by Jodi Summers
Proposition 13 limits annual tax increases on both commercial and residential properties at 2% each year after a sale takes place. The landmark 1978 California tax change was passed, in part, so that older Californians are not priced out of their homes through high taxes. Proposition 13 has been called the “third rail” (meaning “untouchable subject”) of California politics, and it is not popular politically for lawmakers to attempt to change it.
Sen. Mark Leno (D-San Francisco) wants voters to alter Proposition 13 to make it easier to pass local taxes for schools. Leno is introducing a constitutional amendment that would allow local parcel taxes for schools to pass with 55% of the vote, instead of the two-thirds currently required.
Proposition 13 (officially named the People’s Initiative to Limit Property Taxation) was an amendment of the Constitution of California enacted during 1978, by means of the initiative process. It was approved by California voters on June 6, 1978. It was declared constitutional by the United States Supreme Court in the case of Nordlinger v. Hahn, 505 U.S. 1 (1992). Proposition 13 is embodied in Article 13A of the Constitution of the State of California.
The proposition states:
Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.
The proposition decreased property taxes by assessing property values at their 1975 value and restricted annual increases of assessed value of real property to an inflation factor, not to exceed 2% per year. It also prohibited reassessment of a new base year value except for (a) change in ownership or (b) completion of new construction.
In addition to decreasing property taxes, the initiative also contained language requiring a two-thirds majority in both legislative houses for future increases of any state tax rates or amounts of revenue collected, including income tax rates. It also requires a two-thirds vote majority in local elections for local governments wishing to increase special taxes. Proposition 13 received an enormous amount of publicity, not only in California, but throughout the United States.
The two-thirds majority is what Congressmen Leno wants to change, dropping the majority 11% to 55% of the vote.
“This change in law would give voters the power to make decisions about public education at the local level, allowing schools much-needed flexibility to improve instruction, fund libraries, music, the arts or other programs, or hire more teachers to reduce student-to-teacher ratios,” Leno justifies.
With new supermajorities in both legislative houses, Democrats now also have the power to place measures such as Leno’s on the ballot without GOP backing. In 2000, voters passed a measure changing the vote threshold for local school bonds from two-thirds to 55%.
edited by Jodi Summers
The Postal Service announced that they are proceeding with plans to relocate the services of the historic Santa Monica Main Post Office to the carrier annex at 1653 7th Street, south of Colorado and the future Expo line. The Santa Monica Conservancy was among dozens of organizations and hundreds of residents who wrote letters opposing the closure at the time of the July 17 hearing.
We are following this situation very closely, and would like to bring you up to date on three initiatives we are taking:
- Joining appeals of the decision to relocate the Post Office
- Requesting Consulting Party status in the Section 106 Process defined by the National Historic Preservation Act
- Asking our Landmarks Commission to prepare a nomination of the Post Office
See below for details and how you can help.
Appeal of the Postal Service decision to close the 5th Street Post Office: It is our understanding that the City of Santa Monica will be making a formal appeal. The Conservancy will be sending its own letter opposing the decision for closure and ask you to do the same. The Conservancy’s letter will include the following points:
- The Santa Monica Main Post Office is a beautiful historic structure which is recognized in the City’s Historic Resource Inventory as being eligible for the National Register of Historic Places. It has been serving the community since its dedication in 1938 as part of the Federal Works Progress Administration.
- We are very concerned that the proposed sale of the Post Office will place this historic building at risk. The National Trust for Historic Preservation is so concerned about the failure of the Postal Service to provide adequate protections that it has named the Historic Post Offices to its 2012 list of the Nation’s Most Endangered Historic Places. See below for additional concerns about Postal Service adherence to federal laws intended to protect historic properties as they are sold into private ownership.
- Closing the 5th Street Post Office may very well turn a profitable location into one that operates at a loss. The current location in the Central Business District is within walking distance of many local residents and businesses, and accessible by public transit. The outpouring of opposition describes the proposed location as much less convenient and indicates that the facility would be avoided by many – suggesting that it may not generate enough revenue to cover operating costs.
Your letters of support should be sent to:
Vice President, Facilities
Pacific Facilities Service Office
1300 Evans Ave. Ste. 200
San Francisco CA 94188-0200
Requesting Consulting Party status in the Section 106 process defined by the National Historic Preservation Act: Under Section 106, the Postal Service cannot sell a historic property without a protective covenant to ensure that the historic property suffers “no adverse effects” when sold. Unfortunately, experience to date indicates the protections put in place are likely to be very weak unless local preservation organizations like the Conservancy request a consulting role. We will be making this request immediately without waiting for the results of the appeal, and will keep you informed of our progress.
