OT: bearishgurl should clean up her act or go

[CA renter]

For one thing, phaster, while you’ve been obsessing about what other people’s benefits are costing, there are people who’ve been actively working on solutions to these problems. One part of the solution began about 20 years ago when public employers started to get rid of retiree healthcare…which will begin affecting retirement ages (causing them to go up) within the next 10 years as employees without retiree healthcare stay on longer in order to retain their medical coverage. This is something that is not yet being calculated in the actuarial data, and may never be included, even though it will have a fairly significant effect, especially WRT public safety workers. In 2013, PEPRA was enacted, and many employees are receiving lower benefits and paying more toward their retirement. Over the past few years, employers have also been renegotiating contracts, and employees have been paying more toward their retirement and healthcare costs — even longer-term employees are being affected.

More solutions are being worked on at this very moment, and we’ll begin to see a combination of changes within the next 2-3 years, IMO, as benefit formulas are reevaluated and contribution requirements are updated.

All that being said, I still can’t help but wonder if you like to focus so much on the benefits that have been **earned** by public employees in order to distract people’s attention from the multi-billion dollar annual giveaway to property owners such as yourself in the form of Prop 13 subsidies. Most people favor Prop 13 protection for a single primary residence, but they strongly dislike subsidizing the profits of wealthy commercial and residential landlords, wealthy owners of large tracts of land, and entitled heirs of expensive California properties who did absolutely nothing to deserve these billions of dollars in tax subsidies every year.

If you truly care about the heath of our state and local economies, they you should be willing to take the first step yourself. We can discuss the costs of those who’ve earned their benefits AFTER those who have not earned their tax subsidies refuse/refund this money first. Go ahead…prove to everyone how much you care about the financial health of our governmental agencies by paying back your unearned subsidy first (thousands of dollars per year). After you’ve done that, then you can come back and talk to us about reducing the compensation that other people have actually worked for and earned.

BTW, you’re not educating or informing anyone of anything. The pension issue was beaten to death LONG before you ever came into the picture.

[Coronita]

.

[Coronita]

[quote=CA renter]For one thing, phaster, while you’ve been obsessing about what other people’s benefits are costing, there are people who’ve been actively working on solutions to these problems. One part of the solution began about 20 years ago when public employers started to get rid of retiree healthcare…which will begin affecting retirement ages (causing them to go up) within the next 10 years as employees without retiree healthcare stay on longer in order to retain their medical coverage. This is something that is not yet being calculated in the actuarial data, and may never be included, even though it will have a fairly significant effect, especially WRT public safety workers. In 2013, PEPRA was enacted, and many employees are receiving lower benefits and paying more toward their retirement. Over the past few years, employers have also been renegotiating contracts, and employees have been paying more toward their retirement and healthcare costs — even longer-term employees are being affected.

More solutions are being worked on at this very moment, and we’ll begin to see a combination of changes within the next 2-3 years, IMO, as benefit formulas are reevaluated and contribution requirements are updated.

All that being said, I still can’t help but wonder if you like to focus so much on the benefits that have been **earned** by public employees in order to distract people’s attention from the multi-billion dollar annual giveaway to property owners such as yourself in the form of Prop 13 subsidies. Most people favor Prop 13 protection for a single primary residence, but they strongly dislike subsidizing the profits of wealthy commercial and residential landlords, wealthy owners of large tracts of land, and entitled heirs of expensive California properties who did absolutely nothing to deserve these billions of dollars in tax subsidies every year.

If you truly care about the heath of our state and local economies, they you should be willing to take the first step yourself. We can discuss the costs of those who’ve earned their benefits AFTER those who have not earned their tax subsidies refuse/refund this money first. Go ahead…prove to everyone how much you care about the financial health of our governmental agencies by paying back your unearned subsidy first (thousands of dollars per year). After you’ve done that, then you can come back and talk to us about reducing the compensation that other people have actually worked for and earned.

BTW, you’re not educating or informing anyone of anything. The pension issue was beaten to death LONG before you ever came into the picture.[/quote]

Yes, phaster please go off and argue with CAR about public pensions.
I don’t know why you continue to drag me into this discussion.

