The annual Assessor's Annual Report, recently published by the Office of Santa Clara County Assessor Larry Stone, marks a big milestone for this year: The 2019-2020 County's assessment roll totaled $516 billion — that's over half a trillion dollars, and a 6.79% increase over the previous year.
According to the report, Palo Alto's share of the assessment roll grew by 6.72% for 2019-2020 and makes up 7.62% of the total assessment roll.
An assessment roll is, as the report describes, "the official list of all property within the county assessed (for taxes) by the Assessor."
The report also includes a retrospective of the past 10 years, a bit like the greatest hits of the area's recent near-decade of major economic growth.
"Since the end of the great recession, we've had consistent large increases," Stone said in an interview.
Stone recalled that the first assessment roll that he oversaw, in July 1995, was $115 billion.
"That's the kind of growth that we've seen. I don't think that any county in the state has seen that kind of growth over the last 24 or 25 years — that's because we're Silicon Valley," Stone said.
As for how the more than half a trillion in property taxes from the 2019-2020 roll is spent, the report shows how the funds are divvied up in the county overall, with a large proportion of the funds going to public schools (44%), and community colleges receiving 7%. Overall, the remaining funds are allocated to cities (13%), special districts (6%), Redevelopment Trust Fund (12%) and the county (18%).
The amount school districts receive does vary, Stone said, due in part to how much tax revenue each city generates. The report shows that the estimated total allocated to the Palo Alto Unified School District is 46%.
According to the report, "Property sales and new construction were principal contributors to the assessment roll growth this year. Just over 60% of the $32.9 billion increase in assessments was attributable to re-assessable changes in ownership."
In Palo Alto, that amounted to $336,969,571 added assessed value due to changes in new construction, the report showed. Among the top 10 changes in ownership for 2019-2020, two Palo Alto sales made the list: office properties assessed, respectively, to Leland Stanford Jr. University, with a net assessed value of $145,100,000 and to San Francisco No. 69 LLC (Alexandria Real Estate Equities) at $136,000,000.
Countywide, businesses also gave the roll a $5.8 million boost in taxes on "business personal property," items that the report describes as machinery, equipment, computers, and fixtures.
Business is still booming, but nonetheless, as the report notes, the growth rate for business personal property is "virtually the same amount as the prior year, 3.3 percent, another indication that our local economy is beginning to cool."
Stone said that such signs do point to the economy slowing.
"I think we're just at the beginning of what we call a 'normal recession' — not a meltdown like we had in 2008," he said, but emphasized that he sees indications of much greater stability compared to the last time Silicon Valley saw skyrocketing growth, the dot-com boom — and eventual bust.
"There's a significant difference, even though the roll growth is about the same as back in the dot-com boom days," Stone said. "The difference is this: The basis of the assessment roll is real property — bricks and mortar, homes and buildings.
"(During the dot-com boom), the development was based on speculation, developers building office or industrial buildings and leasing them to startups, primarily with no earnings, so when the market went from the dot-com boom to the dot-com bust in 2002, a lot of these companies went out of business or just walked away from space that they leased."
Stone said that in the current market, large, well-established companies are doing the building and developing. "That bodes well for the future because (companies like) Apple are not going to go out of business," Stone said.
"Apple and Google used to do long-term leases, now they're buying land and building buildings, which again, is just a much more stable market," he said. In fact, the report indicates that Apple and Google alone account for 3% of this year's assessment roll.
Warehouse space is enjoying a low vacancy rate at 2%, Stone said, which is attributable to the move of distribution centers closer to urban centers, due to companies like Amazon. Stone did note the one area where numbers are consistently down is in retail.
Stone said that high housing prices remain a major concern, cautioning that lack of housing could upend our local economy if it's not addressed.
"I think the lack of affordable housing — both affordable and worker housing, there is a difference — the lack of both of those will ultimately lead to our demise if we don't seriously deal with it quickly."
He emphasized that overall, while the numbers are showing a decline in growth, it's nothing as precipitous so far as in previous downturns.
"We're beginning to see a leveling-off; we are beginning to see kind of a normal market coming back," he said, noting that for the first time in four or five years, he's seen "for lease" signs outside of apartments and even some offices.
"We're seeing some office vacancies now. The office market is clearly showing signs of over building — again nothing serious."
View the full report here.