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.