Yes, I recognize there is a longer term problem. But it’s not on my radar of important things that I care about. I was dragged into this only because on one thread I brought up CA municipal bonds, and only because on that thread someone asked about a vanguard fund performance, which BTW YTD, again wasn’t bad at all. I might end up selling some in December if the Fed raises rates anyway, and if there are better things out there. And if I do, it will take exactly 1 day for the transaction to complete, which again, is contrary to your belief that a crisis will financially impact me holding this tiny percentage in my portfolio.

Why you keep bringing me into this pension issue is beyond me. Talk and argue with CAR please. CAR is very opinionated on public pensions and the public sector.
And you will get much more response in any fights you try to pick over public pensions. I don’t care about this topic. If you want to talk about peak oil, and what a joke it is, let me know. 🙂

Meanwhile, please use your free Obamacare and seek medical care for your drug addiction.

[mixxalot]

Is there a photo of the real life BG here? I’d also like to see one of zika dude. Make a celebrity deathmatch cartoon showdown.

[CA renter]

You literally made me laugh out loud, flu. 😉

[phaster]

[quote=CA renter]For one thing, phaster, while you’ve been obsessing about what other people’s benefits are costing, there are people who’ve been actively working on solutions to these problems. One part of the solution began about 20 years ago when public employers started to get rid of retiree healthcare…which will begin affecting retirement ages (causing them to go up) within the next 10 years as employees without retiree healthcare stay on longer in order to retain their medical coverage. This is something that is not yet being calculated in the actuarial data, and may never be included, even though it will have a fairly significant effect, especially WRT public safety workers. In 2013, PEPRA was enacted, and many employees are receiving lower benefits and paying more toward their retirement. Over the past few years, employers have also been renegotiating contracts, and employees have been paying more toward their retirement and healthcare costs — even longer-term employees are being affected.

More solutions are being worked on at this very moment, and we’ll begin to see a combination of changes within the next 2-3 years, IMO, as benefit formulas are reevaluated and contribution requirements are updated.

All that being said, I still can’t help but wonder if you like to focus so much on the benefits that have been **earned** by public employees in order to distract people’s attention from the multi-billion dollar annual giveaway to property owners such as yourself in the form of Prop 13 subsidies. Most people favor Prop 13 protection for a single primary residence, but they strongly dislike subsidizing the profits of wealthy commercial and residential landlords, wealthy owners of large tracts of land, and entitled heirs of expensive California properties who did absolutely nothing to deserve these billions of dollars in tax subsidies every year.

If you truly care about the heath of our state and local economies, they you should be willing to take the first step yourself. We can discuss the costs of those who’ve earned their benefits AFTER those who have not earned their tax subsidies refuse/refund this money first. Go ahead…prove to everyone how much you care about the financial health of our governmental agencies by paying back your unearned subsidy first (thousands of dollars per year). After you’ve done that, then you can come back and talk to us about reducing the compensation that other people have actually worked for and earned.

BTW, you’re not educating or informing anyone of anything. The pension issue was beaten to death LONG before you ever came into the picture.[/quote]

PROP 13 ??? = NOISE

not accounting for health care costs for DECADES (which dramatically increases the burden on taxpayers), is yet another symptom that interested parties (who derive financial benefits) lack a basic understanding of middle school math concepts when they designed and managed various public pensions

as it currently exists various state and local public pension(s) are unsustainable and the end result is going to be no different than a deliberately designed “debt bomb” or ponzi scheme

[quote=STATE OF THE WEST SYMPOSIUM]

http://west.stanford.edu/projects/state-west-symposium

it’s great to be here and I really appreciate having the chance to talk with Jody we just met this morning at another conference

and I’m really excited about continuing this conversation beyond today because virtually everyone recognizes that we had a significant public employee pension problem in California

for the most part people have been sniping at each other and there really has not been a lot of dialogue and I think that we really need to work to try to find some sort of consensus as we move forward because we all have a fairly significant stake in
this

