After several years of lower property tax bills, some Plumas County residents could receive a bit of a shock when tax bills arrive this month, reports Cynthia L. Froggatt, Plumas County assessor.
“The people who have seen lower bills are the ones who could see the increase,” she said. “If the economy continues to gain, more will see increases next year.”
During the economic downturn, may property owners saw their taxes decrease thanks to Prop. 8, which allows for a temporary decrease in value to reflect market values.
But as market values rebound, the values can increase faster than the 2% per year allowed under Prop. 13. Froggatt said the areas of the county that are beginning to experience an increase in the price of homes being sold are Graeagle, Lake Almanor and parts of Quincy.
Former Assessor Chuck Leonhardt began making downward changes to the taxable value of county homes in 2007 due to the changing market. Going forward, Froggatt will continue to follow the market and make adjustments as necessary.
Why tax bills may go up
Froggatt provides the following explanation from the State Board of Equalization:
When housing prices rise, Prop. 13 allows a maximum 2% annual increase in the property’s taxable value for inflation. This value is known as the “factored Prop. 13 value.” When housing prices decline, Prop. 8 allows a temporary reduction of the property’s taxable value to reflect the current market value.
Because a Prop. 8 reduction is only temporary, it requires the taxable value to be reviewed annually and increased or decreased to reflect that year’s current market value, as of Jan. 1 each year.
Thus, when the housing market crashed, Prop. 8 enabled some homeowners to receive significant temporary assessment reductions, resulting in lower tax bills. As housing prices increase, however, a home’s taxable value that had been lowered by the assessor under Prop. 8 many increase more than 2% if its market value increased more than 2%. The increased value, however, may not exceed the factored Prop. 13 value.
Tax increase example
The State Board of Equalization provides this scenario:
A property owner purchased a home in 2006 for $500,000. In 2013, the factored Prop. 13 value would be about $544,000: $500,000 increased by an inflation factor that cannot exceed 2% each year. If the market value of that property was $450,000, the assessor would temporarily enroll the lower value for property tax purposes pursuant to Prop. 8.
In 2014, if the market value of the property recovers to $540,000, the market value will be enrolled because it was lower than the factored Prop. 13 value. While the 2014 taxable value exceeds the previous year’s taxable value by more than 2%, it reflects the current market value and does not exceed Prop. 13 limits.
In following years, the market value of the property will again be determined and compared to the Prop. 13 value and the lower value will be enrolled.
Information provided by Plumas County Assessor’s Office
