For decades, Proposition 13 has been cast as the bane of cash-strapped local government, limiting property tax revenues even as California's housing market soared.
But this week, as county assessors reported rising tax bases despite the housing slump, they credited the 30-year-old law -- revealing its unexpected role as an economic stabilizer.
Counties across Southern California reported that their overall tax bases grew compared with last year's. The corresponding revenue increase occurred despite falling home prices and even though assessors have reduced the property values on nearly 600,000 homes in five Southland counties in the last few months because of the real estate downturn.
"The big factor is Prop. 13," said Los Angeles County Assessor Rick Auerbach, explaining his county's 6.9% increase in the total property assessment roll.
L.A. County's property tax roll rose to $1.1 trillion, an increase that exceeded the assessor's estimates. San Bernardino County's rose 5.1%, Ventura County's increased 3.2% and Orange County's rose 3.7%. Even Riverside County -- hit hard by foreclosures -- posted a 1.45% increase.
Proposition 13, approved by voters in 1978, limits tax increases on a property to 2% a year as long as that property doesn't change hands. It kept tax rates lower than housing values during the long real estate boom. But because the 2% increases can be assessed even during housing downturns, governments can count on the extra revenue as long as most home values in a county have not fallen below the assessed values.
Although housing prices have dropped , many homeowners purchased their homes long enough ago that their property is still worth more than its assessed value. If a home was purchased for $500,000 in 1998, for example, it could not now be assessed at more than about $609,500, whatever its market value.
Another factor in the increased assessment roll is property changing hands. Under Proposition 13, when a property sells, it is reassessed at its market value.
Jack Kyser, senior vice president and chief economist at the Los Angeles County Economic Development Corp., said the numbers show that Proposition 13 is a "stabilizer" that prevents soaring tax bills for homeowners but also prevents tumbling tax revenue for governments.
He also noted that some communities in Southern California remain largely buffered from the housing slump, citing Marina del Rey and the Wilshire Corridor stretching from Koreatown to the Miracle Mile as examples.
"It surprises people," he said, "but in some cases in L.A. County, there is no downward price move."
Several cities saw significant increases in their property tax bases over the last year:
* Beverly Hills, long a pricey address, had an 11.8% increase.
* Santa Monica, where new development included hospital construction, rose 10.8%.
* Pasadena, where several mixed-use housing-commercial complexes opened, had a 10.2% increase.
* San Gabriel, where there was new downtown construction, had a 10.2% increase.
* Seal Beach, where there was new retail development, had a 9.89% rise.
Much of Southern California has been battered by falling home values.
State law allows homeowners who believe their property values have dropped below their assessed value to have those values reconsidered, and thousands have done so. Over the last few months, county officials have been reviewing properties in their jurisdictions that were purchased after 2004, which are most likely to have lower values than the purchase price.
Los Angeles County reviewed 318,000 residences and lowered the assessments of 128,000, Auerbach said.
Ventura County reviewed 43,000 residences and reduced the values on about 34,000. Orange County looked at 170,000 and lowered the value on 127,100. San Bernardino County reduced the value of 84,000.
The numbers are starkest in Riverside County. Larry Ward, the county's assessor, clerk and recorder, said that the property tax base in the county nearly doubled during a construction boom from 2003 to 2007, climbing from $125 billion to $240 billion. Last year, he said, the county posted a 17% increase.
Ward said that county officials reviewed 270,000 properties purchased since 2004 and determined that the owners of about 200,000 homes will see a reduction in their tax bills.
"It comes with the territory," said Ward. "We were one of the fastest-growing counties, not in the state but the country. And now, we've kind of given some back."
Proposition 13 severely restricted the state's ability to raise property tax rates and is blamed for drastic cuts in some government services.
Although officials agree that they are seeing its stabilizing effect, many critics maintain that the measure continues to stymie the state's ability to provide services and fix its aging infrastructure. Without Proposition 13, they argue, governments would be taking in more property tax revenues.