature approved the dissolution of the state’s 400 plus RDAs. After a period of litigation, RDAs were officially dissolved as of February 1, 2012. As a result of the elimination of the RDAs, property tax revenues are now being used to pay required payments on existing bonds, other obligations, and pass-through payments to local governments. The remaining property tax revenues that exceed the enforceable obligations are now being allocated to cities, counties, special districts, and school and community college districts, thereby providing critical resources to preserve core public services.

To help facilitate the wind-down process at the local level, SAs were established to manage redevelopment projects currently underway, make payments on enforceable obligations, and dispose of redevelopment assets and properties.  Each Successor Agency has an Oversight Board (OB) that supervises its work.  The OB is comprised of representatives of the local agencies that serve the redevelopment project area: the city, county, special districts, and K-14 educational agencies. Oversight Board members have a fiduciary responsibility to holders of enforceable obligations, as well as to the local agencies that would benefit from property tax distributions from the former redevelopment project area.

Finance is responsible for implementation of the RDA dissolution statutes, (AB)x1 26, AB 1484, AB 471, and SB 107, and oversees the winding-down of the SAs.

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