The county tax assessor expects Gilroy property values to fall
11 percent
– more than any other city in the county – and that likely means
a $1.1 million hit to next year’s budget and spells additional
stress for the school district.
The county tax assessor expects Gilroy property values to fall 11 percent – more than any other city in the county – and that likely means a $1.1 million hit to next year’s budget and spells additional stress for the school district.
The decline in values will only apply to next year’s budget, which begins July 1. Due to tax payment lags from the county, though, city officials actually expect this year’s property tax revenues to increase by $188,000 to nearly $10.6 million, according to a Feb. 24 memo City Finance Director Christina Turner wrote to City Administrator Tom Haglund. Sales tax revenue projections this fiscal year, however, have fallen from $13.9 million to $12.1 million. Combined with a standstill in fee-generating development that officials expect to last throughout next fiscal year, these downfalls have practically erased $3.8 million in general fund expenditure cuts Haglund made from this year’s budget before Christmas.
Those cuts came after Haglund slashed $4.5 million in expenses as soon as he came on board in May 2008 – a month before the council passed the current budget. The budget the council approved then still ran a $3.9 million deficit, but that shot up to $6 million as the economy slowed last year. Laying off 48 full-time employees Jan. 31, freezing vacant positions, cutting back on materials and services, and tweaking major infrastructure projects brought this year’s deficit down to $2.3 million, but it rose back up to $3.8 million in February when the finance department last updated the city council, members of which have vowed to deliver a balanced 2009-2010 budget by June 30.
“If we need to do some more layoffs, so be it,” Mayor Al Pinheiro said. “This is not rocket science. It’s a new era, and the focus of this council is to work on a no-deficit budget. It’s just as simple as that.”
Depressed values could also mean higher bond payments from residents who approved the $37 million library bond last November and expected to pay about $11 per $100,000 in assessed value. Turner said the city will try to honor previous projections.
“If property values are dropping, then property owners will pay a larger share,” she said. “But we want to hold as close as possible to (the projections) we indicated to residents.”
Last week, Pinheiro traveled up to San Francisco with Haglund and Turner to meet with credit rating agencies about the library bond. They are still deciding what grade to give Gilroy before the city sells its first round of bonds later this month, and construction will likely begin next spring after the second issuance of notes, Turner said. Pinheiro and the rest of the council have also been meeting with the city’s unions to discuss possible wage freezes and reductions, but there have been no agreements so far.
For the Gilroy Unified School District, news of the 11 percent drop exceeded previous expectations of a 5 percent fall in property values. Officials contacted bond consultants Friday for an update, but Superintendent Debbie Flores wrote in an e-mail Monday they were still waiting on concrete numbers.
“We’re still evaluating the situation,” she said Friday, adding that she suspected Measure J – a tax the school district has collected every year since 1974 that will stop in 2011 – to be the hardest hit of the district’s outstanding bonds.
“Things are getting harder and harder,” Flores said, “but we’re going to try and keep this as far away from the children and classrooms as possible.”
At City Hall, the last time the council addressed next year’s budget was during layoff talks last winter, when it expected personnel and other reductions to bring next year’s general fund nearly $1 million in the black. Now it appears Haglund’s back to square one.
“This is a challenge that we will rise to meet,” Haglund said. “We need to look back and realize that this city has taken very significant measures to bring its general fund into balance.”
For those eager to pay less taxes, Stone encouraged patience in his press release.
“While taxpayers are certainly anxious to know their assessed value, we urge everyone to wait until they receive their notification cards in late June,” he said. “Otherwise staff will be answering calls instead of reducing values.”
When the market value of a property falls below its assessed value, Proposition 8, passed by voters in 1978, requires the assessor to temporarily reduce its value to reflect reality. The county assessment roll has only declined during the Great Depression and again in 1978, according to Stone’s office. California property values are expected to drop 10 percent over the next three years, which will reverberate throughout the state’s cities and school districts.
For more information on filing an appeal after receiving a value notice in June, visit www.sccassessor.org/prop8.
By the numbers:
-12,717 – Number of parcels in Gilroy
-$6.8 billion – Estimated value of Gilroy parcels as of Jan. 1, ’08
-1,430 – Number of Gilroy properties reduced by an average of $160,000 last year
-11 percent – expected drop in value from Jan. ’08 to Jan. ’09
-$303 billion – Total value as of Jan. 1, ’08 for county’s 460,000 parcels
-42,000 – Number of county properties reduced in value last year
-$5.3 billion – Cost of reductions to county
n 90,000 – Expected number of county-wide reductions this year
