Speaking of Russia in 1939, Winston Churchill said, “It is a riddle, wrapped in a mystery, inside an enigma…”, which makes Russia easier to understand than California’s property tax apportionment system. Let me try to give you an idea of how it works.
Distribution of property taxes is called apportionment because local taxing entities get a portion of the property taxes. Calculated under state law, the rates of distribution vary wildly from county to county and sometimes across county lines. Including the 422 former RDAs, more than 4,200 local government agencies statewide get a piece of the property tax pie from someone. In almost all cases, the size of the piece is determined using a set of complex individualized formulas in each county. That’s right, on the payout end of the system there are, essentially, 4,200 tax rates.
San Benito County has about 40 agencies with dibs on some portion of its basic property taxes – basic property tax means the 1 percent property tax after exemptions. You might not consider some of the agencies local, but they are for tax purposes. Example, Hartnell Jr. College gets $1,064 of every million dollars of basic property taxes in San Benito County, but most agencies are within the county lines.
I won’t go into the history of how California got here, but for those who really hate Proposition 13 just a reminder; those same 4,200 agencies used to set their own tax rates directly or indirectly.
The 2012-2013 taxable value of San Benito County property less exemptions was $5.48 billion dollars; therefore, the 1% basic property tax take would be $54.8 million. The taxing entities involved fall into four general categories – counties, cities, schools, and special districts/other. For political reasons all agencies claim they are underfunded, so there is a constant battle about category assignment. Hollister gets less than 2 cents on the dollar, but the Hollister RDA successor also gets about 13 cents to pay their bills. Ask the city and they say they get less than 2 cents, ask a taxpayer, the county, or the state and the number is 15 cents.
Using my own judgment on where to charge the funds, schools – Including junior colleges and augmentation payments – are getting approximately 68 cents of each San Benito County property tax dollar. The cities, including the RDA, get about 15 cents, the county gets 11 cents, and the 15 special districts/others get 6 cents total. Throughout the state the basic county government portions range from 62 cents down to about 10 cents, we are near the bottom. Cities range from about 19 cents down to nothing excluding the RDAs. Schools range from 73 cents to 26 cents and we are near the top.
According to the state: “The property tax is one of the largest taxes Californians pay. In some years, Californians pay more in property taxes and charges than they do in state personal income taxes… Local governments collected about $43 billion in 2010-11 from the 1 percent rate. The other taxes and charges on the property tax bill generated an additional $12 billion.”
That’s $55 billion total. Remember, the apportionment rates are set individually by state formulas based on what entity was paying for service “back when.” Those on the short end would like to get a rate adjustment; those taking in the most oppose the idea. State legislators know that their best chance for reelection is not to stir the pot, they have done little to fix the system, and the public cannot fix a system they do not understand.
