Where do my property taxes go?

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Question of the week: Where do my property taxes go?

Answer: If you own property in California and have not yet received your property tax bill you may want to go to the tax agency for the county where the property is located and download a copy.

For those who have received our tax bills for the 2022-23 fiscal year, reading through the bill can raise several questions. Below are links to WR&MU from the past that have covered other topics regarding property taxes, but because this is an election year, the question of the week is somewhat pertinent.

Reading your Annual Secured Property Tax Bill, in the upper right quadrant is a detail of taxes due for your property.

The first line is the General Tax Levy of 1% of your property’s assessed value. This amount is set at 1% by the State, and due to Prop 13 any increase is limited to 2% per year increase in assessed property value. For instance, if your property is assessed at $500,000 the general levy is $5000 for the year. If property values increase during the year, the maximum assessed value for your property for 2023-2024 fiscal year is $510,000 and your general tax levy of 1% will $5100.

This general levy goes to the county in which the property is located. The county then distributes the funds to local governments and agencies within the county based on funding formulas, and of course budgeting controlled by elected officials.

Below the general tax levy section is, on almost all tax bills in California, “voted indebtedness.” These amounts are to pay for bonds issued by agencies for capital improvements and construction and have been placed on the property tax bill by voters. For instance, in Long Beach, we have three such levies on our tax bill, totaling about 14.5% of our total tax bill with the funds paying for bonds issued by the Metropolitan Water District, Long Beach Community College District, and Long Beach Unified School District.

Below the indebtedness items are direct assessments. These fees are levied against properties in the county where the property is located and go to specific agencies that provide services or product to residents. For instance, direct assessments may be for sanitation districts to maintain sewers and treatment plants, water delivery and filtration infrastructure. In Los Angeles County there is a levy for trauma and emergency services that was originally a measure passed by voters in 2002, the amount of the levy having been raised twice by the LA County Supervisors to increase revenue to support the budget of the LA County Department of Health Services.

Using our tax bill in Long Beach, Los Angeles County, the total taxes due equal almost 1.3% of our assessed value. Because of the 2% limit on increases in assessed value, our assessment is 46% higher than our purchase price in 1998; without Prop 13 our tax bill would be about two and a quarter-times higher than the one we received last week.

 Breaking down our total tax bill, the general levy is 67% of the total bill and the levies for bond payments (direct indebtedness) and direct assessments total 23% of our total bill.

Looking ahead, the later charges will likely be even greater percentages of our taxes as politicians and voters approve other assessments and indebtedness to be paid via the tax bill. It should be noted that the State Constitution limits the amount of additional levies (ad valorem taxes) that can be imposed on property owners to 1% of the assessed value of the property and increases are limited by the 2% per year assessment adjustment. This means, theoretically, that voters and elected officials could double, triple, quadruple…your tax bill by passing measures that equal 1% of your current assessed value, to be paid on top of the 1% general tax levy and the other assessments listed on the property tax bill.

For instance, on our ballots in Long Beach this year is a measure placed on the ballot by LBUSD for a bond that will raise funds for school retrofitting and construction, adding an additional $60 per $100,000 of assessed value, on top of the current $125 per $100,000 if approved by 55% of voters. The measure is likely to pass and improving schools is always a priority for residents and voters, pushing the LBUSD portion of the tax bill to close to 10% of the total tax bill.

To finish, one important take away, the State of California does not receive any revenue from property taxes. All property taxes collected remain in the county in which they are collected.

When you look at your property tax bill, and then you look at your ballot, understand the connection between the two—your actions on one may impact the other! As someone once said, elections have consequences.

Other WR&MU’s addressing property taxes:

Have a question? Ask me!

Rates for Friday October 21, 2022: The good news is that rates are up by the least amount week-to-week in past ten weeks, the bad news is that rates have increased 10-weeks in a row. Consensus seems to be growing that the Fed will increase its benchmark rate to over 5% in 2023, despite prior Fed comments that they were looking at a 4.25-4.5% high end. This will continue to be priced into the markets.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30-year conforming                              6.99%          Up 0.115%

30-year high-balance conforming        7.49%          Up 0.115%

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

I am hopeful, so very, very hopeful, that when I write the WR&MU next Friday I will be excited to see the Phillies in Game 1 of the World Series that night. Phillies phans are appreciative and welcoming of the good vibes and cheering they are getting from Dodger fans—can you believe Giants fans are rooting for the Padres?!? On the other side, in the American League, even many life-long Yankee detesters (grandma Sis told not to say hate) are rooting against the Astros.

Whoever wins in the National League, both American League teams will be tough to beat. In the meantime, as they say in Philly, Ring the Bell! (Get it, Liberty Bell…Philadelphia…😊)

Have a great week,

Dennis

Past Weekly Rate & Market Updates can be found on my blog page at my website www.DennisCSmith.com/my-blog