San Francisco Chronicle: Paying the Price for Prop 13

[marmar]

Property tax revenue plummets with home values
Carolyn Said, Chronicle Staff Writer

Sunday, January 25, 2009



California could pay the price for the foreclosure crisis for years to come, thanks to Proposition 13, the 1978 voter initiative that caps property taxes.

As banks feverishly dump foreclosed homes at cut-rate prices, and as neighboring homes change hands at similar bargain-basement rates, those amounts are enshrined as the new basis for determining property tax until the homes are sold again. Under Prop. 13, that basis can rise a maximum of just 2 percent a year, even if the home is worth significantly more. The consequence is likely to be a revenue crunch for the public services funded by property tax revenues.

"This is going to have a long-term impact on the state budget and on local budgets," said Jean Ross, executive director of the nonpartisan California Budget Project in Sacramento. "It means that even after the economy recovers, state and local government budgets will not recover fully."

Gus Kramer, Contra Costa assessor, puts it in stark terms.

"It's going to be an absolute economic disaster in Contra Costa County and surrounding areas," he said. "Everyone thinks this is like the last recession with values going down and that when they come back there will be a resurgence - but it's not going to be like that. It will be years before (the tax roll) recovers because all these people are selling (distressed) homes, banks are selling at deep discounts, values are going down from 50 percent to 75 percent. The people buying them will hold onto them for five, six, seven years. The tax base is not going to recover anytime soon." .........(more)

The complete piece is at: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/01/25/MNV7155VSC.DTL&type=business&tsp=1

[DainBramaged]

1. Oh well they reap what they sow. Someone should have thought about this sooner

BUT a few very wealthy people profited and left America holding the bag. It is looking like a real depression facing Obama, no two ways about it.

[mrreowwr_kittty]

6. People really don't think these things through.

There's nothing wrong with tax cuts at particular times but it is the height of colossal stupidity to make them permanent and enshrine them in the state constitution.

[Taverner]

2. When I was Seven Years Old I knew Prop 13 was a bad idea

It was using a hammer instead of a screwdriver

[rvablue]

3. Yep. I've been chanting this on every post re: the CA budget crisis

The question is, will the legislature grow a backbone and repeal Prop. 13, because it is unlikely CA voters will do the right thing and do it themselves.

[Merlot]

4. Prop 13 also gave us the 2/3 majority for budget passage

which is why we don't have a budget. The majority should be able to pass a budget, but the obstructionist repubs won't let it pass.

There was some talk of putting it on the ballot to repeal the 2/3 majority requirement. Campaign Courage sent me some emails on that last fall, and I haven't heard of any action on it yet.

[bluestateguy]

5. It was 30 years ago

One often forgets what led to Prop 13 in the first place: mushrooming home values, and ever increasing property taxes which forced long-standing homeowners out of their homes, as they were unable to pay the taxes. These were people who purchased reasonably priced homes in the 1950's and 1960's, well within their means and their incomes at the time. But as the value of their homes escalated out of control, you had little old ladies being forced out of their homes, at property tax rates they could not afford to pay.

The root of this problem was irresponsibility by speculating home buyers (or "flippers" looking got make a fast buck), dimwitted borrowers buying houses they could never possibly afford to own, and unscrupulous banks and loan officers, taking advantage of people with ARM's and subprime mortgages, and encouraging people to lie about their incomes in loan applications.

[mrreowwr_kittty]

8. The understandable but it was stupid to make it permanent.

Also, it's possible to design the tax code so that elderly and low income people aren't punished by ballooning home values.

The root of this problem was irresponsibility by speculating home buyers (or "flippers" looking got make a fast buck), dimwitted borrowers buying houses they could never possibly afford to own, and unscrupulous banks and loan officers, taking advantage of people with ARM's and subprime mortgages, and encouraging people to lie about their incomes in loan applications.

It's not just flippers and dimwits who have been buying expensive homes in CA. For the past 10 years, pretty much anyone buying even a modest home in many areas of the state was paying top dollar. Prop 13 has caused an incredibly unfair situation where young people are bearing the lion's share of the tax burden, while well-heeled baby boomers are paying a pittance.

[GodlessBiker]

7. Another lesson: Don't rely on property taxes when RE values are in a bubble.

Local governments drank from the inflated property value teat, then cry when the milk runs dry.

Property taxes are a bad way to fund government anyway.

[mrreowwr_kittty]

10. Then they go and give big companies all kinds of subsidies to locate there

Only to have those companies take the money and run after a few years, having not provided nearly the number of "good paying jobs" they promised. Why people continue to elect the morons who run their states like this never ceases to amaze me.

[catzies]

9. Ah yes, Prop 13. The third rail of California politics.

And it's been the death of us, and was one of the things I thought of in President Obama's speech when he talked about us taking the easy way out of everything for years and that's why we're in the mess we're in. Prop. 13 was a selfish fix to a nonexisiting problem and proves citizens chose the ME over the WE. Our schools have suffered and we have more prisons - and more prisoners - than anyone else. We have let ourselves fail ourselves miserably. I'm a homeowner so yes it does affect me but I believe in paying my fair share and I will and think others should too.