“Nothing is certain except death and taxes.” And sometimes, not even taxes are that certain. Many people in Santa Cruz County are grumbling about the tax increase recently passed by the County Board of Supervisors. It seems like we are paying more and receiving less in the way of services. Also, taxes seem to be significantly higher in some communities than others. That’s right on both counts, said Supervisor John Maynard and County Manager Carlos Rivera in a recent interview with the PRT.
The short answer to why we are paying more is that the economy is taking far longer than expected to recover. Over the past seven years, revenues went down significantly and expenditures did not. The county’s reserve fund, which fills the gap when revenues are less than expenditures, is almost tapped out. In 2016, the county would have run out of cash completely without an increase in the tax rate now (and maybe next year too?). The 2013-14 rate increase averages 21.3% countywide (a 60 cent increase from $2.82 to $3.42/$1000 assessed valuation). Individual tax amounts vary depending on assessed property valuation.
The longer and more interesting answer requires understanding how your tax bill is computed, what other revenues, beside property taxes, fund the county’s budget, and whether there are significant increases in county expenditures.
There are two basic components to any property tax. The first is the tax rate that is approved countywide by the board of supervisors and is usually expressed in dollars per $1000 of property valuation. The second is the value of your property, which is set by a different elected official, the county assessor, based on comparison with other local properties. Your property tax is the county-wide rate multiplied by your individual property value.
Of course, there are complicating factors. Your property tax in Santa Cruz County is actually made up of at least five county-wide jurisdictional taxes. If you live in Patagonia, you have two additional taxes for our schools (Patagonia Elementary and Patagonia High School). If you live in Sonoita, you also have two schools (Elgin School and Patagonia High School) and a fire district tax to pay. Look on your county tax bill and you will see the breakdown.
While the majority of our property tax dollars pay for public schools, our school taxes remained relatively stable between 2012 and 2013. The biggest changes in rates and bills are seen in the Santa Cruz County Primary Property Tax (first on the list) and Santa Cruz County Community College (SCCCC) Tax.
Another complicating factor is that the state sets a lid, a maximum tax that can be levied in every county. For example in 2008, when the economy was strong and assessed values were high, the county had to reduce the tax rate to stay within the lid. As assessed values dropped, the county chose to keep the tax rates low and draw on reserves to make up the difference in taxes collected and expenditures incurred.
“We tried to maintain services without raising taxes,” said Maynard.
The recession hit the state and federal government too, and they cut funding to the counties in order to balance their budgets. Criminal justice activities were particularly hard hit. For example, Santa Cruz County had to take responsibility for $5.8 million for expenses like Department of Public Safety officers, costs for housing sexually violent and mentally incompetent prisoners, plus the full costs of justice of the peace salaries. Adding to the problem, local sales tax and fees from building permits all remain low due to the depressed economy.
There are also factors on the expenditure side that influenced the need for general fund and community college tax increases. The SCCCC was approved by county voters in a 2009 special election that established a three-year property tax rate of seven cents per $1000 of property valuation. That generated only enough revenue for a virtual college without a physical home and with very limited staff and faculty. In 2013-14, the property tax for SCCCC increased to 48 cents per $1000 property valuation. The reasons for the increase are complicated and include a lawsuit by Pima County Community College (with a $6 million damage clause) requiring SCCCC to close or become a bona fide college. The SCCCC board chose a tax increase to create a real local college rather than a probable $6 million settlement and no local college. The current SCCCC enrollment is over 900 students and growing. The tax increase allowed the college to rent a building with classrooms and laboratories, expand faculty and staff, and deliver over 100 classes and six certificate programs: Fire Science Technology, Emergency Medical Technician, Certified Nursing Assistant, Medical Assistant, Logistics, and Early Childhood Education.
The increase in the County Primary Property Tax is also complicated. In response to decreased revenues, all county department budgets were reduced in 2009, more in 2010 and again more in 2012. In spite of these cuts, the gap between general fund expenditures and revenues continued to widen.
One likely factor is our big new courthouse and jail complex. The voters approved the new facilities in 2005. The new courthouse was funded by the County General Fund and the new jail by a voter-approved half cent increase in local sales tax. The assumptions behind the jail were stable sales tax revenues, increased demand for jail beds by the federal government, and increased demand from illegal immigration within the county.
None of these assumptions held true. Today, the 380 bed jail has an average occupancy of 50. The new courthouse sits beside the old courthouse–a large, attractive 30-year-old building. Both feel a little empty. How are we paying the operating and maintenance costs of this oversized complex?
Carlos Rivera agrees that maintaining the large underutilized jail is a significant additional expense. The Primary Property Tax has plugged the hole in revenues caused by the drop in sales taxes and the lack of prisoners paid for by the federal government. The sheriff is looking for further cuts while the county supervisors are considering eliminating the Primary Property Tax subsidy to the jail. But it is expensive to keep the lights on and the heating and cooling systems operating in a large, modern jail.
Tax rates, questionable facility development, and revenue shortfalls are not the whole story. Since 2010, assessed values have also dropped steadily due to the downturn in the economy. That means that although countywide tax rates remained the same from 2010 to 2012, fewer tax dollars were collected.
Like tax rates, property assessments are not a simple story. Look for a second article on the impact of property assessments on your taxes in an upcoming PRT.