Big Bubble, Big Mess
Declining property values mean fewer tax dollars.
Thursday, December 11, 2008
The housing market decline has hit Monterey County hard, sending property values– and property tax revenue– plummeting.
Officials expected property taxes to generate $115.8 million for the 2008-09 fiscal year, a growth rate of 5 percent from the prior year’s budget. Actual revenue is $114.8 million.
Next year, Monterey County may lose money in property taxes– a first, says Monterey County Assessor Stephen Vagnini.
“In the last six to eight years, assessed valuations in Monterey County have increased anywhere from 7 percent to 10 percent a year, consistently,” he says, explaining his 5 percent growth rate projection at the start of the 2008-09 budget process.
“But over the course of the year, the market was starting to turn the other way, so I lowered that projection to 4 percent, then 3 percent. The actual growth rate is 2.24 percent.
“It was impossible to predict because we had a freefall in areas like Seaside, Marina, South County, North County. The same areas where property values dramatically increased– they came dramatically falling.”
Vagnini says his office lowered the assessed value on 14,000 properties in Monterey County, which means less property tax for local coffers.
“Of those 14,000 properties, we’re probably going to end up lowering those properties again and there will probably be other properties that we’re going to lower for a first time. Right now, we’re processing all the sales that have occurred in 2008, then we look at the entire county as of Jan. 1, 2009 and try to identify properties that may be over-assessed. At that point, we’ll probably have a loss in the assessed value in Monterey County.”
This means, for the first time in Vagnini’s 23 years on the job, the county will likely lose money in property tax revenue. “We may have a 2 to 3 percent decline– I’ve never seen a decline in value. Just like everything we’re seeing today, it’s unprecedented. We’re in unchartered water.
“If you look at a long-term historical appreciation of homes, homes are not supposed to appreciate by 10 percent a year. In California, homes became an investment, and then people started looking at them as lines of credit and the values just kept going up and up and up and up. People kept saying, “‘The bubbles going to burst.’ It’s like chewing gum: The bigger the bubble gets, the bigger the mess is going to be.”