Built by then-president Franklin D. Roosevelt’s Works Projects Administration, it opened with pomp—red, white and blue bunting strung across the lawn—in July of 1938.
But now, there’s less of a need for the brick and mortar outlet, Postal Service officials say. About 40% of the agency’s retail revenue comes from the Internet, grocery stores, pharmacies and office supply stores.
Though Santa Monica’s main post office has dodged closure lists since 2009—when expansive plans were first announced to consider shuttering thousands of locations nationwide—it is now being targeted.
Under a plan that still needs to be vetted by the public, the retail services would relocate less than a mile away to a carrier annex facility at 1653 Seventh St. The lucrative downtown property at 1248 Fifth could be sold, said spokesman Richard Maher.
Finally, the Conservancy has requested that the Santa Monica Landmarks Commission prepare a nomination of the Post Office so as to be ready to act as soon as the Post Office passes into private ownership, since they have no jurisdiction as long as the building remains a federal property. We understand that this will be on the Commission’s agenda for their next meeting, scheduled September 10 at 7 PM in the Council Chambers at City Hall.
Are you a current member of the Conservancy? Your annual membership contributions support our work to preserve the architectural and cultural heritage of our city. You will receive our informative quarterly newsletter and discounts on tours and events.
Thank you for your support!
Questions? Call 310-496-3146 or email firstname.lastname@example.org.
Santa Monica Conservancy
PO BOX 653
Santa Monica, CA 90406
Contact Name: Santa Monica Conservancy
Telephone Number: (310) 496-3146
From: Santa Monica Conservancy [mailto:email@example.com]
The SAVE Act, is new bill being proposed in Congress, would create 83,000 jobs and generate $1.1 billion in annual energy bill savings. Officially known as the “Sensible Accounting to Value Energy” (SAVE) Act, it would require mortgage lenders to include expected energy-costs savings into the value of a home. Bill sponsors, Senators Michael Bennet (D-Colorado) and Johnny Isakson (R-Georgia), call the bill, ”A win-win for the economy and the environment.”
The Institute for Market Transformation notes that SAVE Act would help revitalize the hardest hit sectors of the economy by providing lower rate mortgage financing for cost effective energy improvements; allowing homebuilders and homeowners to recover the cost of efficiency investments; and enabling better federal mortgage underwriting while lowering utility bills for American households.
“It would allow folks to retrofit their homes and be rewarded for it over the life of the loan,” Senator Bennet enthused.
Let’s put the SAVE Act into action using a recently built home as our example. Most likely the newer home is as much as 75%-more energy-efficient than its older neighbors > saving the owner $1,500 a year. Under the SAVE Act, that savings would be factored into the value of the home and the borrower’s ability to make the mortgage payments.
Expected benefits include:
* Enable federal mortgage programs to improve the quality of mortgage underwriting and provide an accurate picture of repayment risk and the expected costs of homeownership
* Greatly accelerate the supply of and demand for energy-efficient new homes
* Quickly return any incremental cost for homebuyers due to home efficiency improvements
* Put people in the construction and manufacturing sectors back to work renovating and building energy-efficient homes and products
“It allows us to build and sell more energy-efficient houses, which is a win-win,” shared Randy Melvin of Winchester Homes. “It’s good for us, it’s good for the environment, it’s good for the consumer, it’s good for our country’s energy independence.”
The average homeowner spends more than $2,000-a-year on energy, yet it is not factored into appraisals, unlike insurance or real estate taxes.
“Let’s say you install double-pane windows in your house that create energy efficiency, that’s a cost as homeowner, but it’s a savings that the lender can now recognize,” concludes Sen. Bennet.
From the Santa Monica-Malibu Unified School District:
Senior Exemption – Measure R
On February 5, 2008, the voters of Santa Monica and Malibu approved by 73% the Measure R parcel tax, which combines and replaces the previous Measures Y and S parcel taxes, contains a CPI-U adjustment, and allows those senior citizens who qualify to be exempted from the tax if they:
Seniors who applied for & received the exemption will be sent a 2012-13 Renewal Form in April, which needs to be completed, signed & returned by June 30, 2012.
Completed & signed applications must be returned, along with required proofs of age and property ownership, to:
Santa Monica-Malibu Unified School District
Applications must be received and/or postmarked by June 30, 2012.
From: Zina Josephs
Subject: FOSP: Measure R senior exemption – June 30th deadline to apply
Edited by Jodi Summers
1. You are usually eligible to exclude much the gain from income if you have owned and used your home as your main home for two years out of the last five years prior to the date of sale.
2. If you have a gain from the sale of your primary residence, you may be able to exclude up to $250,000 of the gain from your income ($500,000 if you’re filing jointly, in most cases).