I’ve only got three slides I will be fairly brief so we can maximize the time for discussion

so let me start here okay

this is what got everything going

John referred to the study that five grad students for the public policy program did not quite a year ago

we’ve been asked by Governor Schwarzenegger’s office to assess the funded status of the the big three state funds CALpers CALstrs and UC system

essentially the governor simply wanted to know what number he should use

you know how much in the red are we how much are we underwater

on the left hand side those up first five columns against reported liabilities from 2008

and you see CALpers CALstrs and UC system the total

again this is prior to the financial crisis

that number was around $55 and half billion dollars

now the fund ratios assets to liabilities look okay eighty-six percent ninety one percent ninety nine percent

but then the students working with a lot of very smart folks here said well because these obligations are different I mean these are not traditional pension obligations these are guaranteed payments you have to make

you really should discount those liabilities at a risk-free rate

and that risk free rate they used at the time was four point one four percent

so if you work through that unfunded liabilities you end up with about $425 billion dollars

quite a different figure from the fifty five and a half billion dollars

so Governor Schwarzenegger liking things bigger took this number and say well let’s just make it 500

in fact the number was probably pretty close that because the market did significant downturn in loss of assets probably end up about five hundred billion dollars

then I issued another and I apologize you probably have a tough time reading some with that type there

I issued another brief in November this last year

we done the work at the state level I said well let’s get a sense of how things are at the local level for these municipal funds because it’s not just CALpers CALstrs and you know state workers

we really should look at things like the San Francisco fund the one in San Jose, Orange County, city of San Diego, etc.

so I did a fairly simple analysis in which I looked at the unfunded liabilities not just for pensions obligations but also for retiree health care

and when you add those together and make again, these are based on that risk-free assumption for those future liabilities

in this section shows the share of payroll that those entities will need to pay in order to cover pension and OPEB unfunded liabilities as you see the worst one is the city of SAN DIEGO would need to devote about eighty percent of its covered payrolls (a little less than total payroll) just to cover those unfunded liabilities for pensions and for retiree health care, huge number

the average here is about 50

you see San Francisco in the middle there

I can’t remember where San Jose is offhand, San Jose is toward the bottom as well so San Jose which actually just passed some pension reforms measures the last election is down there as well

so again it’s not this is not a problem as you know that exist only at the state level it existed the at the local municipal level, in fact by a number of metrics I would argue that things are actually worse off at the local level

and then in preparation for this today I said well you know there have been changes in the market since we looked at this a about a year or so ago and I ran a Monte Carlo simulations a total of 10,000

I said let’s take the assets and liabilities the market value assets liabilities that CALpers has, again use reasonable assumptions and this actually assumes that they hit their target, seven and three quarter percent rate of return over this period of time, over sixty year duration of liabilities

and if you add up the numbers on the left and on the right hand side you’ll will be underfunded over the 16-year period, only about one in four chance it’ll actually make meet those obligations

so again no matter how you slice this at the end of the discussion I think most people would say boy these are serious numbers and we need to find some way to help dig these funds at the state and local level out the hole that they are in

and I look forward discussion

thank you

https://www.youtube.com/watch?v=BRr49iAgI9g

[/quote]

[quote=public radio]
When It Comes To Pensions, Illinois Is California’s Ghost Of Christmas Yet To Come

As California’s public-employee pension crisis grows—with taxpayers on the hook for hundreds of billions of dollars, and no clear plan for how to pay—other states are facing similar problems, and have lessons to teach.

In some cases, those will be lessons about what not to do.

http://www.capradio.org/82583
[/quote]

looking at the big picture most of the budget @ the state level goes toward three things, k-12 education, higher education and health and human services (i.e. welfare and medical for the poor)

http://www.sco.ca.gov/state_finances_101_state_spending.html

bottom line, by ignoring problems like corruption in public pensions @ the state down to the local levels, it has contributed to an increase number (and will continue to do so) of people who are low-income, uninsured, and uneducated

[quote=CA renter]
BTW, you’re not educating or informing anyone of anything. The pension issue was beaten to death LONG before you ever came into the picture.
[/quote]

really???

http://piggington.com/how_will_unfunded_pensions_affect_economy?page=5#comment-262974

http://piggington.com/how_will_unfunded_pensions_affect_economy?page=6#comment-264989

[CA renter]

Instead of posting pictures of lame cartoons, try responding to why we should take from those who worked (public sector employees) to give to those who don’t (wealthy commercial, industrial, and residential landlords; owners of vast tracts of land, etc.).

If we were to stop subsidizing the land owners (not referring to a single primary residence, as that is why Prop 13 passed by such a large margin, and I do not believe in taxing people out of their homes), the “pension crisis” in California would mostly disappear.

