REVENUE AND EXPENDITURE ASSUMPTIONS
PROPERTY TAX
Description Property tax is a tax imposed on the value of real property, such as land and buildings. Property tax revenue is collected by the County and allocated according to state law among cities, counties, school districts and special districts. Irvine property owners pay a basic tax equal to 1 percent of the assessed value on real property. The City’s General Fund receives approximately 2.7 percent of these 1 percent tax payments, with larger shares going to local schools, community colleges and the Orange County Fire Authority. As part of the State Budget Act of 2004, the legislature reduced motor vehicle license fee (VLF) revenue allocations to cities, replacing this funding with additional property tax allocations that change proportionately with the City’s annual assessed valuation (“property tax in-lieu of VLF” revenue). The City also receives “no-low” property tax payments that provide a “floor” for the City’s share of overall property tax payments. Including all these sources, Irvine receives approximately 9¢ of every $1 of property taxes collected. The City’s assessed valuation for FY 2018-19 is $78.4 billion and is the largest city assessed valuation in Orange County for the fourth consecutive year. Property tax comprises 36.0 percent of next year’s overall General Fund resources. Trend The City’s property tax revenue has grown exponentially reflecting both new development and increasing property values in Irvine. Growth is expected to continue and housing demand, especially in the new home market, remains healthy. Although prices remain strong, assessed values are anticipated to soften to four percent, in comparison to the 8 to 9 percent growth seen in previous years. In 2018, the Irvine median home price increased 8.3 percent to $842,500 (detached/attached single family residences). Outlook The City, working with its property tax consultant HdL, projects property tax revenue using four factors: property turnover, pricing and appeals exposure, new construction activity, and Proposition 13’s annual inflation adjustment. Based on these factors, Irvine’s property tax revenues are projected to increase 6.1 percent in FY 2019-20, 4.8 percent in FY 2020-21, and 4.4 percent annually over the remaining forecast. In addition to this year’s Proposition 13 inflation adjustment of 2 percent, assessed valuations will be positively influenced by significant growth in real estate prices and the projected construction of approximately 6,300 new residential units throughout the City over the forecast period.
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FY 2019-21 Proposed Budget
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