Taxing Times in Montecito

Taxing Times in Montecito

Bob Geis is Auditor & Controller of Santa Barbara County. His office and state law determine how property taxes are paid and how they are properly allocated between the County and its cities and special districts. Refreshingly, Geis believes that democracy works best when voters are informed. The more voters know about how their tax dollars are collected and spent, the better off the County and its local jurisdictions will be. We sat down with Mr. Geis to discover how taxes derived from Montecito residents are spent.

 

How do Property Taxes Work?

 

Proposition 13 limits California property taxes to 1% of the cash value of the property, based mostly upon the purchase price, with an annual inflation of no more than 2% per year. When an owner sells his property, it is reassessed at 1% of the selling price, plus the cost of any improvements made by the purchaser. Since the passage of Proposition 13 in 1978, Santa Barbara County assessed valuations have increased almost tenfold, from $6.4 billion to $62.8 billion. Surprisingly, neither Montecito property taxes nor Santa Barbara County property taxes declined during the recent recession, when housing prices dropped precipitously. Montecito residents paid property taxes of $70 million in prerecession 2007-2008; property taxes climbed to $82 million by 2011-2012, an increase of 17%. In Santa Barbara County, property tax collections rose from $577 million in the pre-recession year of 2007-2008 to $620 million in 2011-2012, a 7.4% increase.

 

Montecito is an unincorporated community without its own mayor or city council. For property tax analysis, Geis uses the Montecito Fire Protection District (MFPD) as the boundaries for Montecito, as opposed to the less accurate 93108 ZIP code footprint.

 

Does Montecito Pay Its Fair Share of Property Taxes?

 

With 2.1% of the county’s population (8,965 out of 426,878 county residents), Montecito, with its payment of $82 million in property taxes, paid 13% of the $625 million in property taxes collected by the county.

Montecito’s 4,184 parcels have an assessed value of $8.3 billion, or $2 million per parcel, compared to the total county’s 128,817 parcels with an assessed value of $63.4 billion, or $0.5 million per parcel. Interestingly, the $82 million in total property taxes paid by unincorporated Montecito residents exceeds the property taxes paid in seven of the eight incorporated cities in Santa Barbara County. Montecito also pays from three to nine times as much per parcel as any of our county’s eight incorporated cities.

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** Montecito is not an incorporated city, but with 1/6 the number of parcels of the City of Santa Barbara, it pays more than three times as much per parcel.

 

Who Pays What in Montecito Property Taxes?

 

Montecito is a self-defined semi-rural residential community with few large commercial properties. Its primary business district, Coast Village Road, was ceded to the City of Santa Barbara in exchange for sewer service over fifty years ago. Coast Village Road properties such as the Montecito Inn (assessed at $10.7 million) and both gas stations on either end of the strip all pay property taxes to the City of Santa Barbara.

 

Montecito does claim Ty Warner’s Four Seasons Santa Barbara Biltmore

Resort at 1200 Channel Drive (assessed at $139 million), which pays $1.4 million per annum in property taxes. Warner’s San Ysidro Ranch at 900 San Ysidro Lane is assessed at $30.7 million and pays $ 314,000 in annual property taxes. Warner’s 78-acre Montecito Country Club at 170 Summit Road (assessed at $32.4 million) contributes $337,000 in property taxes, all of which, however, goes to the City of Santa Barbara. On the residential side, Ty Warner assembled five parcels for his new beachfront home at 1000 Channel Drive (assessed at $160 million) and a property tax bill of $1.9 million per year. This means that Ty Warner’s two resorts and his home contribute $3.6 million of Montecito’s $82 million in property taxes, or nearly 5%.

 

By comparison, Oprah Winfrey’s 45-acre estate has a more modest assessed value of $93.2 million and an annual property tax bill of $958,000. Oprah pays almost $100,000 more in property taxes for her home than the 360-bedroom

Fess Parker Doubletree-Hilton Resort at 633 East Cabrillo pays to the City of

Santa Barbara.

 

Other large Montecito property tax contributors include the 83-acre

Westmont College at 955 La Paz Road (assessed at $23.4 million), but taxed at $742,375 per year. The 44-acre Casa Dorinda at 300 Hot Springs Road is assessed at $53.1 million and pays $544,000 in annual property taxes, ten times as much as the 45-acre Valley Club (assessed at $5.3 million) which pays only $54,000 per year. If the Miramar Beach Resort & Bungalows is ever built by Rick Caruso at a $170 million price tag, it would add another $1.7 million to Montecito’s $82 million in property tax revenues. You can find out what you pay in property taxes compared to your neighbors by Googling propertyshark.com/mason and entering a street address.