YOU are the beneficiary of thousands of dollars of theses subsidies every year because you inherited your parents’ rental units. Why do you think a cop, firefighter, or teacher should give up the pensions that they have earned so that we can maintain these exceedingly profitable — AND TOTALLY UNEARNED — subsidies to YOU?

[Anonymous]

[quote]If we were to stop subsidizing the land owners (not referring to a single primary residence, as that is why Prop 13 passed by such a large margin, and I do not believe in taxing people out of their homes), the “pension crisis” in California would mostly disappear.
YOU are the beneficiary of thousands of dollars of theses subsidies every year because you inherited your parents’ rental units. Why do you think a cop, firefighter, or teacher should give up the pensions that they have earned so that we can maintain these exceedingly profitable — AND TOTALLY UNEARNED — subsidies to YOU?[/quote]

You do know that people receiving pensions are not working either?

Oh…but they did work in the past, right!

How do you think people buy investments like land? Many of them earn the money by working for it and then invest it, perhaps to finance their own retirements. Many of the Piggs here have done just that. They worked, they earned, they saved, they bought investment properties. For many, their rental properties are their pensions – they don’t get a government agency to take care of them.

Pensions are investments, just like real estate.

The cash flow from a pension is entirely passive. There are taxpayer-funded agencies, e.g. CalPERS, that do all the work. Pensioners just collect the checks.

Your use of the word “subsidized” horrendously twisted.

Real estate is taxed – money flows from the landowner to the state. There are no subsidies, regardless of how often you misuse the term.

Pensions are subsidized. Money flows from the state to the investor. The often unsustainable, guaranteed return of pensions are subsidized with taxpayer money when the investment falls short. There is no dispute that this is happening on a large scale. The recent LA Times article is one of many sources that thoroughly documents how pensions are being subsidized due to mismanagement and unrealistic objectives. The taxpayers – people working to fund their own retirements – are footing the bill.

No real estate investor receives a taxpayer-backed guaranteed return.

Your “solution” is to just tax more.

Your entire argument comes down to this: “MY investment should get a GUARANTEED return. If things don’t work out, we need to tax YOUR investment – the one that you made with YOUR EARNED MONEY – and GIVE IT TO ME. Because I worked for my money and you did not. I GET MINE EVEN IF WE HAVE TO TAKE IT FROM YOUR EARNINGS.”

Your claims of entitlement are staggering.

[FlyerInHi]

[quote=CA renter]Instead of posting pictures of lame cartoons, try responding to why we should take from those who worked (public sector employees) to give to those who don’t (wealthy commercial, industrial, and residential landlords; owners of vast tracts of land, etc.).

If we were to stop subsidizing the land owners (not referring to a single primary residence, as that is why Prop 13 passed by such a large margin, and I do not believe in taxing people out of their homes), the “pension crisis” in California would mostly disappear.

YOU are the beneficiary of thousands of dollars of theses subsidies every year because you inherited your parents’ rental units. Why do you think a cop, firefighter, or teacher should give up the pensions that they have earned so that we can maintain these exceedingly profitable — AND TOTALLY UNEARNED — subsidies to YOU?[/quote]

I don’t think there’s any kind of equivalence between Prop 13 and pensions.

Pensions shortfalls are a result of past budgets shenanigans and/or incompetence. Let it all work out in court when the time comes.

I would never support tax increases to paper over the pensions. Tax increases for services to citizens, fine. But no new taxes to pay for retired people who don’t provide us anything. Sorry.

[bearishgurl]

[quote=FlyerInHi][quote=CA renter]Instead of posting pictures of lame cartoons, try responding to why we should take from those who worked (public sector employees) to give to those who don’t (wealthy commercial, industrial, and residential landlords; owners of vast tracts of land, etc.).

If we were to stop subsidizing the land owners (not referring to a single primary residence, as that is why Prop 13 passed by such a large margin, and I do not believe in taxing people out of their homes), the “pension crisis” in California would mostly disappear.

YOU are the beneficiary of thousands of dollars of theses subsidies every year because you inherited your parents’ rental units. Why do you think a cop, firefighter, or teacher should give up the pensions that they have earned so that we can maintain these exceedingly profitable — AND TOTALLY UNEARNED — subsidies to YOU?[/quote]

I don’t think there’s any kind of equivalence between Prop 13 and pensions.

