Treasurer-Tax Collector Discusses Property Tax Outlook For 2011

How much has San Diego County collected in property taxes over the last year, and how is that money being invested? We speak to Treasurer-Tax Collector Dan McAllister about the outlook for 2011. Plus, learn where you can go to find out if there's a supplemental refund waiting for you.

Guest

Dan McAllister, San Diego County Treasurer-Tax Collector

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MAUREEN CAVANAUGH: I'm Maureen Cavanaugh, and you're listening to These Days on KPBS. Many San Diego residents were not exactly either to pay their property taxes last month. About a third of property owners waited until the last minute to get in the first installment on their tax payment. This despite the fact that the county's over all valuations have dropped dramatically. The plunge in San Diego's property tax collections may be a silver lining for homeowners issue but it does come with consequences, this morning, we'll be talking about what amount of property taxes the county is expecting to collect this year, and what that tells us about how the economic downturn is still affecting San Diego. I'd like to welcome my guest, Dan MacAllister, San Diego County treasurer, tax collector, and Dan welcome back to These Days.

MACALLISTER: Good morning. It's my pleasure. Distinct pleasure, I should say. This is a great show, and you do a great service for you community.

MAUREEN CAVANAUGH: Well, thank you very much. Now, I want to invite our listeners to join the conversation. Do you think you're paying a fair amount in property taxes, do you think San Diego is making the best use of property tax revenue? Give us a call with your questions and are why comments issue our number here is 1-888-895-5727. That's 1-888-895-KPBS. So Dan how much did San Diego County collect in property taxes last fiscal year?

MACALLISTER: Last fiscal year, we were a little bit higher than we were this fiscal year. In fact, we were about 48 million dollars higher. And the last year, we were about 50 million dollars higher. So you can see that is there is a trend here, and the trend is a town worried trend. 50 million the first year after we peeked, a couple of years ago at almost $4.6 billion. This year, we expect to collect just a little under $4.5 billion. So things are moving down, still. And that is really kind of a lagging economic indicator from a tax base standpoint, we think, because I very often tell people that it's pretty simple lie summarized in something called the dog chart. Now, the dog chart is something we came up with, but if you can picture a little dog wounding through an open field, you know that the head represents the economy, the body represents the housing market, and the lagger here is the tail, which is the taxes. And we saw a tremendous upsurge in that dog's bounding abilities over the last ten years or so here in this marketplace as both the economy and housing market in valuations rose. Well, that happened then the hit the top was that they start to trend downward. The tail was still coming up, so it got up about two years ago to that 4.6 billion figure and now it's trending down.

MAUREEN CAVANAUGH: And so it's really virtually impossible to say when that tail might start going back up again. Do you have any idea? Are you making any sort of predictions? What do you watch to see if indeed the property tax collections may start to go up? Is it just the real estate market.

MACALLISTER: Well, I think it's a combination of an awful lot of things. Unemployment figures are key. There's no question about that. And no matter which economist you talk with, they always seem to talk about the unemployment numbers. Our unemployment numbers are still high, although California's numbers are high, as are those for the nation. And once those start to subside, I think you will start to see better numbers where we're concerned. The other thing that I think people are looking at and we're looking at that, certainly. And Ernie Dronenburg, our new assessor said the other day when we met that they're looking at this, and that is the foundational aspect of how the markets is trending. We have seen some up ticks in the last few months in terms of sales at the lower end of the cost spectrum; more investors are stepping up to purchase properties because now the math makes sense, so if they acquire the properties as an investment property, they can rent that property out and they can make their monthly payments pencil out better than at the peak of the marketplace. So we see that as a good indicator. However, there is still some mystery out there. Part of that mystery lies in the fact that all the foreclosures that were tan back by the banks and the lenders still have yet to make their way out onto the market scene. And whether they're trickling them, or whether they're planning to avalanche them out onto the marketplace, I'm not certain. I think basic economics and good sound business practice would say not to turn them all out at one time, but to drip them out on the market place, and that will help to main tape values as well.

MAUREEN CAVANAUGH: I'm speaking with San Diego County treasurer tax collect or Dan MacAllister, and taking your calls at 1-888-895-5727. I just wanna be clear, I want to be clear for myself and for listeners, as our property tax revenue decreases, what does that exactly mean for the county?

MACALLISTER: Well, it means that it contracts. It means that the total number of dollars that come in for the various services that are supported by property taxes. And that would be schools. About 43 percent of ever dollar that comes in goes to public schools K-14. They get hurt which the revenues go down. There's no question about that. And there's subject a little bit to a double whammy, because now, the unpredictable nature of Sacramento looming large in their lives means eve more cuts. And that could double up their cuts, and that's really, sadly, not fair. The other areas that are fed by property taxes include libraries at the county level, redevelopment agencies thought the county, all 18 cities benefit from property taxes in the county. So a wide range of services are ultimately impacted when the property taxes contract.

