SETTING THE RECORD STRAIGHT (publ. 12/10/2013, pg. A4)
A story about a quirk in California law that will hold down increases in property tax bills next year did not make it clear that not all homeowners will be protected. While the vast majority of home-owners will see their assessments rise less than half a percent, thanks to the state's low rate of inflation, some homes that dropped in value below their purchase price during the recession could see their assessments climb much higher because of the market rebound.

SACRAMENTO -- Housing prices in many Bay Area neighborhoods have skyrocketed in the last year, but a quirk in Proposition 13 means even more good news for local homeowners: Their property taxes next year will barely go up.

Neighborhoods in Brentwood in 2002.
Neighborhoods in Brentwood in 2002. (Bay Area News Group)

Under the landmark tax-revolt measure passed in 1978, county tax officials can increase a home's assessed value each year by 2 percent or the inflation rate -- whichever is lower.

And now, for the eighth time in 35 years, California's inflation rate is lower -- less than a half of 1 percent. Oddly, a big drop in Southern California gas prices dragged down inflation statewide even though the cost of living in Northern California jumped by almost 2 percent.

"This is such great news," Danville homeowner Trina Asbell said Sunday. "It made my day."

With the economy just starting to rebound after years of slow growth, she said, the timing couldn't be better.

The Proposition 13 wrinkle, however, is bad news for dozens of school districts in Bay Area counties that rely heavily on local property tax revenue to fund their budgets.

"The property tax growth is going to be one of the lowest we've had since Proposition 13 passed," said Larry Stone, Santa Clara County's assessor. "We're getting inquiries now from concerned school districts."

For Santa Clara County, the low rate of inflation means the county will take in at least $17 million less in property tax revenue next year than it expected. A little less than half of that money, $7.7 million, would have gone to schools.

Alameda County will take in at least $16 million less and Contra Costa County about $25 million less than it would have received if inflation had been 2 percent or higher. San Mateo County will be shorted roughly $14 million.

Stone said he started to worry over the summer when he realized the California Consumer Price Index was stagnant. He hoped the figure would climb before October, but that wish didn't pan out.

County tax assessors across the state abide by a Halloween deadline to set the percentage by which assessed property values will go up the following fiscal year, which begins July 1.

Reflecting a rising cost of living in the Bay Area, inflation in San Francisco, Oakland and San Jose climbed 1.6 percent. In the Los Angeles area, however, it dropped 0.1 percent.

Because Proposition 13 set property tax rules for the whole state, Northern California's bump is in effect averaged with Southern California's decline. This left California with lower inflation than the national average calculated between October 2012 and October 2013, which was just shy of 1 percent.

Plummeting gas prices in Los Angeles helped put Southern California's inflation rate in the minus column, said Steve Reed, a spokesman for the U.S. Bureau of Labor Statistics. They were down 16.5 percent from the previous year, mainly because of an easing of Mideast tensions and fixes at Southern California refineries.

"Yes, homeowners will be paying a little less, but if you have children in the public schools, drive on the streets or call 911, this means you're also going to get a little less in public services," said Stone, the Santa Clara County assessor.

Portions of Proposition 13 revenue also fund counties, cities, community colleges and special districts. But public schools get the most by far.

The school districts affected the greatest by the Proposition 13 anomaly are known as "basic aid districts." They're some of the wealthiest districts in the state, and they earn the distinction because they get enough property tax money to cover their costs without much help from the state.

School districts in Palo Alto, Los Gatos and Beverly Hills are among more than 100 basic aid districts across the state. There are 14 in Santa Clara County and 15 in San Mateo County. But Alameda, Contra Costa, San Francisco and Solano counties have none.

The state general fund will be forced to cover the loss for other districts that rely on a combination of local and state revenue, but the impact on the state budget will be minimal, said H.D. Palmer, a spokesman for the state Department of Finance.

Larry Gerston, a political science professor at San Jose State, said wealthy districts often have millions of dollars saved from years when property tax revenue came in higher than expected. And if districts don't want to touch those savings, he said, they can call on local parent associations to collect the difference through fundraising drives.

"Los Gatos recently asked every parent to donate $500 per student, and I'd be surprised if many people said no," Gerston said.

Indeed, lower-than-expected tax revenues won't stall Mountain View-Los Altos high school district's plans for a synthetic turf football field or an expansion of bathrooms at five schools, said Joseph White, the district's associate superintendent for business services.

"We're going to have a little less spendable income," White said, "but it's not really a reduction. It just means we don't have the extra."

Staff writer Pete Carey contributed to this report. Contact Jessica Calefati at 916-441-2101. Follow her at Twitter.com/calefati. Read the Political Blotter at IBAbuzz.com/politics.