Pensions shortfalls are a result of past budgets shenanigans and/or incompetence. Let it all work out in court when the time comes.

I would never support tax increases to paper over the pensions. Tax increases for services to citizens, fine. But no new taxes to pay for retired people who don’t provide us anything. Sorry.[/quote]CA residents wouldn’t have to support continual tax increases if those millions of “heirs” who inherited real property CA were paying their FAIR SHARE in property taxes! The phasters of the world (and millions of others, including the Piggs) are being unjustly enriched through Props 58 and 193 (as progeny of Prop 13). This is so because the current heir/owner’s assessments (vast majority are able-bodied) on their propertie(s) handed down to them by parents and grandparents (whether residential, commercial, industrial or agricultural) are still assessed as low as 1/10th of their fair market value! Meanwhile, the parcel(s) directly adjacent to theirs very well could be assessed at FMV or very close to it.

The passage and subsequent very heavy use of Props 58 and 193 by “heirs” is a HUGE form of welfare to one segment of CA’s population at the expense of all other property owners not so fortunate. The beneficiaries of Props 58 and 193 use just as much (or more) city/county services as their close neighbors do who pay up to 10x the annual property tax. This “welfare benefit” is highest for those who “inherited” properties in CA’s most valuable communities. Therefore it mostly benefits the “rich” meaning those born into money and/or those whose parents or grandparents managed to buy up properties in CA’s best communities and hang onto them over the years.

I have stated here before that I don’t have any problem with ultra-low Prop 13 assessments (for original owner/occupiers who still occupy the SAME residence today because they will eventually pass on, and (in the absence of Props 58 and 193), their residence would have ostensibly been reassessed at FMV upon their deaths. What I have a problem with is that, in CA, their ultra-low assessments are routinely passed onto their “heir(s)” incentivizing the heir(s) to keep the property for their own residence or an investment. In the other 49 states, if an heir couldn’t afford the property tax on a stepped-up assessment of their deceased parent/grandparent’s property, they choose to sell it. As it should be.

Again, the vast majority of these occupying CA “heirs” are middle-aged (even young), very much able-bodied and NOT disabled! They are no more “deserving” of a 90% discount on their property tax bill than I am! The ill-thought-out shenanigans by our Legislature in passing Props 58 and 193 in the ’80’s is the sole reason for the dearth of inventory (listings) in CA’s most established areas. This problem is especially pronounced in CA’s most exclusive and valuable established areas because that is where the “inherited” Prop 13 property tax discount is the deepest due to the superior rate of appreciation of those areas over decades.

Props 58 and 193 have effectively rendered the ultra-low September 1975 assessments (used as a base year for the [retroactive] 2% increase in assessment per year from September 1978 forward) into perpetuity as long as the property is held by a descendant of the original owner/decedent and never sold. These measures should have never been passed and should be repealed forthwith. Not only are they grossly unfair to all CA property owners who didn’t “inherit” their property, the measures will eventually bankrupt our state . . . and as a byproduct, our more well-established cities.

[FlyerInHi]

BG, pensions are contracts between employers and employees. Go to court if there’s a dispute.
Taxpayers should not bail out public pensions.

[EconProf]

