Monthly Newsletter | April 2016

In This Issue:

For April's Map of the Month, we took a look at timber as a percentage of all natural resources and agricultural production. We also feature a map detailing waste disposal sites by facility type.

CED's research experts are continuing to work on collecting the most up-to-date information to assemble Economic and Demographic County Profiles. Check out Del Norte's County Profile that was sponsored by Del Norte's Local Transportation Commission.

Since April is both income and property tax month, CED'S Associate Director of Research, Michael Suplita highlights the top seven things you need to know about California property taxes

Dan Ripke, 
Director

Trend: Lower Unemployment Rates in CA and the CSU, Chico Service Region
  • Butte County is experiencing the lowest unemployment rate in the region at 7.2 percent.
  • Colusa County is experiencing the highest unemployment rate in the region and state at 21.6 percent. The industry suffering the most job loss in the past year is state government with a percent change of -14.3 percent. Other industries affected negatively are the farm, wholesale trade, and financial activities industries.
  • 9 industries experiencing overall job gains: construction, trade, transportation and utilities, information, financial activities, professional and business services, educational and health services, leisure and hospitality, other services, and government.
Timber and Trash: A Look at Natural Resources for Earth Month

This month, the Center for Economic Development selected two maps featuring important aspects of natural resource management in California. The first map examines timber as a percentage of all natural resources and agricultural production in each county for 2012. The second map pin-points waste disposal sites by facility type throughout the state.

  • Timber accounts for only 0.5 percent of all natural resource and agricultural production in the state of California. 
  • For the North State, however, timber holds a greater importance - accounting for 3.4 percent of all natural resource and agricultural production. 
  • The county with the highest percentage of its natural resource production in timber is located within our region - in Trinity County, timber accounts for 48.7 percent of all natural resource and agricultural production. Read More.
  • By far, the most common facility type is solid waste and transfer facilities, with 144 total sites. Of these, 12 sites are located in the CSU, Chico Service Region.
  • Of the 16 industrial or toxic waste facilities located in California, 3 can be found within the CSU, Chico Service Region. 
     
  • Overall, the CSU, Chico Service Region has a high number of solid waste and transfer facilities but relatively fewer specialized disposal sites compared to other parts of the state. Read More.
     
     



Form more information or to sponsor a profile contact Michael Suplita 
at (530)  898-4598 or [email protected].



When:
Thursday, May 26, 2016

Time:
8:30 AM - 4:30 PM
Cost:
  • $50 per person in advance
  • $60 per person at the door
Location:
 
You Will Learn How To: 
  • Successfully access the global marketplace to grow your business.
  • Locate the best sales opportunities.
  • Identify financing programs to fund new opportunities.
  • Export financing.
  • Find various types of credits; commercial terms.
  • Insure against possible risks.
  • Address foreign currencies and exchange rates.
  • Properly ship products and get paid
  • And much more!
 
 
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 April is Not Just Income Tax Month, But Also Property Tax Month 

Many of you have mortgage companies that pay your property tax out of an escrow account so we often do not think about when our property taxes are due or the assessed value of our homes or investment properties. As April, is not just income tax month it is also the property tax month (YAY!) for those of us who choose to hold on to our cash until the last minute and pay in two equal payments for the year I think it is fitting to highlight some of the intricacies of the California property tax system:

1. In California, property taxes are NOT based on the true market valuation of property.

Proposition 13 limits local governments from increasing the assessed value of a given property more than 2 percent in any given year, unless the property changes ownership or undergoes construction. 
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  • At the time of purchase, the county's assessor's office has one year to re-assess the value of your property to its current market value but during times of large property price inflation, a large disparity between the assessed value of the property and its actual value appears.
  • Often times, the longer the property is owned without changing hands, the greater the disparity. 
  • businessman_at_desk.jpgBecause many properties are taxed based on a value assessment that is much lower than the properties actual market value when the property is sold, there is often a very large increase in the assessed value when a property is sold, which is an important consideration when making a real-estate purchase.
2. California's property tax system is inherently unfair.
  • Although the Supreme Court has upheld Proposition 13 when challenged using the equal protection clause of the US Constitution there are often large disparities in the property tax burden from neighbor to neighbor. 
  • The disparities are especially noticeable on large property purchases such as agricultural land or in areas of rapid real-estate value growth. 
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For example, suppose you own a home in a nice Bay Area neighborhood worth over a million dollars and purchased the property in the 60's. After 1978 the assessed value has only be able to go up as much as 2 percent a year, assuming a property value of $75,000 in 1978 and an increase of 2 percent every year the property would have an assessed value of around $150,000 today. Over the  35 year period your property tax burden would have increased from $750 per year to $1,500 per year. 

If a neighbor's home (of similar value) sold, and the assessed value finally caught up with the true market value of the property, the new property owners tax burden would be  around $10,000 per year (1% of $1,000,000). That leaves a discrepancy between the two party's tax burdens of $8,500 per year. 
  • The lack of equality in the tax burden is so substantial that it has become an economic hardship for younger generations to purchase their first home. 
3. California's property tax system provides an economic disincentive for retirees to relocate or downsize. 

This is important to think about for a large number of people. 
  • If you are nearing retirement age and arefamily_home_savings.jpg thinking about relocating or purchasing a smaller home it is important that you consider the possibility that your new home, however much smaller or in a less expensive area, may require you to pay higher property taxes. 
Consider our previous example. If you were to sell your million dollar Bay Area home and purchase a $375,000 home in Chico, your property taxes would increase from $1,500 to $3,750 per year.
  • This is often the case with people that have lived in their homes for extended periods of time. 
  • This is an important consideration for communities who base a large portion of their economy on attracting wealthy retirees from the larger cities. This particular issue holds true for Northern California, where wealthy retirees are economically disincentivized to bring new money and relocate here.
4. YOU CAN REQUEST TO HAVE YOUR ASSESSED VALUE LOWERED! 

Proposition 8, an amendment to Prop 13, allows for temporary downward adjustments in assessed property values for declining true market values. 
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  • Unlike the base assessment, your adjusted assessment can be raised to reflect true market values each year regardless of percentage increase (does not have to follow the 2 percent rule, until the assessed value is equal to the base assessment). 

 
  • If you feel like your property is worth less on the open market than its current assessed value, you can easily request a FREE re-assessment.
5. Propositions 13 and 8 have allowed countless people to age in their family homes.
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Due to large fluctuations in property values long time average increase in property values in most markets, it would be difficult for a person to plan their financial future with the uncertainty of property taxes in their budget.

 
In the example used earlier, it is likely that if you purchased your home prior to 1978 and your property tax burden increased from $750 per year to $10,000 you would have had to move long ago. 

 
6. The State Board of Equalization (BOE) allocates property taxes to the county in which they were collected.


The BOE's job is to make sure that there is uniformity among county assessment practices.

The only tax that the state does not allocate back to the counties is the property tax generated from privately owned rail cars. 

7. Parents can transfer property to their children without triggering a reassessment.

family-bike-ride.jpgParents should check with a tax attorney prior to transferring property to their children in order to not trigger the reassessment, but generally, a parent can transfer their residence and property worth up to one million dollars to their children without it having to be reassessed. 

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