Marin’s rate of property tax growth slower than forecast

The county might have about $2 million less revenue than expected, according to the budget director.

The assessed value of properties in Marin grew at a slower pace than expected last fiscal year.

The county finished the 2023-24 fiscal year at the end June with a growth rate of 4.27%, down from 6.34% in the previous fiscal year, Marin County Assessor-Recorder-County Clerk Shelly Scott said.

The newly certified property assessment roll totaled $105.6 billion, up $4.3 billion from a year earlier.

Josh Swedberg, the county’s budget director, projected a growth rate of 5%, which is the county’s historical average, during a county supervisors briefing in December.

The assessment roll is used in calculating the amount of property tax Marin residents pay. A larger assessment roll means more tax revenue for county government, local school districts and special districts, which all receive a share of the proceeds. County government relies on property taxes for about 35% of its general fund budget.

“We knew it was going to decline from the current rate of 6.3%,” Swedberg said. “We just weren’t expecting it to be that significant.”

Swedberg originally anticipated Marin’s property tax growth rate would be 5.5% in 2023-24 but shaved 0.5% off that forecast in December due to a steep decline in local home sales. For the 2024-25 county budget approved by supervisors in June, Swedberg projected a property tax revenue growth rate of 5% in 2024-25 and 4.5% in 2025-26.

Swedberg said the lower-than-expected growth rate “will equate to less than budgeted revenues. At this time we don’t expect this to require expense reductions. I’m estimating approximately $2 million in reduced revenue.”

“Marin’s real estate values experienced small decreases compared to a year ago but remain relatively stable with an offsetting downward pull from high interest rates and upward push from low inventory and high demand,” Scott said in an announcement about the new assessment roll.

In an email, she added: “In a market like Marin County, where property values are typically high, the effect of interest rates can be even more pronounced. If homeowners are locked into low-interest mortgages, they may be less inclined to sell and take on a new mortgage at a higher rate, reducing the overall sales volume. This can contribute to lower growth in terms of sales transactions, even if property values remain strong. I think this is the biggest contributor for the lower roll growth.”

A total of 2,360 homes — single-family homes and condominiums/townhomes — were sold in Marin in 2023, about a 21% decline compared to 2022.

A total of 1,688 detached homes were sold in Marin in 2023, a decrease of nearly 24% from 2022. The median sale price of detached homes in Marin dropped to $1.65 million in 2023, a decrease of more than 5.5% from 2022.

Sales of condos and townhomes dropped from 767 in 2022 to 672 in 2023. The median price of condos and townhomes in Marin dropped to $789,500 in 2023, down from $845,000 in 2022.

During the pandemic, sales of commercial properties ground to a virtual halt, as fewer people went to an office to work and people stayed home rather than dining at restaurants and shopping at the mall. Sales of commercial properties became so infrequent that it became difficult to assess their value for tax purposes.

“The office real estate market is currently experiencing a period of adjustment as the need for permanent office space has decreased, leading to a higher vacancy rate than historical averages,” Scott said. “We are closely monitoring this sector to determine any future value impacts.”