“Widespread cutbacks at local cities and schools are being hastened by yet another bad year for real estate and projections of an unprecedented plunge in property tax revenue.
“New county estimates suggest falling home values will push taxes owed on property down for the first time in at least 40 years. Revised forecasts by the Assessor’s Officer, which has reassessed thousands of county homes at lower values over the past year, indicate that property tax collections in the coming fiscal year, beginning in July, will drop 3.3 percent over the current year.“The real estate market was inflated,” said county Administrative Officer Pat Busch. “There was a bubble and that bubble has burst.”
The county, as well as cities, schools and special districts, rely on property taxes for as much as 20 percent of their annual budgets. While just a few years ago many public finance directors across the county were seeing double-digit growth in property tax revenues, most are now slated for declines.
“This decline increases the level of service reductions and cuts that we have to plan for,” said Marc Pimentel, finance director for the city of Watsonville.
Watsonville is expected to see its property tax revenue fall nearly 12 percent next year. That estimate has prompted city officials to revise their projected shortfall up to $4.5 million of their $37 million total budget, and propose 10 percent pay cuts for employees.
Property tax revenues from the unincorporated communities, meanwhile, which make up the largest portion of the tax pool, are expected to drop 3 percent. Revenues in the city of Santa Cruz are expected to decrease 0.8 percent.
The new estimates have forced cities and schools from Santa Cruz to the Pajaro Valley Unified School District to seek even deeper cuts than what they had planned just a month ago.
Earlier this year, the Assessor’s Office released a slightly rosier projection for the property tax roll, suggesting next year’s revenue would remain about the same as the current year, not fall.
County Assessor Gary Hazelton declined to comment on the new estimates but said his office, in the wake of the real estate slump, has reassessed more than 15,000 properties. Those reassessments have prompted the projected slip in the tax roll.
Collections for the current year are expected to be $347 million, up from $336 million in 2007-08 and, if the new projections hold, also above the roughly $336 million slated for 2009-10, according to the Auditor-Controller’s Office.
“Negative growth sounds like a weird term, but that’s what it is,” said Auditor-Controller Mary Jo Walker.
The expected 3.3 percent decline would be the first time the county has seen a downturn in property tax revenues since current record-keeping began in 1968-69. The previous low is a growth rate of 2.76 percent in 1996-97 when the economy was similarly sluggish.
Santa Cruz Finance Director Jack Dilles, who faces a $6.5 million hole in his city’s $75 million budget, doesn’t see much good ahead. He expects homes in Santa Cruz County will continue to be assessed at lower rates and that property tax revenues will slip again in the year after next.
“Lots of folks are still thinking we’re trying to find bottom,” he said. “I don’t like being such a pessimist because I’m an optimist at heart, but it just looks pretty gloomy right now.”
County’s Property tax growth:
For the first time in at least four decades, Santa Cruz County is projecting a decline in property tax revenues, meaning cities, schools and special districts will be forced to make additional cuts.09-10: – 3.3 percent *
08-09: 3.3 percent
07-08: 7.4 percent
06-07: 9.4 percent
05-06: 9.8 percent
04-05: 7 percent
03-04: 6.7 percent
02-03: 6.1 percent
01-02: 9.6 percent
* Estimate
SOURCE: Santa Cruz County
Auditor-Controller’s O ffice
