Bittersweet windfall

<p>More than 19,000 Sonoma County homeowners -- a record number -- will see their property tax bills fall this year because of declining home values.</p><p>The annual property tax bill for about one of every seven homes in the county will be reduced by an average of $1,000.</p><p>Most of the affected properties were purchased at the height of the housing boom, and they now are worth $100,000 less on average, said Bill Rousseau, the county's chief deputy assessor.</p><p>Homeowners across the county received notices last week with the pleasant news that their property taxes will go down when bills are sent out in October for the 2008-09 budget year. The unfortunate reason, however, is that the assessed valuations are dropping because their homes are worth less.</p><p>The number of homes dwarfs those that received property value reductions a year ago, a reflection of the ongoing toll from the region's housing downturn. Last year, the county lowered values on about 2,500 homes. The average reduction was $70,000.</p><p>With home values showing little sign of stabilizing in many corners of the county, even more homeowners could get tax bill reductions next year.</p><p>The tax reduction could have an impact on the county budget as well. Overall, property tax revenues will increase this year, but only slightly above last year, Rousseau said. That compares with an annual increase of 7.9 percent in 2006, the smallest in nearly a decade.</p><p>"It will give us less money to play with," said Sonoma County Supervisor Mike Reilly. "That, in combination with what they're going to be doing in Sacramento, doesn't make it look pretty."</p><p>Reilly said county budget analysts have been closely monitoring declining property values for some time, and said the financial impacts are likely to be felt in the near future.</p><p>"We're going to have two or three really tough budget years," he said.</p><p>Normally, properties are reassessed to reflect the sale price under provisions of Proposition 13, the 1978 California initiative that put a lid on annual increases in property tax bills. Under state law, the county can temporarily reduce the tax amount when a property is worth less than its assessed value.</p><p>As home prices continued to sink last year, county appraisers began reviewing values and lowering assessments without waiting for a homeowner to request a reduction.</p><p>"We knew we had a lot of work. This is a record for us," Rousseau said.</p><p>The review centers on homes purchased between January 2004 and September 2007. The hardest-hit areas of the county have been northwest and southwest Santa Rosa, Windsor, Rohnert Park and east Petaluma, Rousseau said.</p><p>Those communities often were hotbeds for subprime lending that stoked an already sizzling housing market, which peaked in summer 2005. Foreclosure rates now are highest in many of the same areas.</p><p>"We feel that we've taken enough off the tax roll that it should reduce the amount of requests and appeals," Rousseau said. "There's somebody that always wants to argue value, and if they have the information, we will listen."</p><p>The reassessments are the first the county has initiated since the mid-1990s housing slump. About 15,000 homes had values lowered throughout that downturn, which lasted several years, Rousseau said.</p><p>The extent to which home values are falling exceeded Rousseau's estimates, and he said it could spread as his appraisers continue their work.</p><p>Property values are based on what has happened in a particular area of the county's housing market. Appraisers primarily take into account sales of comparable homes and may also drive through neighborhoods, Rousseau said.</p><p>"They've been working in the neighborhoods for years, so they know the homes pretty well," he said.</p><p>Homes receiving reduced valuations will be reviewed annually by the Assessor's Office, as required by state law.</p><p>"These are temporary values," Rousseau said.</p><p>With economists predicting the housing slump won't bottom out until year's end, at the earliest, home values likely will continue falling in many areas. Even then, home values face a long climb back to levels reached during the boom.</p><p>The housing slump is having an impact on the county budget, which gets about a quarter of property tax revenues. About half of the money goes to school districts.</p><p>The total assessed value of land in Sonoma County is expected to inch above the $67 billion figure from last year, he said. That amount translated into about $660 million in revenue.</p><p>Total valuation has gone up each year because of a 2 percent annual increase for residential property allowed under Prop. 13, and the revaluation of homes when they are sold. That increase in the upcoming year will be limited because of the loss from the property reassessments, which would reduce tax collections by more than $19 million.</p><p>During the last slump a decade back, homes didn't regain values for several years, Rousseau said.</p><p>"This downturn is worse," he said.</p><p>Staff Writer Martin Espinoza contributed to this report. You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.</p>