In recent years, a new type of property tax assessment has started to take hold in California. Contractual assessments are a new way for property owners to voluntarily increase their taxes by financing specified improvements to their property. Modern contractual assessments were born from an idea put in place in Berkeley in November 2007. On that date, the Berkeley City Council approved the "Sustainable Energy Financing District," which authorized a city-wide voluntary assessment district to pay for the installation of solar panels and solar hot water systems. The City provided the funding for the project from a bond or loan fund that it repays through assessments on participating property owners' tax bills for 20 years. The tax assessment itself essentially runs with the land and is transferable between property owners.

This idea was later codified at the state level with the passage of AB 811 in 2008; which authorized the legislative body of any city to determine that it would be in the public interest to designate an area within which authorized city officials and free and willing property owners may enter into contractual assessments to finance the installation of distributed generation renewable energy sources or energy efficiency improvements that are permanently fixed to real property. It also authorized a property owner, upon written consent of an authorized city official, to purchase directly the related equipment and materials for the installation of distributed generation renewable energy sources or energy efficiency improvements and to contract directly for the installation of those sources or improvements. Since this bill was passed, many local governments have begun enacting these types of conforming laws.

The legislature is now considering expanding this type of assessment to include other improvements. AB 2182, for example, which is now pending in the legislature would fund septic improvements that are permanently affixed to residential, commercial, industrial, agricultural, or other real property. These assessments may spur the economy by allowing private industry to sell products to property owners. In addition, the cost of these assets, which will automatically be secured to the real estate, theoretically provides a safe form of financing. Although it may be wise for some property owners to enter into agreements for contractual assessments, buyers must be aware of the potential for increased property tax bills based upon these agreements.