Bearish Girl: you have often made the claim here that Propositions 58 and 193 are huge giveaways to an undeserving group of Californians–those who take over the property of their parents and keep the same tax assessment. Please tell us exactly how big a tax break this is. How much money is involved? How many people?
First, I fully agree that it is an unearned and unwarranted giveaway. Why should the heir of a property owner, probably already above average in wealth and income, get this subsidy? Heirs of parents who are renters or are property-poor get nothing. From a wealth or income redistribution standpoint, the results are perverse. It’s like the government saying “Oh, you are going to inherit property? Here’s some more money, courtesy of all other California taxpayers.” Insane.
It was foolishly passed by the taxpayers (not, as you say, by the legislature) because it was a feel-good policy. The costs and benefits were not fully understood. As we economists often complain, policies that benefit a politically organized select few and harm a large, diffuse, and unorganized majority get approved.
But I suggest the dollar amounts involved are not huge. The reason is because property turns over an average of every seven years, which cuts in half the number of eligible heirs drastically since 1975–the base year of assessments for Prop 13. Furthermore, what percentage of sales involve an heir taking over a property? 2%? 1%? Please do not use personal anecdotes from your neighborhood. Bring data.
Back to that seven-year turnover rate, which may be off–I remember it from a few years ago. The 41 years since 1975 involve nearly 6 such turnovers. So whatever the number is of heirs who got the benefit must be cut in half every 7 years.
And what about the 2% increase Prop 13 allows every year? A cumulative 2% increase per year means a doubling every 35 years. So those original heirs did see a doubling of their tax bills. Oh, and there is the addition of taxpayer-passed bonds which makes the effective tax not 1% but about 1.25%. And there is the years when CA property values went down in the Great Recession, while those heirs still saw theirs going up 2% per year. But the main flaw in attributing a big welfare transfer to Props 58 and 193 is the rarity of its use when a property sells. Heirs seldom can or want to take over their parents property.
The actual dollars lost due to Propositions 58 and 193 would make an interesting research project, or Master’s Degree thesis. But I suggest it is a small and diminishing problem, and BG’s statement …”will eventually bankrupt our state.” is wildly exaggerated.

[bearishgurl]

[quote=FlyerInHi]BG, pensions are contracts between employers and employees. Go to court if there’s a dispute.
Taxpayers should not bail out public pensions.[/quote]I welcome any court actions pleading to stop payment on and dismantle public pensions in CA. Go for it!

[Coronita]

Lol. THANK YOU EVERYONE for finally getting phaster off my back about pensions and CA muni bonds. Please carry on, I don’t give a flying f about this.

For the record, I just completely sold of my Vanguard CA bond position that I’ve had and moved it into cash + other shorter term bonds. It’s not that I feel CA bonds are in immediate danger of defaulting…It’s just that I think rates are gonna go up by next year and I think we can find better returns very soon.

[bearishgurl]

[quote=EconProf]Bearish Girl: you have often made the claim here that Propositions 58 and 193 are huge giveaways to an undeserving group of Californians–those who take over the property of their parents and keep the same tax assessment. Please tell us exactly how big a tax break this is. How much money is involved? How many people?[/quote]It depends on the area. In areas built before 1975, these measures had the effect of permanently holding an (unknown) portion of residential properties off the market. In areas built before 1960, it likely had the effect of permanently holding HALF of more of residential properties off the market, permanently. In areas located within one mile of of the ocean (particularly parcels situated on streets where at least one side of the street has a unobstructed whitewater or bay view), there is undoubtedly a huge portion (75-90%?) of current residential owners benefiting from Props 58 and 193, whether currently occupying those properties … or not. This phenomenon explains why there have been so few listings to choose from in the best areas of CA coastal communities. It will only get worse from here.

[quote=EconProf]First, I fully agree that it is an unearned and unwarranted giveaway. Why should the heir of a property owner, probably already above average in wealth and income, get this subsidy? Heirs of parents who are renters or are property-poor get nothing. From a wealth or income redistribution standpoint, the results are perverse. It’s like the government saying “Oh, you are going to inherit property? Here’s some more money, courtesy of all other California taxpayers.” Insane.[/quote]Econprof, your (italicized) phrase is an oft-held myth. Many of these occupying “heirs” did not even make it through high school and some did not even make it thru the 9th grade. Yes, even in Mission Hills (SD)! This large, low-income owner-occupant group is usually on some sort of fixed income and cannot in any way, shape or form maintain the home they have “inherited.” Many of them “inherited” their (free-and-clear) parent’s home without having to pay out any equity to other heirs solely because they were an only child or their only sibling was deceased.