MAUREEN CAVANAUGH: I'm taking your calls at 1-888-895-5727. Frank is calling us from San Diego. Good morning, frank, welcome to These Days.

NEW SPEAKER: Thank you, when I moved down here to San Diego four years ago, the tax assessor's office accused my escrow company of not filing an exchange form with the deed. And then after a few phone calls and what not, I was then told it was an incomplete form, and I asked for a copy of the incomplete form, it wasn't available. And then I was penalized a thousand dollars for this non-- you know, this form.

MAUREEN CAVANAUGH: Uh-huh. And?

NEW SPEAKER: And then -- there's no appeals process specifically for that. I filed an appeal because I bought at the peak, and I lost pretty much, you know --

MAUREEN CAVANAUGH: A lot of your value, yes.

NEW SPEAKER: And so I filed an appeal and waited and waited. It takes two years before you can be heard. And then in the meantime, a year later, the tax assessors' office increased my assessment $20,000, and that made.

MAUREEN CAVANAUGH: Frank, do you have a question here anywhere?

NEW SPEAKER: Well, I never received a thousand dollars back, the appeals process in my experience is a total sham. And I had to go through my City Council member and we, in fact, Mr. MacAllister and I had a conversation once. Said he would like into it, and he didn't.

MAUREEN CAVANAUGH: Well, let me get a reaction, Frank. And thank you very much for the call. So you have a sort of disgruntled property owner here.

MACALLISTER: Well, in the first place, all of the questions that Frank raises are assessor questions, and we are very careful to delineate the two.

MAUREEN CAVANAUGH: I think now would be a good time to do that, yes.

MACALLISTER: Our mission really in the tax collectors' office is to bill exactly what the assessor's office should be billed to every property owner, and almost a million of them exist in San Diego County each year. Those people, then, who are billed are entitled twice a year to appeal the assessed value that the assessor has give us to place on their tax bills. At the end of November, 30th, and at the end of May, 30th, each purpose is granted that right, and bee are also told by the assessor's office that legally, state law gives them up to two years, so frank is right, it gives them up to two years to consider these property tax assessment appeals. Now, I have heard on great authority that it does not take two years, usually, and it can be pushed ahead in significantly shorter blocks of time. I think if defense of the assessor's office, they are limited in terms of the number of appraisers that they have. Last year, for instance, they had 226000 requests for reassessment or assessment appeals, of which they granted 2016 this happened, according to the assessor's office. Soap I think they are will bending over backwards two try to help people that have issues. Now, I would welcome frank to call my office, and I will in turn notify the current and the new assessor to see if we can't get to the bottom of his concerns. We would be happy to do that, frank, and my number at the county is 619 531 5231. And if you would be so kind as to call, I would be happy to see if we can't forward that today to the new assessor Ernie Dronenburg.

MAUREEN CAVANAUGH: I am speaking with county treasurer/tax collector, Dan MacAllister. And of course emphasizing that treasure/tax collector's office is not the assessor's office, I have heard, I've read, in news reports that requests to the assessor's office for reassessment of property have dropped off more than 80 percent this year. Does that tell us anything, Dan? Does that tell us that real estate prices are perhaps stabilizing in San Diego County?

MACALLISTER: Well, according to the assessor, previous to Ernie Dronenburg, as well as Ernie, the assessor's office make a very proactive move to try to get to the bottom of valuations [CHECK AUDIO]. And I think that to their credit, they achieved a fairly remarkable effort there, and their staff, by the way, just does a great job. And one more note, I wanted to apologize personally to frank if we did not follow up on something. I will take responsibly for that. But I am more than happy to follow up and see if we can't get to the bottom of his issues. Very often people will come back to us and say that they think something is not right. The assessor's office has told us, by the way, that for those people who have purchased property in the last five years, almost certainly they will be entitled to some sort of a break-in their taxes. And it might result in a tax refund. So there still may be hope, frank, please call the office, and we'll see if we can get to the bottom of it.

MAUREEN CAVANAUGH: We're taking your phone calls at 1-888-895-5727. Tiffany is calling from San Diego. Good morning, Tiffany, welcome to These Days.

NEW SPEAKER: Thank you. I was wondering with the high foreclosure rate, who pays the property taxes on these properties that are in foreclosure?

