By Jon Coupal
Fall is the time for pumpkins, Halloween, and - even more scary - property tax bills. If you own a home, you have probably already received your bill from your County Tax Collector. The bill is usually divided into two installments and tells you how much in substantial penalties you will pay if you are late. Although mistakes on property tax bills are not common, they do occur. Moreover, the bills can be downright confusing so it is worthwhile for every property owner to review their bill and to understand the various charges.
The best way to check a tax bill is to have your previous year's bill handy for reference. That way, if there has been any increase, you can tell which category of levy got raised. There are three categories of charges on the typical property tax bill. They are the General Tax Levy, Voted Indebtedness, and Direct Assessments.
General Tax Levy
The General Tax Levy is what most people think of when talking about property taxes. It is based on the assessed value of land, improvements and fixtures. This charge usually makes up the largest part of the tax bill and it is the amount that is limited by Proposition 13, which was approved by the voters in 1978. Prior to Prop. 13, different communities had different tax rates - up to 3 percent or even higher. Under Prop. 13, the general tax levy cannot exceed one percent. But one percent of what?
Prior to Prop. 13, homes were assessed on current market value. That means if property values go up quickly, so did your tax bill. This was probably the reason why California voters passed Prop 13: It says that even if your property values go up quickly, your general tax levy cannot go up more than two percent in any one year.
What if your general tax levy goes up by more than two percent in one year? Is this illegal? Maybe. If your property's value was ever reduced in previous years, it might be treated differently by your county assessor. You should get an explanation from your assessor to make sure. Also, if you improved your property with, for example, a swimming pool or addition, your "base" value might be increased. Can assessors reassess your whole property if you get an improvement? No! Just the value of improvement should be reflected in the increase.
Your tax bill might also reflect (most do) a smaller additional amount for school bonds or other so-called "general obligation bonds." These taxes to repay voter approved debt will appear every year until the bonds are paid off (usually between ten and thirty years). Up until last year, any tax to repay these bonds had to be approved by a two-thirds vote of the citizens. However, with the recent passage of Prop. 39, school bonds (which are repaid only by property owners) can now be approved by a 55% vote of all voters.
Finally, most homeowners will find a category of taxes called "direct assessments" or "direct levies" on their property tax bills. Some can be for so-called "benefit assessments" which are imposed to pay for sidewalks, streets or street lighting in your immediate neighborhood. Some are to pay for property related services, like trash collection. For many communities, however, home-owners receive a separate bill for services. What's the difference? Usually it is based on the convenience of the city. But watch out! Anything that appears on your property tax bill creates a lien on your property.
If you have a question about the general levy on your property tax bill you should first contact your county assessor. If it's a voted indebtedness or direct levy, your bill may provide the right contact information for the agency imposing the tax. Local governments have improved - a little - in providing background information on the various levies, but it can still be confusing.
Keep in mind that your tax bill may have lots of gibberish that is impossible to decipher: Not everyone knows that "CFD -3-1995" probably means the 3rd Community Services District (aka Mello-Roos) levied by a city starting in 1995. But look, its your money. You have a right to know.
For more information, please see www.hjta.org for "Frequently Asked Questions" about property taxes. If you are really at the end of your rope, you can email HJTA at email@example.com.
Jon Coupal is a recognized expert in California tax policy. He is an attorney and President of the Howard Jarvis Taxpayers Association with offices in Los Angeles and Sacramento.