Property taxes are a key funding mechanism for various state, county, local government, and other special districts (schools, utilities, etc.)
Properties are taxed in two ways:
- The value of the property (called Ad Valorem), which consists of an assessment for land (the square footage of the lot), and improvements (buildings, etc).
- Fixed Charges and/or Special Assessments - flat fees or based on a percent charge per square footage of buildings on the property.
A property tax bill has three tables that break down how taxes are calculated.
The Tax Computation Worksheet (middle right of the statement) shows how Net Assessed Value is calculated. There are three components to this calculation: land value, building/improvement value, and if the homeowner lives on the property, a $7,000 homeowner's exemption. This table also shows the total Ad Valorem component of your property taxes.
The Tax Rate Breakdown (middle left of the statement) shows a break down of the total Ad Valorem tax rate. The first item is the county-wide tax of 1% of Net Assessed Value. Below that is a list of all the agencies that have issued voter-approved debt (see Bonds below): The City of Berkeley, BART, EBMUD, the County, school districts, etc.
On the top right is the Fixed Charges and/or Special Assessments table. Many of these are based on the size of the building (or the size of the lot). And some are flat rates.
Note that the City of Berkeley and Berkeley Unified School District assess both Ad Valorem, and Special Assessment charges on property tax bills.
More information on California property taxes can be found in this link
New taxes planned for 2020
Several new taxes are planned by local and regional entities for 2020.
|BUSD||March 2020||raise teacher salaries||TBD||$45 per $100,000 of Assessed Value||Planned||BUSD board agenda|
|Silicon Valley Leadership Group & Bay Area Council||Nov 2020||construction of second transbay BART crossing||$100 billion||Unknown||Early Stages||this link|
|ABAG, MTC||Unknown (Nov 2020 ?)||build affordable housing||Unknown||Unknown||Unknown||Enabling legislation passed|
|BUSD||Nov 2020?||school infrastructure||TBD||Unknown||Unknown||BUSD board presentation (9/24?)|
Bonds are voter-approved debt used to finance major capital projects in Berkeley.
When a bond is approved by the voters, the city can issue a Government Obligation for sale on the bond market and get cash for a specific purpose. In return, it has to pay the value of the bond with interest over its term, which typically is about 30 years (but can vary). The city charges a percentage of assessed property value for all the bonds it is currently paying out to the buyers of its bonds.
When the city asks voters to approve a Measure, they are told the amount of the bond, i.e., $100 million. This is how much money the city wants to borrow in total. The total cost of the bond is equal to the principal and the interest (P&I). The interest depends on a number of factors, including the overall bond market and the city's bond rating. In many ways a bond is very much like a loan -- you borrow the money up front, and agree to pay it all back slowly in installments over the term of the loan. Typically, for a bond that gets financed over 30 years, the total cost (P+I) will be about twice the amount borrowed. One recent example is Measure O, a $130 million affordable housing bond that passed in 2018. The total estimated cost is $270 million, which Berkeley residents will be paying for the next 35 years.
When voters approve a bond measure, the city will offer it on the bond market not in the full amount, but in tranches. You can see some here: Berkeley Municipal Securities (click on the 'Trade Activity' tab)
For tax year 2018-2019, the tax rate for all city-issued bonds is 0.0507% of Net Assessed Value. Here is a breakdown (from p13 of this city report):
|Authorization Amount||Outstanding Amount||Final
|FY 2019 Bond|
|2015 GO Refunding Bonds
(Refunding Measure G, S, I)
- In 2012, a $30 million measure (Measure M) was approved to improve streets and the watershed. If your home had an assessed value of $1,000,000 in 2012, you paid an initial $116/year. This amount increases as the valuation of your home increases. You will be paying off this bond for 30 years (starting in 2012).
- Measure T-1, a $100 million infrastructure bond, was approved in 2016. If your home has an assessed value of $1,000,000 you will pay an initial $210/year. This amount increases as the valuation of your home increases. You will be paying off this bond for the next 40 years (starting in December 2018).
- Measure O, a $135 million affordable housing bond was approved in Nov 2018. If your home has an assessed value of $1,000,000 in 2019, you will pay an initial $230/year. This amount increases as the valuation of your home increases, and will increase to $32 per $100,000 of assessed value in 2025-2026. You will be paying off this bond for the next 36 years (starting in 2019).
