July 7, 2005

Assessed values increase, reflecting improved local market place

Following three years of marginal growth, the assessed value of property in Silicon Valley appears to have finally turned the corner.

County Assessor Larry Stone announced July 5 that the total, net assessed value of all real and business personal property in Santa Clara County grew by a healthy 7.99 percent, reflecting an increase of $17.77 billion.

The total assessed value of all real and business personal property is $240.14 billion, nearly one-quarter of a trillion dollars. The assessment roll is a snapshot of the total assessed value of property in Santa Clara County, as of Jan. 1, 2005, the lien (valuation) date, and published on July 1, the date the assessment roll is officially closed.

“Silicon Valley’s resiliency and speed of the recovery is quite remarkable,” said County Assessor Larry Stone. This year’s assessment roll growth of 7.99 percent is nearly four times as large as last year, and exceeds the combined roll growth for the past two years. (2.23 percent in 2004, 3.16 percent in 2003). Not since 2001 have property assessments increased at this rate in a single year.

“The majority of the increase is attributed to changes in ownership and new construction of residential properties,” said Stone. “The worst appears to be over for commercial and industrial property owners, with a level of market stabilization not seen in several years. It is all relative,” said Stone. “Last year, the assessed value of commercial and industrial property experienced steep declines, in excess of 40 percent. This year the declines are closer to 10 percent. “It is never good to lose equity, but a 10 percent drop is a lot better than 40 percent. Hopefully, the trend will continue in a positive direction,” he said.

Reflecting an improving real estate market and in compliance with Proposition 8, the assessed value of nearly 20,000 residential properties in which assessments were previously reduced to reflect the declining market, were fully restored to their Proposition 13 factored base year value. Less than 3,000 residential properties will continue in a reduced status totaling a reduction of $675 million. In contrast, last year the assessments of more than 23,000 residential properties were reduced, totaling $1.7 billion.

Most of the commercial and industrial properties previously reduced will continue in the reduced status since the market value of these properties, as of Jan. 1, 2005, remains stagnant. Nearly 1,500 commercial and industrial properties account for almost a $9 billion reduction from the county’s 2005 assessment roll.

Consistent with the overall improvement in the marketplace, many of the county’s high-technology businesses are once again cautiously investing in their physical plants. “For the previous three years, companies have either discarded or extended the useful life of machinery, equipment, computers and fixtures. During this period, the net assessed value of unsecured business property declined 30 percent. This year, the net value of business personal properties increased 4.34% ($19.27 billion),” said Stone.

Finally, the assessed value of properties exempt from property taxation increased 13.9 percent. This marks the third year in a row that the value of exempt properties has increased.

In addition, this year’s roll growth data contained fewer geographic disparities than last year. Gilroy experienced the largest percentage increase in assessed value, 13.53 percent, while the city of Santa Clara had the lowest increase in assessed value of 4.05 percent. As expected, many redevelopment agencies, where major commercial and industrial facilities are located, did not fair as well as cities.

The major beneficiaries of property taxes are the students who attend California’s public schools and community colleges. Sixty-one percent of local property tax revenues generated by assessments in Santa Clara County go to fund public education.

Finally, Stone pointed out that this year’s assessment activity occurred despite a significant reduction in his appraisal staff due to retirements. “It was truly remarkable,” said Stone. “The staff really pulled together. Assisted by streamlining initiatives, we were able to increase our productivity with a smaller staff and return $1.2 million of the assessor’s budget to the county general fund” said Stone.