PROPERTY TAXES

The lull in foreclosure activity is likely to end as Lenders restart foreclosures that were frozen in October, November and December We expect an acceleration of foreclosures in the first quarter of 2011 as some properties have been sitting in foreclosure for up to 2 years. 38.1% of homes that sold in December 2010 had entered foreclosure during the past year. The all time high was February 2009 at 58.5%. December 2010, home sales were down 13.4% from December 2009 due to continued high unemployment and rising interest rates.

The HdL Companies PROPERTY MAKEUP BY USE TYPE

The HdL Companies PROPERTY MAKEUP BY USE TYPE

There are only a handful of county assessors that provide timely resources to cities during the budgeting process. Ask your assessor if he/she has a projection for value changes in your jurisdiction. Ask your assessor how aggressive the reductions are anticipated on successful appeals. Taxpayers won 76.6% of appeals heard in Be prepared for assessor’s to respond that they are not equipped to provide data until after the close of the roll in June which is too late to be useful in budget planning. WHAT CAN YOU EXPECT FROM YOUR ASSESSOR?

WHAT REDUCTIONS ARE ANTICIPATED FOR ? The granting of Commercial and Industrial Appeals resulting in the reduction in receipts during the year. Assessment appeal tax payer refunds are pooled countywide and bear no relationship to the appeals being filed in your city. Prop 8 Reductions – IN FEWER NUMBERS or none in some communities Properties in bank ownership being sold for less than the assessor enrolled values Continuing lower supplemental apportionments

Revenue Sources that are Pooled & Apportioned per AB-8 You get your city’s proportionate share of the revenue of: Supplemental Payments – sales transactions or new construction valued mid year – positive or negative. Roll Corrections - errors found or late enrollment of values Tax Payer refunds – overpayment of taxes Refunds from successful appeals which may encompass multiple years hitting a single future year.

PROPOSITION 8 REDUCTIONS Huge wave of Prop. 8 reductions impacted the through tax years. The largest hit counties were Merced, San Joaquin, Riverside, and San Bernardino While reviewed annually by the Assessor, recapturing will take time; as much as 10 years to recover depending on jobs, availability of funds for financing new home purchases and economic certainty.

MEDIAN/ AVERAGE SALES PRICE HISTORY

MEDIAN/ AVERAGE SALES PRICE HISTORY

LOOKING FORWARD TO For there was a Negative CPI adjustment that was compounded by Prop 8 reductions, depressed sales prices, and Commercial/Industrial appeals that are poised to be heard..753% CPI adjustment for applied to Real Property. For many agencies, property tax receipts will be lower in than those received in and flat in While economists are suggesting that the economic recovery has begun, it won’t be fast enough to impact property values and the related taxes for January 1, 2011 is the lien date for the revenues received in Fiscal Year. The next year of measurable property tax growth for most cities will be at the earliest.

BUDGETING CONSIDERATIONS FOR PROPERTY TAX ESTIMATES 1.The CPI for =.753% If budgeting beyond use 2%. 2.Are properties selling for more or less than in 2009? Account for increase or decrease. 3.If properties in 2010 sold for less, there is a potential for additional Proposition 8 reductions. 4.How much of the commercial and industrial successful appeals will be refunded mid-year and impact property tax receipts? Assessor can help. 5.Base year values in redevelopment projects are budgeted flat.

6.Unsecured values are expected to depreciate, budget 5% less than in the prior fiscal year. 7.Completed new construction outside of the redevelopment agency- General Fund portion of the City? Was there any new growth? How much? 8.For Non-Teeter Cities account for a delinquency of 3%-4%. 9.Budget Supplemental revenues equivalent to receipts - don’t project increases. 10.The VLF in Lieu is tied to citywide change in property values.

11.BUDGET CONSERVATIVELY Property Tax estimating is not a precise science. 12.Legislative changes are an uncertainty that cannot be forecast. ie. Redevelopment changes being proposed by the Governor or other unanticipated changes in the property tax landscape as it is currently administered. 13. ABOVE ALL ELSE BE PREPARED TO ADJUST!!!

Paula Cone (909)