[Blog] How would Venice secession affect the Los Angeles property tax base?
Updated August 28, 2016
Community leaders in the Los Angeles neighborhood of Venice have recently expressed interest in separating Venice from the City of Los Angeles, sparking discussion and media attention. This nascent secession movement, dubbed "Vexit" by Curbed Los Angeles in reference to the United Kingdom's recent referendum, could (if proponents are successful) result in Venice being jurisdictionally divorced from Los Angeles and independently incorporated for the first time in nearly a century.
Setting aside consideration of the likelihood of secession and the surrounding political issues (the Local Agency Formation Commission for the County of Los Angeles would need to approve Venice's detachment, as would Los Angeles voters), numerous questions remain about the financial and economic consequences of secession and Venice's potential for viability as an independent municipality. Using geographic information systems (GIS) research methods and open data published by the City of Los Angeles and Los Angeles County, Geospatial @ UCLA offers preliminary answers for some of the most salient questions surrounding "Vexit":
How would the secession of Venice affect property tax revenue for the City of Los Angeles?
Our estimates indicate that the total taxable assessed value of property within the City of Los Angeles is approximately $429.73 billion for the 2014 tax year. This estimate takes in to account the total assessed values, less homeowner exemptions, of all parcels that are fully contained within the boundaries of the City of Los Angeles. Assuming an estimated population of 3,945,037 for the City of Los Angeles, the assessed property value per capita citywide is $108,931.
The total taxable assessed property value within the Venice Neighborhood Council district's boundaries is $8.89 billion, which accounts for approximately 2 percent of the estimated property tax base of the City of Los Angeles.
Empower LA estimates that the total resident population served by the Venice Neighborhood Council is 26,875, which accounts for approximately 0.6 percent of the population of the City of Los Angeles. Given this estimated resident population, the assessed property value per capita within the Venice Neighborhood Council district is $330,896 -- slightly over three times greater than in the City of Los Angeles overall.
Therefore, assuming that the area served by the Venice Neighborhood Council is the geographic area that could become incorporated as the independent municipality of Venice, it is likely that "Vexit" would result in the City of Los Angeles losing a share of its property tax base that is disproportionately large relative to the corresponding decrease in resident population.
What would be the property tax base for the hypothetical municipality of Venice, and how does this tax base compare with that of other nearby incorporated communities?
The area now served by the Venice Neighborhood Council had a total taxable property tax value of approximately $8.89 billion during the 2014 tax year.
While many considerations beyond the scope of this exploratory analysis come in to play when considering whether an incorporated municipality will be financially viable and sustainable, property tax base is an important factor. Considering also that resident population is a factor in estimating the total cost of providing services to a municipality's residents, we compared Venice's property tax base with that of several other incorporated cities. Venice is near and adjacent to several independent municipalities, most notably Santa Monica and Culver City. Santa Monica's total estimated property tax base is $27.17 billion, and with a population of 92,235, we estimate that Santa Monica's assessed property value per capita is $294,630, slightly lower than in Venice. Similarly, we estimate that the total taxable value of property in Culver City is approximately $7.41 billion, which considering a population of 40,065 works out to an estimate of taxable property value per capita of $184,905, considerably lower than in both Venice and Santa Monica.
Would Venice be viable as an independent municipality?
Numerous factors beyond an area's property tax base must be considered when assessing whether a proposed municipality will be economically viable. A 2015/2016 revenue outlook published by the City of Los Angeles, for example, estimated that the city would receive $1.75 billion in property tax receipts (out of $5.39 billion total) in the 2015/2016 fiscal year, indicating that property tax revenues accounted for approximately one third of revenue for the City of Los Angeles. Therefore approximately two-thirds of the City's projected revenue originated from other sources. These other sources of revenue include, but are not limited to, sales tax receipts and franchise tax revenue. Any comprehensive assessment of the viability of forming a municipal government or agency would need to take in to account consideration these and other crucial sources of revenue.
Therefore it is not possible or appropriate using estimates property tax base alone to determine whether Venice would be viable as a detached municipality. Nevertheless, our analysis of the geography of taxable property values in Venice and surrounding communities indicates several interesting conclusions:
- Residents of Venice pay more property tax per capita than residents of the City of Los Angeles at large;
- Venice accounts for 2% of the property tax base for the City of Los Angeles but only 0.6% of its population;
- In terms of total taxable property value per capita, Venice holds a slight lead over Santa Monica and a much stronger lead over both Culver City and the City of Los Angeles overall;
- As parcels change ownership thereby updating the base year from which taxable property values are calculated, Venice's tax base will continue to grow considering the neighborhood's ongoing gentrification and the rapid growth in housing costs.
- Venice's total taxable property value and its property value per capita are favorable indicators for the financial viability of an independent Venice, though property tax base cannot be used alone to determine the viability of a local agency.
Property values and parcel boundaries were obtained from the 2014 Assessor Parcels dataset published by Office of the Assessor for the County of Los Angeles, though Geospatial @ UCLA obtained the data directly from the Los Angeles County GIS Data Portal at no cost. Boundaries for the City of Los Angeles, as well as for neighborhood council districts within the City of Los Angeles, were obtained from the Los Angeles Open Data portal. Boundaries for cities other than Los Angeles were obtained from the U.S. Census Bureau's 2014 TIGER/Line Shapefiles archive.
City population estimates were obtained from the State of California Department of Finance's E-4 population estimates for 2014. Estimated population for Los Angeles neighborhood council districts were obtained from a list of neighborhood council resident populations published by Empower LA; estimates were published in May 2013.
Total assessed taxable property value taking in to account homeowner exemptions, rather than actual taxes assessed, were used as the unit of analysis because assessed taxes include assessments allocated to specific entities and funds. Spatial overlay analysis was used to estimate the total assessed taxable value of parcels in all of the cities and neighborhoods discussed in this analysis. To account for slight inconsistencies between layers of geographic data, only those parcels completely contained within the geographic boundaries of each community were included in the analysis. This may result in a slight underestimation of total taxable property value and per capita total property value as a result.
Please direct all inquiries to Nick Burkhart, Academic Coordinator of Geospatial @ UCLA (firstname.lastname@example.org).
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