 

Agricultural land in Montecito pays significantly less property taxes than residential or commercial. For example, a 209-acre spread that includes five parcels of homes and orchards totaling 209 acres pays just $74,658 in property taxes ($357 per acre) on $7.2 million in assessed value.

 

Across the way, the property owner pays $210,130 in annual property taxes, or $2,050 per acre, for his recently-purchased Arabian horse farm. This means he pays almost three times as much in property taxes ($210,130 versus $74,658) for half the acreage (102 vs. 209 acres).

 

Countywide, the largest property taxes paid are by petroleum companies, with EXXON (oil & gas) on the Gaviota Coast paying $3.4 million; Breitburn Energy (oil & gas) in North County at $2.9 million; Pacific Offshore Pipeline (natural gas) on the Gaviota Coast at $1.1 million; ERG Resources (oil) in Lompoc at $1.0 million; and Venoco (oil and gas) in Goleta at $0.9 million. Other top payers include Southern California Gas Company ($2.0 million); Verizon California ($2.0 million); and Southern California Edison ($1.8 million). Bacara Resort contributes $1.3 million to Goleta’s property tax coffers.

 

How Are Property Taxes Spent?

 

Property taxes are all spent locally; nothing is sent to the state or to the feds.

The chart below shows the six categories that receive a percentage of county property tax dollars collected and Montecito’s contribution to the six categories, based on the same percentage allocation formulas.

taxes table 2

A more detailed breakdown of how property taxes are spent shows the following patterns:

 

1) County School Districts received 45.8% of all property taxes collected in 2011-

2012. The County spends $284 million on public education.

Nearly half of all property taxes collected are spent on public education.

Montecito contributes $38 million to support the 20 school districts in Santa Barbara County, plus two community colleges. The county employs some 3,700 educators in charge of 66,000 county students.

Property taxes constitute about 90% of the funding of Montecito’s two Basic Aid elementary schools. Montecito Union with 470 K-6 students received $9.5 million ($20,200 per student) and Cold Spring Elementary School with 173 K-6 students received $2.8 million ($16,000 per student). Based on the relative populations of Montecito vs. the City of Santa Barbara, Montecito should contribute 10% of Santa Barbara Unified School District’s funding of $53.8 million for junior high and high school students, or $5.4 million. Montecito should also pay 10% of Santa Barbara Community College’s funding of $21.6 million, or $2.2 million.

Montecito property taxes should also fund its proportionate share of the Santa Barbara County Education Office budget of $22.8 million, or nearly another $1 million. Added together, Montecito property taxes contribute some $38 million in education funding and receive back, some $21 million in support. The remaining $17 million goes to fund other county schools.

 

2) The County General Fund received 26.8% of all property taxes collected, or $166 million in 2011-2012. Cumulatively, Education and the County General Fund account for 72.6% of all property tax spending.

 

County General Fund expenditures of $166 million from all property taxes collected can be broken down into seven major pieces: The largest General

Fund piece, 48%, is spent on Public Safety for the District Attorney’s Office, County Sheriffs, municipal law enforcement, incarceration and probation.

Another 14% is spent on Law and Justice to fund county courts, the criminal justice system and public defenders. Another 11% is spent on

Health and Public Assistance such as public health programs, alcohol, drug abuse treatment and mental health services. An added 11% is spent on Support Services such as human services and child support programs.

7% goes to local Community-based Resources and Public Facilities like Good Samaritan Shelters. 6% goes to General County Programs such as planning and development, while the remaining 4% is spent on the County Supervisors for executive functions.

Montecito, with 2.1 % of the County’s population, should absorb about

$3.5 million of these County General Fund costs; instead Montecito taxpayers pay a $22 million contribution to the County General Fund, about $18.5 million more than its proportionate share.

 

3.) Incorporated Cities received 10.3% of all property taxes collected, or $64 million in 2011-2012.

The incorporated City of Santa Barbara received $26.9 million to help run its city government. Santa Maria received $17.8 million. Goleta, recently incorporated, received $5.7 million to help run its city government. Lompoc received $7.0 million. The City of Carpinteria received $2.9 million to help run its city government. The City of Buellton received $1.7 million. The City of Solvang received $1.2 million. Finally, the City of Guadalupe received $621,000 to help run its city.

