Report: Property Tax Basis Portability Task ForceMay 21, 2007


Taxation Committee
Legislative Committee
The Task Force was appointed in February, with the following charge: Mission Statement:Assess the political viability of addressing the issue of Property Tax Basis Portability, and if feasible, then

a. Determine whether expanding the ability of homeowners to transfer their property tax basis to a new property will increase the availability of housingb. Determine whether homeowners should be allowed to transfer their property tax basis when they purchase homes that are more expensive thantheir current homesc. Examine the tax revenue impact to government.

2. Become familiar with the current program which allows seniors (55 and over) to transfer their existing property tax basis to another home within the same county or toanother county that has elected to participate in the program, and review the options available for expanding that ability to more homeowners.3. Make recommendations as to what, if any, actions (legislative or otherwise) C.A.R. should take with regard toproperty tax basis portability and report to the C.A.R. Board of Directors at their June 2007 Board meeting.Members:Deborah Ritchey, Chair
Toby Bradley
Cynthia Carley
Judy Ellis
Robert Kevane
Peter Morris
Mark Peterson
Michael Roberts
Suzanne YostMeetings:March 21, Sacramento.  The task force heard from the following speakers regarding the political feasibility of expanding property tax basis portability:

- Jon Coupal, President, Howard Jarvis Taxpayers Association
- Colin Grinnell, Consultant, Senate Revenue and Taxation Committee
- Lenny Goldberg, Executive Director, California Tax Reform Association
- Richard Temple, Senior Vice President, McNally Temple Associates

April 30, Sacramento.  Robert Kleinhenz, Deputy Chief Economist for the California Association of Realtors, addressed the task force regarding the demographics of homeownership.Background:Proposition13, approved in 1978, was promoted to help senior citizens keep their homes without being priced out by ever rising assessments and property taxes.  However, it appears to many at this point, that Proposition 13 and the subsequent Propositions 60 and 90 may also have the effect of “trapping” them in their homes because unless they meet restrictive requirements they lose their old tax basis when they acquire a replacement home.For example, Propositions 60 and 90 require that the replacement home must be of equal or lesser value when compared to the sale price of the former home.  This, however, ignores the fact that a senior may be trying to move to a better, safer neighborhood within their county or trying to be closer to relativeswho happen to live in a more expensive area.  The task force felt that revenue losses due to allowing seniors to purchase a more expensive could be mitigated by adjusting the property tax basis upwards by the difference between the property tax basisof the former home and that of the new home.Discussion:While the campaign consultant who addressed the task force seemed eager to tackle such an undertaking as expanding Propositions 60 and 90 (for example, by requiring every county to accept incoming property tax bases, by allowing seniors to “buy up,” or by allowing everyone to do so), most of the presenters at the first meeting of the task force agreed that this was still a “hot potato” issue and such an effort would meet strong resistance from local taxing authorities.It was noted that because the legislature would be unlikely to pass such legislation, it might well require a ballot initiative if such changes were sought.  For even though overall revenue has increased asaggregate assessed values and sale prices have grown, unfunded mandates and other restraints have caused a hypersensitivity to perceived revenue losses.  As an example, one task force member reported that Santa Clara County may be on the brink of deciding to abandon the acceptance of old property tax bases under Proposition 90 even though the projected revenue loss may be as little as $54,000 per year.Addressing the issue of adding to the availability of “affordable” housing by expandingseniors’ opportunities for sale of their residence and purchase of a replacement home, one task force member provided an interesting theoretical model of a chain of purchases that could be triggered by the sale of a classic “empty nest”home.  However, as with the fiscal impact question, this aspect of impact remains anecdotal such that it was felt that before proceeding with any specific recommendations, a statistically significant survey of an adequate number of appropriate households should be undertaken.  After that data is in hand, a dynamic model of revenue implications should be undertaken as well.Status/Summary
It appears that there is a good bit of sympathy for allowing seniors to transfer their property tax basisto any county to which they may choose to move.  Ultimately, it depends on how much it will cost government in lost property tax revenues – if the losses are significant, any proposed expansion of portability will be vehemently opposed.Figuring out how much expansion will cost requires several steps.  First, it requires knowing the extent to which Propositions 60 and 90 are now used.  Staff to the task force is working on getting that information from the Board of Equalization (BOE)and from the county assessors whose counties allow Proposition 90 transfers.  Second, it requires determining the extent to which expansion will actually be used by homeowners.  The task force is working on developing a statistically valid survey to gather that information.  Finally, it requires determining how much the cost of expansion can be mitigated.  That will necessitate conducting some fairly complex computer modeling because (1) homes that are now taxed below their value willgenerate additional revenue if the resident of the home moves but (2) that will be impacted by homeowners transferring their previous property tax basis to their new home.Once the task force has ascertained the costs of conducting a survey and of performing the necessary computer modeling, it will make recommendations as to how to proceed.