Fixed Charges and Special Assessments
These are voter-approved taxes, and can come from any number of agencies (city, county, various regional districts, etc). Some of them are a fixed amount, but most often, they are based on the square footage of the buildings on the property, or the lot size.
A few of these are applicable to parcels in specific areas only.
Also note, the property owner can elect to have some utilities and services billed through their property tax statement, instead of directly by the provider. EBMUD and Refuse/Garbage service are two examples.
These charges are generally calculated by the taxing agencies themselves, and submitted to the county for billing. The county does not control how these charges are calculated. The ballot measure that approved each of these charges is the only limiting factor in how the various agencies calculate these charges.
Square Footage Discrepancies
It is important to note that the taxable building square footage (BSF) used by the City of Berkeley to calculate its own Special Assessments is in general NOT the same as the square footage that appears in your property's real estate listing, or closing documents -- the latter are based on the county record.
The City of Berkeley (and as a bill issuer for BUSD) calculates special assessments based on the Berkeley Municipal Code (see (BMC) 7.56.020) which states, “Square footage shall mean the total gross horizontal areas of all floors, including usable basement and cellars, below the roof ... including the square footage of all porches…”
There is no explicit mention of this different standard anywhere. In fact, the city maintains that they use the county's BSF to calculate special assessments.
Homeowners can request the following documents for their property:
- From the Alameda County Assessor's Office, a copy of their i) Residential Building Record, and ii) Property Characteristics page
- From the City of Berkeley Finance Dept.: i) the building square footage the city uses for the property, ii) a breakdown that shows how that figure is calculated, and iii) the building card
You can also calculate the building SQF indirectly: check your 2018/19 property tax bill. The amount shown for CITY LANDSCP/PARK divided by 0.1663 is the building square footage used by the city and school district to calculate special assessments.
Other entities that assess special charges may use the county's BSF figure.
Many of these charges and assessments increase every year due to annual inflators. City-imposed charges for 2018-19 increase by 3.789% (except for refuse which is 3.0%).
It is important to recognize that while the City may say on its website, “this tax funds maintenance of X, Y, and Z,” this is not always the case. Your taxes are absorbed into the City's General Fund and can (legally) be spent on anything the City Manager or City Council wishes to spend them on. Approximately 80% of all taxes are spent on salaries, pensions, health care, and other benefits for city workers, which increase significantly each year.
Tax and fee increases for FY2018/19:
- [City street lighting: no increase]
- [Landscaping and parks: 3.789% ]
- [City refuse collection: 3.0%]
- [Disaster fire equipment: no increase]
- [Library 3.789%]
- [Paramedic supplemental 3.789%]
- [Emergency services for the disabled 3.789%]
- [Fire Protection and Emergency Response and Preparedness Tax: 3.789%]
- [Clean storm water: no increase]
For a closer look at Berkeley, please follow this link for 2018/19 parcel statistics.
Residential parcel assessments across Berkeley's Council Districts
Proposition 13 allows property owners to effectively freeze, with small annual increases, the assessed value of a property at the time of purchase or certain other transfers and remodeling projects. It also provides mechanisms for intergenerational transfer of ownership without an increase in assessed value.
Property owners in California are entitled to a homeowner's exemption in valuation of $7,000 if they reside in the property in question.
In this chart, we present the distribution (as of June, 2019) of assessed values in each district, separated by properties that did (not) take the homeowner's exemption.
Distribution of Assessed Residential Property Values by Council District, segmented by Homeowner's Exemption, June 2019
(Note: values have been clipped to under $3.5M, above which there are outliers)
The distribution in each district is clearly skewed toward the lower valuations, reflecting the benefits of Prop 13 for incumbent property owners. In districts 1-4, the distribution between exempt and non-exempt properties is quite similar, suggesting that turnover is relatively low. In districts 5-8, non-exempt properties have a flatter distribution, with more properties on the higher end of the assessed value scale.
Aggregate parcel taxes
Based on the 2018-19 tax roll, Berkeley's 29,055 parcels add up to 243.2 million sqf of land, and 80.5 million sqf of improvements (per county figures). This results in $19.3 billion of gross assessed value. After exemptions (homeowner, other), the total net assessed value of all parcels was $18.5 billion.
This shows the total Ad Valorem taxes collected from all property parcels in the city of Berkeley.
In FY 2018/19 Berkeley taxpayers paid $9.4 million for all outstanding city-issued bonds. Similarly, for BUSD bonds taxpayers paid $23.5 million.