The unincorporated Village of Montecito contributed $9 million in property tax revenue to support incorporated cities in the county, but received zero dollars back in benefits.

 

4) Dependent Special Districts received 6.6% of all property taxes collected, or $41 million in 2011-2012.

Dependent Special Districts are separate local government entities governed by either a local city council or the County Board of Supervisors. They are empowered to sign contracts, employ workers, acquire property and issue bonds. Santa Barbara County spent $41 million in Dependent Special

District funding, including Santa Barbara County Fire at $28.9 million (70%);

South Coast Flood at $4.7 million (11%); Santa Barbara County Water at $2.2 million (5%); and Santa Barbara County Water Conservation at $1.7 million (4%). The remaining 10% of expenditures are split between 15 assorted flood, levee, county service areas and lighting special districts.

If Montecito were billed its fair share of County Fire, flood and water

Dependent Special District services on the basis of population (2.1%), it would pay $860,000 instead of the $5 million it actually pays.

 

5) Redevelopment Agencies received 5.9% of all property taxes collected, or $36 million in 2011-2012.

Redevelopment agencies were originally conceived to end urban blight through both public and private improvements and economic development efforts. Santa Barbara County has nine urban redevelopment agencies in incorporated cities that issue bonds for affordable housing, economic development and other urban uses. The largest allocation is $20 million for the Santa Barbara City Central Project. There is also $6.6 million for the Isla Vista Project; $3.9 million for the Goleta Old Town Project; $2.7 million for three Lompoc Old Town Projects; $1.5 million for Guadalupe City; $1.1 million for Santa Maria Project IV; and $0.8 million for Buellton City.

Montecito has no redevelopment agencies. Therefore, it receives no redevelopment dollars from its $4 million contribution to redevelopment funding.

On February 1, 2012 all redevelopment agencies (RDAs) in California were dissolved by the State of California, and their assets, financial obligations to bondholders and operating expenses were transferred to successor agencies.

Overall, redevelopment had been costing the State almost as much as the University of California or California State University systems, but with little statewide benefits. The result of the state dissolution of redevelopment agencies is that the amount of property taxes collected remains the same, but each county needs to change its distribution of property tax revenues to ensure that funds are available to pay bonded indebtedness.

 

6) Independent Special Districts received 4.7% of all property taxes collected, or $29 million in 2011-2012.

Independent special districts deliver a focused service, such as fire protection, to a defined geographical area. Independent special districts have independent Boards of Directors elected by voters within their defined areas. They can sue and be sued. Montecito has three Independent Special Districts, but only two, the Montecito Fire Protection District (MFPD) and the Montecito Sanitary District receive property tax revenues. Montecito Water District is supported wholly by user fees. Of the $29 million distributed to 30 Independent Special Districts in the county, only $4 million is allocated to Montecito taxpayers.

At $13.1 million, the Montecito Fire Protection District is the largest recipient of Independent Special District funding. Montecito Sanitary receives a modest $439,000, and charges service fees to cover the balance of its costs.

Other Independent Special Districts such as City of Carpinteria Lighting, Santa Maria Public Airport, Goleta Cemetery, Santa Ynez Community Service, Carp-Summerland Fire Protection, Lompoc Hospital, Santa Barbara Metro Transit, Carpinteria Mosquito Abatement, Santa Barbara Coastal Vector Control, Cuyama Valley Recreation, Isla Vista Recreation, Carpinteria Sanitary, Summerland Sanitary, Cachuma Resource Conservation and other receive the remaining $15.7 million in allocated property tax revenues for Independent Special Districts.

 

Conclusion

 

This is a simplified version of Montecito property taxes, how they are collected and how they are spent. What is interesting is that Montecito contributes $82 million in property taxes and gets back about $21 million in education funds; $3.5 million in County General Fund services; and $13.5 million in Fire and Sanitary funding. That’s a total of $38 million. Throw in another $3 million of miscellaneous services and the bill climbs to $41 million, meaning Montecito receives back some 50% of the $82 million in property taxes it pays.

I guess you could say that, Montecito.

 

Written By Bob Hazard

Reprinted from the Montecito Journal, ed. 24 July 2013

 

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