FIRST: ASSESS WHAT IS HAPPENING IN YOUR COMMUNITY

FIRST: ASSESS WHAT IS HAPPENING IN YOUR COMMUNITY

WHAT IS HAPPENING ON THE HOME SALE FRONT? • In California, 51.5% of the state’s mortgage holders and 51.8% of the state’s renters spend more than 30% of their monthly income on housing costs. The lull in foreclosure activity is likely to end as Lenders restart foreclosures that were frozen in October, November and December 2010. We expect an acceleration of foreclosures in the first quarter of 2011 as some properties have been sitting in foreclosure for up to 2 years. 38.1% of homes that sold in December 2010 had entered foreclosure during the past year. The all time high was February 2009 at 58.5%. December 2010, home sales were down 13.4% from December 2009 due to continued high unemployment and rising interest rates.

ALL CITIES ARE NOT CREATED EQUALLY Some cities are established communities with a minimum of new housing development while others are newer growing communities which saw huge residential and commercial development between 2003 and 2007. Some communities have large redevelopment areas while others have none. The mix of residential, commercial, and industrial properties can mean a difference in whether a city is expecting growth or declining values in any year from one use type or another.

PROPERTY MAKEUP BY USE TYPE The HdL Companies 909.861.4335 www.hdlcompanies.com

SECOND: DOES YOUR ASSESSOR MAKE RESOURCES AVAILABLE TO YOU THAT WILL ASSIST IN ESTIMATING CHANGES IN VALUES AND REVENUE IN THE COMING YEAR?

WHAT CAN YOU EXPECT FROM YOUR ASSESSOR? There are only a handful of county assessors that provide timely resources to cities during the budgeting process. Ask your assessor if he/she has a projection for value changes in your jurisdiction. Ask your assessor how aggressive the reductions are anticipated on successful appeals. Taxpayers won 76.6% of appeals heard in 2010. Be prepared for assessor’s to respond that they are not equipped to provide data until after the close of the roll in June which is too late to be useful in budget planning.

WHAT REDUCTIONS ARE ANTICIPATED FOR 2011-12? The granting of Commercial and Industrial Appeals resulting in the reduction in receipts during the year. Assessment appeal tax payer refunds are pooled countywide and bear no relationship to the appeals being filed in your city. Prop 8 Reductions – IN FEWER NUMBERS or none in some communities Properties in bank ownership being sold for less than the assessor enrolled values Continuing lower supplemental apportionments

Revenue Sources that are Pooled & Apportioned per AB-8 You get your city’s proportionate share of the revenue of: Supplemental Payments – sales transactions or new construction valued mid year – positive or negative. Roll Corrections - errors found or late enrollment of values Tax Payer refunds – overpayment of taxes Refunds from successful appeals which may encompass multiple years hitting a single future year .

PROPOSITION 8 REDUCTIONS Huge wave of Prop. 8 reductions impacted the 2008-09 through 2010-11 tax years. The largest hit counties were Merced, San Joaquin, Riverside, and San Bernardino While reviewed annually by the Assessor, recapturing will take time; as much as 10 years to recover depending on jobs, availability of funds for financing new home purchases and economic certainty.

MEDIAN/ AVERAGE SALES PRICE HISTORY

THIRD: HOW DO YOU PROJECT PROPERTY TAXES 5 YEARS OUT IN AN UNCERTAIN OR RECOVERING ECONOMY?

LOOKING FORWARD TO 2012-13 For 2010-11 there was a Negative CPI adjustment that was compounded by Prop 8 reductions, depressed sales prices, and Commercial/Industrial appeals that are poised to be heard. .753% CPI adjustment for 2011-12 applied to Real Property. For many agencies, property tax receipts will be lower in 2010-11 than those received in 2009-10 and flat in 2011-12. 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 2011-12. January 1, 2011 is the lien date for the revenues received in 2011-12 Fiscal Year. The next year of measurable property tax growth for most cities will be 2012-13 at the earliest.

BUDGETING CONSIDERATIONS FOR PROPERTY TAX ESTIMATES • The CPI for 2011-12 = .753% If budgeting beyond 2011-12 use 2%. • Are properties selling for more or less than in 2009? Account for increase or decrease. • If properties in 2010 sold for less, there is a potential for additional Proposition 8 reductions. • How much of the commercial and industrial successful appeals will be refunded mid-year and impact property tax receipts? Assessor can help. • Base year values in redevelopment projects are budgeted flat.

Unsecured values are expected to depreciate, budget 5% less than in the prior fiscal year. Completed new construction outside of the redevelopment agency- General Fund portion of the City? Was there any new growth? How much? For Non-Teeter Cities account for a delinquency of 3%-4%. Budget Supplemental revenues equivalent to 2010-11 receipts - don’t project increases. The VLF in Lieu is tied to citywide change in property values.

BUDGET CONSERVATIVELY Property Tax estimating is not a precise science. Legislative changes are an uncertainty that cannot be forecast. ie. Redevelopment changes being proposed by the Governor or other unanticipated changes in the property tax landscape as it is currently administered. 13. ABOVE ALL ELSE BE PREPARED TO ADJUST!!!

Paula Conewww.pcone@hdlccpropertytax.com (909) 861 - 4335

FIRST: ASSESS WHAT IS HAPPENING IN YOUR COMMUNITY