MACALLISTER: Tiffany, this is just a great question, and I'm glad you raised the issue, I'm sorry I didn't earlier. But thank you for raising it. We think that the reason for the decline by one full percentage last year as well as again this year in the default, IE, the delinquency rates, is due to the fact that the banks and the lenders who have taken back these properties do not want to see a tax blemish on properties, they're about to turn back on the marketplace, so they will race to our doors to pay those taxes, and they will pay, by the way of the old assessed rates. The other thing that woo have been told by some of the lenders is that I will not challenge the [CHECK AUDIO] against the proper. And so it would otherwise admit that it's a lower value, and therefore not entitle them to ask so much for the property. It's kind of an interesting juxtaposition, but it has helped to make us whole in terms of our annual collection rates, and that's kind of a wind fall, and it's a sad wind fall to this otherwise bleak situation.

MAUREEN CAVANAUGH: Right. Now, within the other areas that also gets funded by property taxes is the county investments. And I wonder, what does the county invest in and how is that investment pool doing?

MACALLISTER: Our investment pool -- and I should give credit where credit is due. I have a remarkable team at the County of San Diego, and I think all taxpayers should be extremely proud of the work that Lisa Marie Harris, our chief deputy tax collector, and her team by Rob Hostetter, who is our chief investment officer does every day of the year. And they are out there in the market places. This past year, our investment pool soared to an all-time record high of $6.5 billion. I wish to emphasize we did not move any money in the downturn of the economy. Because our stewards, if you will, our team, is so diligent in watching like hawks every day over every penny of this money, and we stick to a very title woven investment policy statement which disenables us from investing in some of the more esoteric investments that are out there. Now, sadly, other counties in this state as well as state investment agencies around the country, did not adhere to those investment policy statements they had, and now they're once again showing some troubled signs. And I'm pleased to report, and I think the taxpayers should be pleased to know that in the past ten years, each year, we have achieved Standard and Poor's highest ratings of investment pools for communities and local governments throughout this country.

MAUREEN CAVANAUGH: Yes. And does that surplus, that profit, if you will, that you make on the -- does that get reinvested.

MACALLISTER: Yes, it does get reinvested but it also is available for the participants.

MAUREEN CAVANAUGH: For the participants. Okay.

DEFENDANT: And that's the key. Our pool is made up -- we have 110 different clients, if you will. 42 school districts, the public K-12 school districts, five community college districts, the airport authority, SANDAG, any number of water, fire district kinds of authorities out there, we have public cemetery districts. So we have a full gamut. I say because of the public cemetery districts on one end as well as the first five commission moneys on the other end that we manage assets from basket to casket on a daily basis.

MAUREEN CAVANAUGH: You were just waiting to say that. I'm speaking with Dan MacAllister, San Diego County treasurer, tax collector and taking your calls at 1-888-895-5727. You can also go on-line and comment at KPBS.org/These Days. Greg is on the line from Rancho Bernardo. Good morning, Greg and welcome to These Days.

NEW SPEAKER: Good morning and thank you for taking my call. I wanted to comment Prop 13, but first a tie-in to your last comment. I actually bought a home in 2005 which I tried to get reassessed with the other new buyer's 50,000+ in 2008. And my -- the assessor came back and said my home was worth about 780,000, the bank was telling me it's worth 620,000, and therefore I was underwater. I couldn't refinance. It put me in quite a bind. I had a variable mortgage that presented itself at the time. But now I'm a homeowner again, if thanks to the recovering economy, and my question about prop 13 is what are we gonna do about the commercial real estate situation where the commercial investors are able to grandfather in new buyers and they don't pay for any new bases on their property taxes. They can buy a property in 1980, bring in new buyers today and still paying 1980 rates.

MAUREEN CAVANAUGH: I want to take one more question on top of that because it's us about prop 13. Let's take Tom calling from Clairemont. Good morning, Tom, and welcome to These Days.

NEW SPEAKER: Hello, and good morning. My question is prop 13. It's my understanding of it is that even houses that are assessed at 1 tenth their true value that do not go up in assessment in ail year like this, because prop 13 limited to a maximum of either two percent per year or the general housing price increase. So they still don't even catch up in a year like this. And how much money are we losing through that extra give away?

MAUREEN CAVANAUGH: Okay. Thank you. Thank you for that. So you wrote down question number one, and there's question number two for a prop 13 as well, Dan.

MACALLISTER: Yes, Greg is correct. There is a piece of prop than that does not necessary he recognize certain purchases in the corporate world, the public commercial world, and that is something that probably will be addressed or looked at at some time I would be. Secondly, though, he points to an area which is of -- I think sort of looming out there as the next shoe to drop, and that is the down valuation of commercial properties in general: And I don't think that this market has yet been hit by the full brunt of that shoe dropping. I think there's more to come on that front. While the residential markets have stabilized to some degree and are starting to actually creep back up, houses are starting to sell, values are starting to be garnered for closer to asking prices than were just a year or two ago, things are not looking that bright in the commercial side. So those are two areas that probable should be looked at. Now, as to and the issue of increases under prop 13 that the gentleman raised.

