Property Tax
FY 2023-25 PROPOSED POLICY BUDGET
Property tax is the largest single source of revenue for the GPF and represents over one third of all GPF revenues. Under the current law, all taxable real and personal property is subject to a tax rate of one percent of the assessed value. A tax increase can only occur if two-thirds of those voting in a local voting in a local election approve the issuance of bonds. The assessed value of real property that has not changed ownership adjusts by the change in the California Consumer Price Index up to a maximum of two percent per year. Property which changes ownership, property which is substantially altered, newly constructed property, and personal property are assessed at full market value in the first year and subject to the two-percent cap thereafter.
The County of Alameda is responsible for assessing, collecting, and distributing property taxes in accordance with enabling state law, and for remitting such amounts to the City. Property taxes are assessed and levied as of July 1 on all taxable properties located in the City, and result in a lien on real property on January 1. Property taxes are then due in two equal installments-the first on November 1 and the second on February 1 of the following calendar year and are delinquent after December 10 and April 10, respectively.
Over the last 20 years, property tax revenue has grown on average, year-over-year, at a pace of 7.6 percent. The growth for that period was accelerated by a rapid run-up of housing demand, new construction, and developments that began in FY 2004-05. The rise in property tax revenues was also due to a Vehicle License Fee (VLF) “backfill” payment from the State (the difference between the old VLF of 2% and new fee of 0.65%) in the form of property tax revenue. The value of rising property tax, which increased more quickly than VLF revenues, brought Oakland additional revenues. Furthermore, starting in FY 2011-12 with the dissolution of the Redevelopment Agency, unallocated property tax increment is flowing back to the City in the form of additional property tax revenues.
Beginning in FY 2004-05, property assessments rose quickly, propelled by the high volume of home sales and rising home prices. Driven by economic growth and aggressive lending practices, the housing market accelerated and finally peaked in 2007, when the median single-family home price reached $580,000. After this peak, housing demand and prices declined due to an economic downturn, lack of affordability, loss of jobs, tightened credit, and increased foreclosures. At the start of the Great Recession, the median house price fell from $510,000 in 2007 to $315,000 in 2008, and further fell to $192,000 in 2009. The local real estate market bottomed out in FY 2010-11.
Starting in FY 2012-13, the City began to see a rebound in housing prices. Since 2012, the City has received a portion of the Redevelopment Property Tax Trust Fund (RPTTF) as the result of the dissolution of the Redevelopment Agency pursuant to state law. The RPTTF is the portion of property tax increment that would have gone to redevelopment agencies if they had not been dissolved, less the funding required to wind-down the obligations of that redevelopment agency. Of particular note is FY 2012-13, which realized a one-time spike in RPTTF resulting from the distribution of all unobligated tax increment revenue held in reserve by the former Redevelopment Agency. Please note that the RPTTF should not be viewed as the growth of property tax, but rather as a shift of local resources after losing redevelopment agency funding.
General Purpose Fund property taxes, inclusive of RPTTF, are expected to grow from an estimated $274.5 million in FY 2022-23 to an estimated $294.2 million in FY 2023-24 and $308.9 million in FY 2024-25. This is an average projected annual increase of 6.09% year-over-year.