AGENDA STAFF REPORT

Agenda Item AGENDA STAFF REPORT ASR Control 15-001124
MEETING DATE:	08/25/15
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	All Districts
SUBMITTING Agency/Department:	Assessor Department (Approved)
Department contact person(s):	Shaw Lin (714) 834-2733
	Yvonne Herrell (714) 834-2735

Subject: Resolution for Low Value Exemption from Property Taxation

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Resolution to Form

Discussion

3 Votes Board Majority

Budgeted: N/A

Current Year Cost: N/A

Annual Cost: N/A

Staffing Impact:

# of Positions:

Sole Source: N/A

Current Fiscal Year Revenue: N/A

Funding Source: N/A	County Audit in last 3 years: No

Prior Board Action: 08/21/2001 Resolution #01-290, 02/24/1984 Resolution #84-273

RECOMMENDED ACTION(S):

Approve Resolution requesting to increase the Low Value Exemption for Property Tax for both real and personal properties to $3,000.

Rescind Resolutions 84-273 approved in February 1984 and 01-290 approved in August 2001.

SUMMARY:

It is recommended that the Board of Supervisors approve a resolution to increase the Orange County Low Value Exemption for both real and personal properties to $3,000.

BACKGROUND INFORMATION:

The Board of Supervisors approved Resolution 84-273 on February 24, 1984, authorizing the exemption from property tax for all real and personal properties having a full value of $1,350 or less, and directing the Assessor to omit each unit of real and personal property having a full value of $1,350 or less. The amount of $1,350 was established based the average cost of assessing and collecting property within Orange County which was $15.50 per unit of property enrolled at that time.

On August 21, 2001, the Board of Supervisors approved Resolution 01-290, clarifying that the value of certain types of business properties (e.g. vending machine), could be aggregated within one Tax Rate Area (TRA) for the purposes of applying the Low Value Exemption. The amount of $1,350 was not updated, and the provision for the Assessor to omit enrolling properties with value less than the Low Value Exemption was also removed.

The Revenue and Taxation Code Section 155.20 authorizes the County Board of Supervisors to adopt Low Value Exemption for both real and personal properties, up to $10,000. It also provides that: “In determining the level of the exemption, the board of supervisors shall determine at what level of exemption the costs of assessing the property and collecting taxes, assessments, and subventions on the property exceeds the proceeds to be collected.”

Based on the current Board Resolution 01-290, the Assessor Department is required to enroll all taxable properties regardless of the value. The Low Value Exemption is applied by the Auditor-Controller when creating the Extended Tax Roll for the Treasurer-Tax Collector to send tax bills. However, as authorized under the California laws, the Treasurer-Tax Collector currently does not issue any tax bills that are less than $20 (i.e. generally, properties with a value less than $2,000 do not receive tax bills and no revenue is collected).

A survey of the Low Value Exemption for other California county assessors was conducted and found the following facts:

The Low Value Exemption for Business Properties ranges from $0 to $10,000, with almost half (26) of the 58 counties over $3,000, and more than (20) counties exceeding $5,000.

The Low Value Exemption for Real Properties ranges from $0 to $5,000. Out of the 58 counties, there are 14 counties at or exceeding $3,000.

As for the cost of assessing and collecting of $15.50 in 1984, applying the California Consumer Price Index (CPI) published by the State Department of Industrial Relations, the amount would be about $36.67 (equivalent to an assessed value of about $3,600 for the 1% basic levy tax rate).

The recommended update of the Orange County Low Value Exemption Resolution will increase the Exemption for both real and business personal properties from $1,350 to $3,000 with the following benefits:

· The Assessor Department can better utilize our limited resources to focus on the properties that are more significant in value, and manage more efficiently in addressing future workload increases.

· The small business and property owners can save lots of time and costs trying to comply with various reporting and document filing requirements for properties of small values. This would be a benefit especially for the very small businesses.

· Reduces the work and frustration for both the business/property owners and the Assessor Department related to disputing or appealing over properties of insignificant values.

· Saves the costs of producing small bills.

The Assessor Department will continue to review and track the value of properties that are under the Low Value Exemption.

The approval by the Board for the recommended Resolution now will allow the Assessor Department to adjust work processing and system setting to implement the new Low Value Exemption to the 2016-17 Annual Roll.

FINANCIAL IMPACT:

If the recommended Resolution update is approved by the Board, using the data for the
2014-15 Annual Roll, the reduction in the Roll value for real and business properties, with value between $2,000 and $3,000 is estimated to be approximately $31.8 million ($318,000 at 1% tax rate), about 0.0067% of the 2014-15 Annual Roll value.

With the 1% basic levy, the reduction in overall property tax revenue is about $318,000, of which the County’s share is about 6%, or $19,080.

The cost savings from not having to perform the assessment and collection for the real and business/personal property assessments with value between $2,000 (the Treasurer-Tax Collector does not send out bills under $20.00) and $3,000 is estimated at $491,378 ($36.67 for 13,443 units of assessments – 1,399 real property parcels and 12,044 business property assessments).

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A - Resolution Increasing Low Value Exemption to $3,000
Attachment B - Revenue and Taxation Code Section 155.20