MAUREEN CAVANAUGH: Tom.

MACALLISTER: Tom raised, I'm sorry. Under prop 19, it's a given that the baseline will be one percent of the total purchased price. Every year thereafter, then, there's something called the CCPI, which is the California consumer price index, and that is another example of how San Diego gets short changed. In other words, it is based only on the CPIs of LA County and San Francisco. Those two markets only make up the California CCPI. And so as those, the markets in those two locations, so goes the markets and our abilities to tax in all the other 56 counties of the State of California.

MAUREEN CAVANAUGH: And what does CPI mean again?

MACALLISTER: Consumer price index for those lower markets.

MAUREEN CAVANAUGH: I see.

MACALLISTER: Now, it's interesting to note also that until last year, that CCPI had been up every year since prop 13 passed in 1978. And last year for the first time ever, it declined of so what this meant, apparently, according to the assessor's office, was that the property taxes paid by the -- 80 percent of the people who did not qualify qualify to challenge their property tax assessments were going to get a little bit of relief this year, and that will be a permanent relief for their property taxes and those who got the temporary relief of the challenge to their property tax assessments and the assessed valuations would not benefit from that because they had already benefited from the discount that they got on a temporary bases. Kind of confusing.

MAUREEN CAVANAUGH: Yes.

MACALLISTER: But nevertheless, prop 13 said that in a good year, in a positive year, and by the way, this is when people don't notice, when the People's going up, so they don't really say much about it, that the county assessors have the right to add on up to two percent of the original one percent. It's important to clarify that. So it's not two percent of the value. It's 2 percent of the original one percent.

MAUREEN CAVANAUGH: Wow.

MACALLISTER: That it could if up. So it's minute.

MAUREEN CAVANAUGH: Now, I can't really believe that we're hymn out of time, Dan, but I don't want to understand our conversation until we talk about refunds.

MACALLISTER: Yes.

MAUREEN CAVANAUGH: Because I know that there are refunds available from the county, a lot of these refunds unclaimed. So where can people go to find out if they have a supplemental refund that needs to be claimed?

MACALLISTER: Well, that's a great question too. And they can access, first of all, our website for unclaimed moneys, and that website is www.sdtreastax.com. And if they have any questions about how to access it or have a problem, please call my office, 6195315231. Now, to this issue of refunds, it is a miraculous thing to me that people, many times have no idea that they've paid too much in property taxes, or because they received a downward assessment, in other words, their assessment appeal was granted, they may be entitled to a refund. And in fact, we process, literally, millions of dollars in these refunds every year. And it's pretty staggering when you look at how much we have processed and sent back. For instance, since July '50 of 2010 to date, we've sent back $7.3 million in tax refunds to people here in San Diego. Since July 1st of fiscal year 2009, and that was through this past union, 2010, we sent back over $20 million in refunds. And it's amazing to me, again, that people sometimes just have no idea that they've paid too much. And let me give you a couple of examples as to how this can happen. In the good times when people were constantly reappraising and refinancing their homes, and there are it many people inning San Diego who did that, to pull out money for home improvements, a new car, [CHECK AUDIO] they went down to their escrow office, who [CHECK AUDIO] and we all know that the escrow officer says, have you paid your taxes? That's the bottom line question before you can sign and withdraw the money, and in many cases people had said yes, but not knowing. And so the escrow officer didn't know, necessarily. So they charged them double. They charged them again, they paid for an escrow through a refinance. That was one example.

MAUREEN CAVANAUGH: I see, I see.

MACALLISTER: Another situation occurs when people actually relocate. And it's fascinating to see how mobile San Diego abs are. People very often ask me, how many people are still covered under prop 13 as it originally passed and live in the same houses? Well, it's less than nine percent of our total stock in property here in San Diego. So that means that people move constantly. It means that following them, if they don't take time to send in a new mailing address to the assessor's office, when they pay their taxes, we send that over to them to adjust the roles. The check may go to a place that's not deliverable.

MAUREEN CAVANAUGH: I'm afraid we have it there, but could you give that website one more time where people can check it and see if they have a refund coming?

MACALLISTER: Sure. Yes, it's www.sdtrestax.com. Well, once again, thank you. It's always a pleasure.

MAUREEN CAVANAUGH: I've been speaking with Dan MacAllister, San Diego County treasurer/tax collector. If you have a question or a comment, please go online. KPBS.org/thesedays. Coming up, we've come a long way from The King's Speech. New treatments for stuttering as These Days continues here on KPBS.