4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
6. You cannot deduct a loss from the sale of your main home.
7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your primary residence is the one you live in most of the time.
9. If you received the first-time homebuyer credit and within 36 months of the date of purchase the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.
For more information on the subject, refer to IRS Publication 523, Selling Your Home.
And please, confirm your intentions with your accountant.
By Jodi Summers
For decades, 64% of American households owned their own home. The numbers began growing in 1995, due to incentives and encouragement from President Bill Clinton and President George W. Bush. Homeownership hit an all-time peak of more than 69% in 2004. Between 2006 – 2008, the U.S. Census Bureau calculates that home ownership in the U.S. dropped more than 1% > from 68.8% to 67.8%. In 2010 home ownership was @ 66.9%. As you’d expect, that leaves a lot of vacant homes scattered throughout the countryside.
The percentage-point difference between the latest home vacancy rate (2.5%) and our usual rate (1.5%) amounts to an excess inventory of almost 1 million vacant homes. Those million homes are our “housing bubble” so to speak. As the situation exists, the extra inventory is slowly being worked off as the economy recovers and more households are formed. The oversupply of housing stock could easily be reduced by offering a tax write-off for investors who buy empty properties and rent them out.
“The biggest barrier to housing’s recovery right now is the vast supply of foreclosed and about-to-be foreclosed homes…the dreaded shadow inventory,” summarized CNBC journalist Diana Olick. “The biggest problem in the rental market right now is dwindling supply.”
Democrats and Republicans would agree that it’s in everyone’s best interest to get those vacant homes occupied. If that means renting them out as opposed to selling them, then Woooo! Hooooo!
Currently, for tax purposes, people who purchase residential real estate depreciate the value of the property over 27.5 years. To stimulate investment, policy makers have allowed businesses to immediately depreciate the full cost of most of their investments. Real estate hasn’t been eligible for this luxurious write down. But, what if Congress were to give investors the incentive to buy vacant houses by allowing them to write off the value immediately, as long as they hold on to the properties for some number of years and rent them out.
Investors are easy buyers because they skip the convoluted loan process and use cash. SoCal buyers paying cash accounted for 28.5% of total September home sales, notes DataQuick Information Services. 52.9% of those paying cash were absentee buyers, meaning they were investors or second-home buyers. For the record, cash buyers paid a median $210,000. September cash buyer level was down slightly from 29.1% in August but up from 26.2% a year earlier. Cash purchases hit a high of 32.3% of sales this February. Over the past 10 years, the historical monthly average has been about 14% paying cash, with about 16.7% of properties being purchased by absentee owners.
If Congress were to give investors the incentive to buy vacant houses and allow them to depreciate immediately, instead of over 27.5 years, “…The annual costs on real-estate investments would be reduced by about a third, given reasonable assumptions about tax rates for investors and the interest they must pay to borrow,” calculates Richard Wagreich of Citigroup’s Financial Strategy Group. This policy would make more rental units available and lower their price, thereby encouraging more people to move out of existing households and into their own rental units.
Obviously some boundaries would need to be put in place. The homes would need to have been vacant for a specified length of time, say six months. Investors would need to hold on to the property a minimum amount of time, say five years. The government would to have provisions to take back the benefit in cases where homes were quickly resold rather than leased to boost the economy.
As you might expect, the rental market continues to strengthen. The Core U.S. Consumer Price for rent jumped by +0.2%, and the index for owner’s equivalent rent increased by +0.1%. Please note this increase is an important category because it constitutes about 24.9% of consumer budgets – greater than the sum of gasoline (4.9%) and food (14.8%). Once again, residential units continue to be a good investment.
Calculate all the numbers, and you realize, the cost to taxpayers would be marginal, in the current economy “By giving the deduction in full now, rather than gradually, the government loses the time value of money over that period,” notes Peter Orszag is vice chairman of global banking at Citigroup Inc. “But when government bond yields are exceptionally low, as they are now, that cost is relatively modest.”
Hypothetically speaking, let’s assume this government gives investors the incentive to buy vacant houses. Because of this policy an additional 250,000 housing units are purchased each year and rented out, on top of the 500,000 other properties that will be rented out regardless of tax incentives. If the average price of those houses is $250,000 (roughly the national average), the 10- year cost to the government for each year the policy is in place would be less than $50 billion > but, figure that most of that amount would be recaptured in future years because the full deductions would already have been claimed, calculates Wagreich. In mathematical actuality, the cost to the government in present value would be about $10 billion for each year the policy was in place.
Using this line of philosophy, if this government were to maintain this policy for two years, we would work off half at least half of the excess inventory at a present-value cost to the government of $20 billion. Then, once the vacant home numbers return to a more normal level, the write-off automatically ends.
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