December 9, 2015
For many Californians, the property tax bill is one of the largest tax payments they make each year. For thousands of California local governments—K-12 schools, community colleges, cities, counties, and special districts—revenue collected from this bill represents the foundation of their budgets. This blog post and associated videos (here and here) explain the different charges on the property tax bill. We also explain how revenue from the largest charge on the bill—the 1 percent tax or “general tax levy”—is distributed among local governments.
In 2013-14, California property tax bills totaled $58 billion. This amount is more than the State of California and its local governments collected from any other tax, except the state’s personal income tax. As described below, three types of charges are listed on your property tax bill.
The 1 Percent Tax. Counties impose a 1 percent general tax levy on behalf of the other local governments in the county. This charge is commonly called the “1 percent tax” because the California Constitution limits this charge to 1 percent of the assessed value of land and buildings. Generally, the assessed value of property is based on the price paid for the property and the duration of ownership. Each county assessor determines the assessed value of property in the county annually. In 2013-14, the total assessed value of land and buildings in California was almost $4.6 trillion. View an LAO video (here) that shows how your county calculates your 1 percent tax.
Voter-Approved Debt Rates. If approved by voters, the property tax bill also includes tax rates above the 1 percent tax. Revenue from these higher rates pay for:
Pensions and other obligations approved by voters before 1978.
Bonds issued for local infrastructure projects, like schools and roads, approved after 1986.
In 2013-14, voter-approved debt rates generated $6.6 billion. To read more about voter-approved debt rates, see our November 2012 report, Understanding California’s Property Taxes (page 8).
Direct Levies. In some cases, local governments impose additional charges based on factors other than the property’s assessed value. For example, some cities impose property assessments to pay for street lighting and charge owners based on the size of their property. Similarly, some school districts impose flat rate parcel taxes to pay for school programs. Typically, direct levies must be approved by voters or property owners. In 2013-14, direct levies generated $6 billion. To learn more about these charges, see Understanding California’s Property Taxes (page 13).
Once you pay your property tax bill to your county tax collector, your county auditor distributes the revenues. Payments for voter-approved debt and direct levies are distributed to the local governments charging these rates. Payments for the 1 percent tax are distributed, according to formulas in state law, to local governments in your county and to a countywide multipurpose fund called the “Educational Revenue Augmentation Fund” or ERAF. State laws direct your county auditor to complete a series of steps to determine how much revenue each local government and ERAF receive. View an LAO video (here) that summarizes the steps your county auditor takes to distribute the revenue from the 1 percent tax.
In the coming months we will release additional online posts that examine how property taxes collected under California’s 1 percent tax are distributed to local governments and ERAF. As highlighted in our video, the distribution of these revenues is largely based on each local government’s property values and the property tax it received in the mid-1970s. While this fixed distribution system provides significant revenue stability for local governments, voters’ and local governments’ ability to change the distribution of the property tax is very constrained.
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