An Ad Valorem Tax is a tax based on the assessed value of a property.  While theoretically this is not unfair (the wealthy property owners with expensive properties pay more than those with low value properties), the adoption of Proposition 13 in 1978 has caused a major "warping" of the valuation structure in Orinda.  This is due to the fact that assessed values can not increase at over 2% per year while market values can (and do).  In Orinda the average home resells, on average, about once every 25 years and over that time period the assessed value becomes a smaller and smaller percent of the market value.  When a home is sold, the assessed value is re-set to the market value.  Two identical homes, one of which just resold and the other which has been held for 25 years, might have assessed values differing by a factor of ten.

The facts are that the top one third of assessed value homes are paying 60 percent of the ad valorem property taxes.  This is not because they are the most expensive homes, but rather they are the most recently purchased homes.  Their assessed values are 85 percent of their market values.  Conversely, the bottom one third of assessed value homes are only paying ten percent of the ad valorem property taxes as these homes are only assessed at 20 percent of their market value.  Since ad valorem taxes provied six times the total tax revenue as parcel taxes, a minority of the property tax payers pay a majority of the property taxes (and therefore a majority of the voters can a new tax on the minority which that minority pays a majority of).  This is not a "minor" discrepency.  The top one third, with the same voting power as the bottom one third pay six times the ad valorem tax.

Below this discrepency is shown as a graph.  The numbers behind the graph are contained in a tableThe $20 million Measure J bond which was voted on in 2014 will be repaid by $30 million in advalorem taxes over the next 20 years which the Top One Third will pay the majority of.  For the proposed new $25 million bond, those in the Mid 1/3 and Low 1/3 combined will end up paying less than 10 percent of the total cost.

Pros

  • Everyone understands it
  • Easy to administer
  • Fixed revenue stream
  • 1/3 of the voters pay 30% of the average and another 1/3 90% of the average making it a bargain for them but not the final 1/3 who pay 200% of average
  • Voters only pay the tax while they live here then pass it on to the new buyers
  • Tax can increase over time but the cost is quoted as a “tax rate” which might actually decrease over time and only the first three years need to be disclosed

Cons

  • Those who have not paid enough over the years to maintain the roads pay the least tax
  • Voters only pay the tax while they live here then pass it on to the new buyers
  • With increasing debt service, the obligation to future taxpayers is maximized
  • 2/3 majority required for passage
  • Ad Valorem taxes already account for 69% ($64 million) of our total local taxes