City sees 13.6 percent surge in assessed value of residential
real estate over last year
Gilroy – Gilroy’s real estate market is the hottest in the county.
The assessed value of all residential property in the city grew to $4.9 billion over the last year, a 13.62 percent leap that paced 7.99 percent growth in the overall tax roll growth for the county. Morgan Hill wasn’t far behind. The value of residential property there jumped 11.39 percent, to $2.9 billion.
“To me that proves how desirable South County is to people looking for an alternative to the prices in San Jose,” said Patty Filice, a broker associate with Intero Real Estate Services in Morgan Hill. “It proves what a great investment the South County area is.”
Santa Clara County Assessor Larry Stone confirmed that the surge in the tax roll is driven by the residential market and cautioned that a bursting of the real estate bubble could lead to a significant downturn in the tax roll.
“The good news is that it’s up 13.5 percent in Gilroy, and 8 percent in the county, but the concern that should be shared by all is that it’s driven by one white-hot segment of the market,” Stone said. “Commercial and industrial property is still flat. The governments that spend the money generated by the assessments should be cautious.”
In the meantime, the increased home values and business property is a boon to the city government, though not enough to dig Gilroy out of its budget deficit. The total assessed value of all residential and business personal property in town was just less than $5.2 billion, which translates to about $500 million in property taxes over the next year. For every dollar in property taxes paid by a Gilroy resident or business owner, the city will receive eight cents, or $3.9 million. That’s about $500,000 more than the city received last year.
“We’re not scoffing at $500,000. A half a million is nice to get, but it’s not going to change the picture much on the cost-cutting we’re doing,” said Mike Dorn, the city’s treasurer. “When you look at the city budget of $108 million, it’s nice to have the money, but it’s not going to change what we’re doing.”
And the jump is in line with the city’s own projection of a 13 percent increase in the tax rolls, less the $600,000 Gilroy must hand over to the state to help cover California’s budget deficit.
“We weren’t surprised. We’ve had a lot of development that has added to the assessment whether it’s been residential or commercial,” City Administrator Jay Baksa said. “We’ll see that increase through next year, but then it will slow down.”
For the fiscal year that begins July 1, 2006, Baksa is also counting on getting back the $1.2 million Gilroy will have paid the state’s Education Revenue Augmentation Fund. After that city leaders, predict a steady annual growth of about 8 percent over the next decade,
“I have to budget for it. We’ll see,” Baksa said of getting a refund from the state. “If we don’t get it we’ll have to come up with some other revenue source.”
Typically, when assessed values go up, schools are the big winners. About 61 percent of the county’s property tax revenue goes to the state to fund education. But there’s a tenuous connection between Gilroy’s property values and funding for its schools.
Steve Brinkman, an assistant superintendent with Gilroy Unified School District, said Thursday that the state’s school funding system means that an increase in this area will not necessarily mean more general fund income for GUSD because its funding is linked to its average daily attendance figures.
The leap in values, though, does make it easier for the district to borrow under Measure J, a 2001 initiative that allows the district to borrow against property tax revenue for facilities improvements. The measure sunsets in 2013.
“In the meantime, if assessed valuation goes up, our capacity to borrow goes up,” Brinkman said. “We’ll probably go out and borrow against Measure J in 2007.”
The assessed value of property countywide grew to $240 billion. Last year it was about $222 billion. The roll growth of 7.99 percent is more than the growth of the previous two years combined, Stone said.
“Silicon Valley’s resiliency and speed of recovery is quite remarkable,” he said. “The worst appears to be over for commercial an industrial property owners, with a level of market stabilization not seen in several years.”
Last year, the assessed value of commercial and industrial property dipped by 40 percent. This year, it fell by just 10 percent. Last year, more than 23,000 residences were devalued, compared to 3,000 this year.
Stone said business property continues to lose value because companies aren’t adding jobs or investing in computer systems and office infrastructure.
“That’s the volatile part, and Santa Clara County has a higher percentage of the roll in business personal property that any other county, because we’re Silicon Valley,” he said. “Everything happens in Silicon Valley first and fastest, up and down, or good and bad.”
In 2000, the county accounted for 25 percent of the state’s roll growth. By Last year, the economy had soured so much it ranked 57th of 58 counties. Rankings for 2005 are not yet available.
Total assessment of area property
2005 2004 Change
• Gilroy $5,161,902,633 $4,546,840,172 13.53
• Morgan Hill $2,391,407,639 $2,198,116,103 10.14
• Santa Clara County $240,141,978,143 $222,376,037,827 7.99
