The Long Beach Civic Center. Photo by Thomas R. Cordova.

Property tax revenue in Long Beach was significantly higher last year than officials expected—and it wasn’t because of a hot residential real estate market.

The boost—which was almost $10 million more than the city expected—largely came thanks to an unexpected stream of funds from reassessments in the city’s former Redevelopment Agency project areas. (Those properties were targeted by the city’s Redevelopment Agency, which Gov. Jerry Brown shuttered in 2012, because they were in need of urban renewal.)

The spike in property tax revenue from those reassessments, which was the result of positive sales trends and a series of improvements and projects in areas like North Long Beach and Downtown, was one of the biggest contributors to a surprising $2.2 million surplus in the overall general fund last fiscal year.

It’s unclear why the city saw such a large uptick in those reassessments last fiscal year. Revenue Management Officer Geraldine Alejo acknowledged it was an unusually productive year for those one-time payments, but she said there was no indication it was related to the COVID-19 pandemic.

Property tax revenue, though, can be volatile. If a payment is late, for example, that could negatively impact the original fiscal year while boosting the following year’s revenue. Assessment decisions that come too late in a fiscal year to be represented in that budget can be another potential source of unexpected revenue for the next year.

Generally, based on the way the city projects the budget, those reassessments result in a net positive. But it’s also possible for revenue to fall into the red. A successful appeal to a change in valuation, for example, can and has led to negative revenue.

And it’s not just the city that’s impacted. Since property taxes are collected at the county level, cities like Long Beach only receive a fraction of the 1% property tax collected from its residents. Over 40% of the collected property tax in Los Angeles County has been allocated to school districts this year, compared to about 15% for city governments.

“On average across the whole general fund, the city of Long Beach gets 21 cents out of every property tax dollar,” Long Beach’s Financial Management Director Kevin Riper said.

Even so, property taxes are the most significant source of income for the city’s general fund, coming in at an average of 22.5% of the fund’s total revenue. This year, property taxes brought in almost $150 million to the general fund—about 23.5% of the $636 million in fund revenue.

“Property tax, along with sales tax, are by far the two biggest sources of revenue that go into the general fund,” Riper said.

And, of course, the general fund is critical for city operations. Among other spending, it provided over $33 million for Development Services, $5.8 million for Health and Human Services and $3 million for Public Works, according to the adopted budget book for the 2022 fiscal year, which lasts from Oct 1, 2021 to Sept. 30.

Because the revenue is so critical for the city, officials are intentional about making realistic projections to anticipate spending.

“We have a conscious policy of making the forecast at the level that we think is reasonably expected to actually come true,” Riper said. “We’re not overly optimistic, we’re not deliberately optimistic, and we’re also not deliberately pessimistic. We make our best professional projection of what property taxes are going to be.”

The property tax forecast for the upcoming year is noticeably higher than the one for the 2021 fiscal year, sitting at just over $140 million total. Predictions do not consider potential one-time payments, Alejo said, so the forecast represents confidence in the city’s real estate market moving forward.

“What you’re seeing in our ‘22 budget is based on what we’re seeing, which is stable sales at increasing prices, continued construction, and continued improvements,” Alejo said.

Additionally, assessed valuations are not expected to decrease as they might have during the past few years, which shows officials are looking beyond COVID.

“We did not see any of the things we were bracing ourselves with any of the negative impacts of the pandemic,” Alejo said. “Overall, things are looking good.”

Christian May-Suzuki

Christian May-Suzuki is a reporter at the Long Beach Business Journal.