1. PROPERTY TAX REVENUE GOT YOU DOWN? CSMFO Conference Los Angeles – February 18, 2009 The HdL Companies 909.861.4335 Sales Tax Property Tax Municipal Software

2. BUDGETING PROPERTY TAXES IN THIS REAL ESTATE MARKET CSMFO Conference Los Angeles – February 18, 2009 The HdL Companies 909.861.4335 Sales Tax Property Tax Municipal Software

3. VALID PROP 8 REDUCTION  If the market value of property as of January 1st (lien date) is determined to be lower than the factored Prop. 13 value (usually the purchase price factored by 2% per year) the assessed value will be lowered to the market value.  The lower adjusted value will be reflected on that year’s annual tax bill, which is mailed by the Tax Collector in September.  IMPORTANT: A Prop 8 reduction is a temporary reduction and does not change your base year value.

4. VALID PROP 8 REDUCTION

5. INVALID CLAIM FOR A PROP 8 REDUCTION

6. Proposition 8 Reductions  Huge wave of Prop. 8 reductions impacting 2009-10.  Estimated at over $250 billion state-wide.  Hardest hit counties saw 7%-12% AV reduction.  Merced 15.9%, Riverside 11.9%, Solano 11.4%, San Joaquin 10.9%, San Bernardino 9.4%, Yuba 8.6%  All communities not created equal.  Expect 2010-11 Prop. 8 reductions to be less severe.  While reviewed annually-reinstatements will take time.

7. Proposition 8 Value Reductions Change between 2008-09 and 2009-10 – Largest % Decline Source: HdL Coren & Cone

8. The little understood elements of Property Tax Apportionment (AB-8)  Shared (pooled) Revenue Sources-General Fund  Supplemental Revenues  Assessment Appeal - Tax Payer Refunds  Roll Corrections between tax years  Redemption allocations in Non-Teeter Cities

10. Property Tax Issues to consider as you Prepare your Agency’s Budget  CPI for 2010-11 has been set at a negative.237%. Properties that have not already been reduced per Prop. 8 will receive a reduction.  With a continued decline in SFR sales prices, year over year, Proposition 8 reductions are still likely in 2010-11 in some jurisdictions.  Commercial and Industrial appeals have started to be filed, reductions will lag 1-2 yrs.  The VLF in Lieu allocation is tied to year over year assessed value change. This will be lower in 2010- 11 for most cities. What to consider as you budget property tax revenues in this real estate

11. LOOKING FORWARD TO 2012-13  For many agencies, property tax receipts will be lower in 2010-11 than those received in 2009-10.  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 2010-11.  The next year of measurable property tax growth for most cities will be 2012-13.

12. REAL ESTATE MARKET UPDATE CSMFO Conference Los Angeles – February 18, 2009 The HdL Companies 909.861.4335 Sales Tax Property Tax Municipal Software

13. Home Sales  The median price of an existing single family detached home in December 2009 was $306,820.  The median price increased by 8.4% from December 2008.  Homes sales have increased on a year-over-year basis for the last 17 months.  41% of all homes sales in December 2009 were properties that were in foreclosure, down from 57% in December 2008.

14. Orange County Detached Single Family Sales (January 2000 to December 2009) -25.4% Source: HdL Coren & Cone

15. Solano County Detached Single Family Sales (January 2003 to December 2009) 67.9% Source: HdL Coren & Cone

16. Foreclosures  Hardest hit sub-markets represent 25% of the state’s housing stock and account for more than 50% of the default activity in 2009.  Number of mortgage default notices filed in 4Qtr 2009 fell by 24% from the prior quarter.  Federal actions not providing much relief.  NODs peaked in the 1 st quarter of 2009.  Highest default counties were Merced, Stanislaus & Riverside.

17. Negative Equity Drives Foreclosures

18. California Foreclosure Activity January 2006 – December 2009 Source: RealtyTrac SB 1137

19. California Foreclosures Percent of Households – 20 Largest Counties Source: RealtyTrac

20. Unsold Inventory  Unsold inventory index for existing, single-family detached homes in Dec. 2009 was 3.8 months, compared to 5.6 months in Dec. 2008 and 13.4 months in Dec. 2007.  Long-term average of unsold inventory is 7.2 months.  Greatest supply is in the high end of the market $750,000 to $1,000,000+.  Many homeowners without an urgent need to sell are keeping homes off the market amid falling prices.

21. Unsold Inventory Index January 1988-July 2009 Source: California Association of Realtors Long Term Avg. 7.2 months

22. Impact on Redevelopment Agencies Source: HdL Coren & Cone

23. Questions to Ask  When were my project areas adopted?  How much new development occurred during the development “boom”?  What is the mix of commercial, residential, etc…?  What is the current vacancy rate for commercial, industrial uses?  How much vacant land is in the RDA?

24. Recovery ain’t what it used to be!  Recovery will vary significantly by region.  Prop. 8 reductions will continue to have a negative impact on revenues.  Commercial property appeals will increase and value reductions will occur through 2011-12.  Impact on VLFAA - property tax in-lieu of VLF.  Many economists do not expect property values to fully recover until 2014.

25. Contact Information Paula Cone pcone@hdlccpropertytax.com Andy Nickerson anickerson@hdlccpropertytax.com www.hdlcompanies.com 909.861.4335 Rob K. Braulik rbraulik@ci.fairfield.ca.gov