[quote=EconProf]It was foolishly passed by the taxpayers (not, as you say, by the legislature) because it was a feel-good policy. The costs and benefits were not fully understood. As we economists often complain, policies that benefit a politically organized select few and harm a large, diffuse, and unorganized majority get approved.[/quote]My bad, you are correct. Props 58 and 193 were passed by what appears to be a vote in the general elections of 1986 and 1996 respectively. From the looks of the votes cast for/against the measures, they appear to have been a vote of only a small fraction of the populace, even back then. (I realize that a lot of voters in general elections only vote for the candidates and leave the ballot measures blank on their ballots.) Both “fiscal impact reports” on the two ballots (10 years apart) were way, way off. They did not take into account the incredible (at the time) future appreciation of CA residential real estate, especially along the coast.

https://ballotpedia.org/California_Proposition_58,_Real_Estate_Transfers_Within_Families_(1986)

https://ballotpedia.org/California_Proposition_193,_Tax_Implications_of_Grandparent-Grandchild_Property_Transfers_(1996)

Taking advantage of these two measures is highly attractive to CA heirs (especially those with no siblings) because upon the death of their parent/grandparent, they realize (and are no doubt advised by their counsel) that they will never in their lifetimes be able to buy any kind of dwelling at all in that particular locale and its low assessment is the icing on the cake that makes it possible for them to hang onto the property in the long term … even if they only move out their parent’s household goods and minimally clean it up for rental service.

[quote=EconProf]But I suggest the dollar amounts involved are not huge. The reason is because property turns over an average of every seven years, which cuts in half the number of eligible heirs drastically since 1975–the base year of assessments for Prop 13. Furthermore, what percentage of sales involve an heir taking over a property? 2%? 1%? Please do not use personal anecdotes from your neighborhood. Bring data.
Back to that seven-year turnover rate, which may be off–I remember it from a few years ago. The 41 years since 1975 involve nearly 6 such turnovers. So whatever the number is of heirs who got the benefit must be cut in half every 7 years.[/quote]Residential property most certainly does NOT turn over an average of every seven years in every micro area. Many older subdivisions of 80 or more homes (using SD County for an example) may only have a 0-6 actual listings in any one year. This low figure includes “pocket listings” (not listed on the MLS) and those listings which don’t qualify for a mortgage (in poor condition) which may be one and the same. As is often the case, the listings which DO come online in these areas are typically NOT for the “mainstream owner/occupier buyer” who needs a purchase-money mortgage.

[quote=EconProf]And what about the 2% increase Prop 13 allows every year? A cumulative 2% increase per year means a doubling every 35 years. So those original heirs did see a doubling of their tax bills. Oh, and there is the addition of taxpayer-passed bonds which makes the effective tax not 1% but about 1.25%. And there is the years when CA property values went down in the Great Recession, while those heirs still saw theirs going up 2% per year. But the main flaw in attributing a big welfare transfer to Props 58 and 193 is the rarity of its use when a property sells. Heirs seldom can or want to take over their parents property.[/quote]Yes, I agree that by 2010 (35 years after the base year assessment for original Prop 13 owners), these owners saw their 1975/76 assessment double. But let’s look at what constitutes a “doubled assessment,” using SD County for an example:

1900 sf SFR in SD’s upper OB (w/partial basement and alley access): 1975 assessment $68K; 2010 assessment $136K.

1750 sf SFR in SD’s College Area: 1975 assessment $58K; 2010 assessment $116K.

1350 sf SFR in Lemon Grove (on 1/3 AC): 1975 assessment $44K; 2010 assessment $88K.

1800 sf SFR all-brick tudor gem in Dtn Chula Vista: 1975 assessment $52K; 2010 assessment $104K.

2500 sf SFR in SD’s Mission Hills (Presidio): 1975 assessment: $140K; 2010 assessment $280K.

1800 sf SFR in SD’s Roseville (on std 5K sf lot with sit-down view of the entire SD Bay and SD dtn skyline from the entire rear of the home): 1975 assessment $72K; 2010 assessment $144K.

2300 sf SFR in SD’s Fleetridge (on 9K lot with quarter turn driveway and same view as Roseville sample [but 2-3 streets higher]): 1975 assessment $88K; 2010 assessment $176K.

2600 sf SFR in SD’s LJ Muirlands (rambling ranch on 15K sf lot with whitewater views from LR/DR and backyard: 1975 assessment $152K; 2010 assessment $304K.

Add in the tens of thousands of SFR’s in SD County’s “working class” areas which were assessed at $16K to 35K in 1975K and had double those assessments by 2010 of which there is a large audience waiting to “inherit” them (if they already haven’t). These homes are especially attractive as a stable personal residence to the heir with no siblings at the time of the death of their last parent (or their were liquid assets in the estate to equalize the other heir(s)) because they have never in their lives been able to own a home and have been at the mercy of landlords and whichever friend/relative they were living with. The vast majority of these “heirs” have never attended college and many didn’t finish HS. Most of them are now on fixed incomes or work only part time for minimum wage or close to it.

