Oct 18 - Meaningful property tax growth for local governments in California will require not only stabilization in home prices, but also improvements in new and existing home sales, according to a new Fitch Ratings report.
While home prices are closer to sustainable levels, Fitch Ratings' Sustainable Home Price Model projects an additional 5 to 10 percent statewide decline in home prices in real terms before reaching sustainability.
'The market is showing the first signs of stability, with only five of the 20 counties that make-up 90 percent of California's assessed valuations showing declines in fiscal 2013. This is down from eight in 2011 - 2012 and 17 in 2010 - 2011,' said Stephen Walsh, Director in the U.S. Public Finance Group.
'But it's still a long way off from the growth experienced during the housing boom. With property taxes accounting for 22 percent of county revenues, 25 percent of city revenues, and 22 percent of K-12 school revenues, local governments will continue to face ongoing pressures.' adds Olu Sonola, Senior Director and Head of Research in the U.S. Public Finance and the Global Infrastructure Group.
California's property tax base lost $172 billion in value between fiscal years 2009 and 2012 - a 3.8 percent decline - but state totals obscure regional differences in tax base performance.
More than half of California's tax base loss between 2009 and 2012 can be attributed to just four counties: Riverside, San Bernardino, Sacramento, and Contra Costa. Assessed values in these counties outpaced growth statewide by nearly one-third between fiscal years 2000 and 2008. Tax base declines following the recession were correspondingly magnified, with AV losses more than three times the state average.
Assessed values for California's inland counties fell by 10 percent over this period while coastal counties experienced losses of less than 2 percent.
Link to Fitch Ratings' Report: Mixed Performance for Californiaâ€™s Property Tax Base (Assessed Value Changes Highlight Stateâ€™s Uneven Recovery)