Churches, affordable-housing projects and other California nonprofits avoided property taxes on $122 billion in assessed value in 2013-2014 thanks to the state's welfare exemption for nonprofits, according to a recent report by the Legislative Analyst's Office.
The $122 billion represents about 3 percent of all taxable property value in California and translates into about $1 billion in lost revenue for cities and counties.
In the Capitol, though, the main focus is on exemptions for affordable-housing projects — and how that benefit can be upended by substitute payments that some project developers make to cities.
Under the rules for welfare exemptions, affordable housing projects must spend what they save on property tax to "maintain the affordability of, or reduce rents otherwise necessary for, the units occupied by lower income households."
Ventura County Assessor Dan Goodwin recently ordered some affordable-housing developers to pay up on their property taxes because they made "payments in lieu of property taxes" — a relatively uncommon practice in California known as PILOT's — to cities. Goodwin contends that the payments violated the welfare-exemption rules.
Now lawmakers are looking at the issue. At a joint hearing Monday of the Assembly's local government, housing and taxation committees, lawmakers seemed inclined to beef up the ground rules for PILOT payments while protecting the tax perks for affordable-housing projects.
The chart below shows, by county, the dollar amount of assessed property value covered by welfare exemptions. Affordable housing projects fall into the "other charitable properties" column.
Source: State Board of Equalization
PHOTO: The Arbor Creek Apartments affordable housing development in Elk Grove had its grand opening Thursday, July 18, 2013. The Sacramento Bee/Randall Benton