Moving onto multifamily properties, let’s travel over to LA and SF Peninsula and see what the typical “heir” in those locales is getting away with paying in property tax whilst charging exorbitant rents:

22-unit property in LA County’s Culver City (4 studios, 10-1 bdrm, 8-2 bdrm): 1975 assessment $556K; 2010 assessment $1,012,000.

42-unit property in LA County’s Compton (12-1 bdrm, 16-2 bdrm, 14-3 bdrm): 1975 assessment $426K; 2010 assessment $852K.

Examples of rent-controlled multifamily bldgs:

3-unit property in SF’s Southern Heights/Portrero (1 ground floor unit of 750 sf with small brick patio and rear garden, 1-2nd flr unit of ~2200 sf, 1-3rd floor unit of ~2200 sf. Bldg has two 2-car tandem garages. 2nd flr unit has peek views of the bay and city lights and 3rd flr unit has a 270 degree panoramic city and bay view with a partial wraparound balcony). 1975 assessment $356k; 2010 assessment $710K.

28-unit property in the heart of SJ (8 studios, 10-1 bdrm units, 10-2 bdrm units): 1975 assessment $688K; 2010 assessment $1,376,000.

I disagree that heirs do not want to take over their parents’/grandparents’ propertie(s). Quite the contrary . . . they are almost always advised by their counsel to take it over, due to its ultra-low tax assessment.

Also, in many (non-CFD) areas of SD County, voter-approved bonds and other fees (pest control, sewer, RR maintenance, etc) only total .11 to .18 of the assessed value. That is, the annual tax equals 1.11 to 1.18 of the assessed value.

[quote=EconProf]The actual dollars lost due to Propositions 58 and 193 would make an interesting research project, or Master’s Degree thesis. But I suggest it is a small and diminishing problem, and BG’s statement …”will eventually bankrupt our state.” is wildly exaggerated.[/quote]Econprof, one doesn’t need to be working on a “Master’s Thesis” to prove this largesse (doled out by the virtually broke Golden State, no less) is happening all over it. However, without a paid subscription to REALIST or WESTLAW (better) one must follow several steps in a particular order for this study because “change of ownership” forms filed with CA county assessors are not public record. One must first go down their county assessor’s office and pick their poison parcel map (depicting a pre-1975 built urban area), pay $2 for each map to be printed and then take them home and look up each parcel number on their tax collector’s website to obtain each annual tax bill. The tax bill will list the last document filed. If the tax bill appears to be ultra-low, one can reference that document number in the county recorder’s grantor/grantee index online to determine if there has been a change of ownership since 1986 (that’s as far back as the online GG index goes). If there is only 1-2 deeds on the property and the assessment appears ultra-low, one records the doc number(s) on a pad and takes that list to the recorder’s office’s computers to determine if any of those deeds were intra-familial transfer deed(s) of which no tax stamps were paid. If no quitclaim deeds are found on the property (or any deeds at all), it is VERY likely the original (pre-1978) owners still own it and thus its ownership has not (yet) been passed down.

The closer the parcel map is to the coast, an “historical area” or to a coveted, well-planned downtown area, all the better! If two or more of these attributes exist with said parcel map, then more “heirs” will have taken advantage of Props 58/193. Can we blame them?

The assessment examples I laid out above are just the tip of the iceberg. The Golden State has undoubtedly lost trillions on these ridiculous statutory schemes (Prop 58 much moreso than Prop 193) since 1986 and that is why its highway construction projects have taken so long and it had to give its employees IOUs in lieu of paychecks in three separate Junes due to gridlock in the Legislature in getting its dicey budget passed. The continuing deleterious results of the passage of Props 58/193 PLUS having the “unfunded mandates” of caring for 9M++ undocumented immigrants medically as well as supporting those many thousands residing in county jails and state prisons and shuffling a large portion of this group thru criminal, civil and domestic courts in nearly every county in CA has financially broken the state in more ways then one.

It can only get worse from here if Props 58 and 193 aren’t repealed and something isn’t done about the illegal immigrant population in CA, IMO.

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