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Stone explains county assessor's role to Realtors

Assessor warns of potential pitfalls

By Rose Meily

Santa Clara County Assessor Larry Stone explained his role and alerted real estate professionals to potential pitfalls in the assessment of real estate when he addressed the Silicon Valley Association of Realtors at its Los Gatos-Saratoga district meeting on April 26.

Santa Clara County is the sixth largest county in the state, Stone said, and it is his job to make sure the assessment of all property within the county is correct.

"The assessor is not a revenue agent for local government. My job is to enroll the correct values for the government," Stone said.

Stone reported that as of July 1, 2005, at the close of the assessment roll, $240 billion worth of assessed value was reflected, which means an increase of $17.6 billion--slightly under 8 percent from 2004. Of property tax revenue generated each year, he explained, 51 percent goes to the state for public education; 12 percent to cities; 17 percent to the county; 9 percent to redevelopment agencies; 6 percent to community colleges; and 5 percent to special districts (i.e., water district flood district, etc.).

Historically, Stone said, Santa Clara County has had the lowest number of assessment appeals. In 1996, while San Diego had 28,000 appeals and Orange County had 48,000 appeals, Santa Clara County only had 7,000 appeals. In the county, there were 4,300 appeals by Sept. 15 of last year. Of all appeals, about 53 percent are withdrawn by the taxpayer, 42 percent get adjusted in the 10 percent to 20 percent range, and 5 percent actually go to hearing.

These numbers are low compared to other counties, he said, "because we do a good job at putting the right value."

Stone explained Santa Clara County is one of eight counties in the state that informs residents of the assessed value of their property early. Residents are informed as early as the third week of May what their assessed value will be in July. He notifies property owners early, he said, "so people can have time to look at it, question it and, if necessary, correct the value so they get the correct tax bill in October."

"My job is to get the correct value on the roll. I tell you that beforehand so if there are any changes that can be made, we can put the right value on the roll as best we can by July 1," said Stone. "It's a very good, cost-effective process."

The assessor then highlighted a number of propositions important to the real estate industry, namely Propositions 8, 58, 158, 60 and 90.

Proposition 8 says when the market value of property decreases, the county assessor is required to temporarily reduce the assessed value to reflect the market value of property, but the law also requires that when the market turns around, assessed values need to be restored. He recalled the situation in the 1995 recession, when the assessed values on 98,000 properties were reduced, but in 2001 there was a "dramatic resurgence in property values," and assessed values then increased.

Stone said during 2003-05, the residential market "was hot," but there are indications today the market is "beginning to cool." Commercial and industrial property, however, "is just the opposite," said Stone. "It's still a bloodbath, with a large amount of vacant space out there." He noted, in downtown San Jose, there is a 25 percent increase in vacancy rate.

"Everything happens fastest in Silicon Valley--up, down, good or bad. My job is to try to put the correct assessed values," Stone reiterated.

Propositions 58 and 193 provide exclusions from reappraisal. They provide property tax relief by preventing reassessment when real property transfers between parents and children (Proposition 58) and from grandparents to grandchildren (Proposition 193). Under Proposition 58, if the parent or child who acquires the property files a claim, which is approved by the assessor, the reassessment will be excluded. Under Proposition 193, if the grandchild who acquires the property files a claim, which is approved by the assessor, the reassessment will be excluded. If the property was already reassessed, the reassessment will be reversed.

Stone said he would like to see some changes to Proposition 193 to allow for specific instances so that property can be passed on to grandchildren when parents are deemed unsuitable. He gave the examples of grandparents who are unable to pass on property to grandchildren because a parent is still alive, but is incarcerated or on drugs.

Proposition 60, and later Proposition 90, provide property tax relief by preventing reassessment when a senior citizen sells an existing residence and purchases or constructs a replacement residence of equal or lesser value than the original. When the senior citizen purchases or constructs a new residence, it is not reassessed if he or she qualifies. The assessor transfers the factored base value of the original residence to the replacement residence. Proposition 60 originally required that the replacement and the original homes be located in the same county; Proposition 90 enabled this to be modified by local ordinance so that the property may be located in another county that recognizes this law.

Problems arise and can be costly when claims are not filed within the required time period, when the value of the new residence is higher than the original residence or when it is new construction.

On Proposition 60, Stone cautioned, "Be careful. You need to assess property at a fair market value," and it must be done within a two-year window.

He explained the law was originally designed for empty nesters trading down, "but this is not happening. What if you sell your property and build a new one? There isn't enough time to get the property assessed within the required period. It should be extended."

The assessor admitted there are delays in assessing property within the given time frame because his office is understaffed, so he advised, "Pay the tax bill and get it adjusted later."

Stone likewise addressed myths pertaining to assessment of property with regard to owners leaving walls standing, the meaning of the term "substantially equivalent to new" and types of remodeling that could impact assessment. If there is any question regarding property assessment, he urged everyone to call his office at 408.299.5588 or email scc-assessor.org.