Drop in taxes could lead to less services

February 2, 2010 7:41:59 AM PST
A drop in property taxes this year will likely translate into reduced public services, including further belt-tightening for Bay Area schools. Local governments are warning, next year could be even worse.

Deflation is happening statewide. In Santa Clara County for example, instead of the more usual 2 percent maximum increase, most homeowners will see about a quarter percent reduction on their property taxes.

It'll be a new burden on the budgets of local governments.

An estimated 350,000 property owners in Santa Clara County will see a reduction in their tax bills this year. It is because of a drop in assessed property values.

The reason for the drop is that California's consumer price index, the annual formula used to determine rate changes, fell below zero for the first time ever since Prop 13 passed -- the 1978 state initiative that limits property taxes.

The deflation causing this is going to hit county and city budgets hard-- with about $70 million in lost revenue, it will boil down to a lower level of public services.

Meanwhile, at the individual level, the savings to homeowners is minimal, no more than $100.

"I'm going to get, in my property, because I've owned it for 38 years a $53 reduction. I'm going to contribute that back either to my local school district or the county hospital. They need it more than I do," County Assessor Larry Stone said.

The loss of property tax revenue will impact public school budgets already stretched thin. The Santa Clara Unified School District already had plans to alter its student-teacher ratio of 20-to-1 in K-thru-3 education to save money. It's unknown what other cuts may have to happen.

The city of San Jose will face the biggest loss, of as much as $2 to $3 million. This could affect services, anything from parks to schools.

Santa Clara County is likely not the only one in the Bay Area that's going to experience a drop in property tax revenue. It just happens to be one of the first releasing its figures for 2010.

Stone is calling this situation a "perfect storm for local governments," and it could be even worse next year if real estate values continue to lower.