State Proposition 13
Authorizes $15 billion in state general obligation bonds for construction and modernization of public education facilities. Fiscal Impact: Increased state costs to repay bonds estimated at about $740 million per year (including interest) over the next 35 years.
Proposition 13 represents another use of the “just a little bit more” mantra to increase taxes even though the existing level of taxation in California is starting to strangle the California economy.
Generally, total cost to borrow – with interest – is up to 70% more than paying for school construction, up‐front, from the regular annual budget. Proposition explicitly 13 authorizes $15 Billion of borrowing for a total cost of nearly $26 Billion including interest. The proposition also authorizes an unspecified amount of additional debt that local school districts and community college districts may take on. (The official proposition summary deceptively leaves that detail out.)
Another seemingly minor provision – “school districts would have new limits on their ability to levy developer fees” – has big implications for a key advocate of a yes on 13 vote: construction trades, especially carpenters and pipefitters. Currently local levies are made on developers when new homes are built if there will be fiscal impact on local schools. It seems most appropriate that these incremental costs should be borne by developers when and where the fiscal impact occurs rather than issuing bonds.
Other big supporters of Proposition 13 – among those spending more than $9 Million for the yes on 13 campaign – are the California Teachers’ Union and the Democratic Party.
Rather than taking on more expensive debt that our children will pay for, our elected state officials should address their priorities with existing revenue including a $21 Billion budget surplus that could be used to pay for $Billions of deferred infrastructure maintenance, to pay down California’s state debt of about $250 Billion or to pay down unfunded liabilities for pensions and retiree health care of about $300 Billion. (For more about California state and local debt and unfunded liabilities see California Policy Center, https://californiapolicycenter.org/californias‐total‐state‐local‐debt‐totals‐1‐3‐trillion/.)
Alameda County Measure C
Measure C adds one half percent (0.5%) sales tax within Alameda County for 20 years, adding about $150 Million of additional annual revenue. It is to be used to 1) expand access to free and low‐cost health care and emergency services at UCSF Benioff Children’s Hospital Oakland and 2) improve access to and quality of affordable quality childcare and preschool for “high‐need” families. It also increases pay for early childhood educators. The initiative names the well‐established nonprofit organization First 5 Alameda County (First 5) as the administrator of the Child Care element. It includes auditing requirements
Measure C is yet another temporary tax that is supposed to pay for better parks and for homeless programs. But this measure is very flawed.
Although an annual audit will assess spending, as with most government programs, limited budget guidance is provided so assessing spending without specific spending criteria may be challenging. And, no retrospective or benefit/cost assessment is required to assess the effectiveness of the program. given that limited budget guidance is included.
Unfortunately, even the most well‐intentioned government early childhood development programs for lower income families yield mixed results at best.
And, in the words of Milton Friedman “There is nothing so permanent as a temporary government program.” If nothing else, once taxpayers get used to a tax it is easy to renew.
UCSF Benioff Children’s Hospital spent about $1.2 million in support of the initiative and would receive tens of millions in revenue from Measure C funds annually.
Advocates of Measure C hope to test the limits of California’s 2/3 (66.7% of votes) requirement for tax increases. Counties and cities contend that measures placed on the ballot by voters (who signed the petition for the measure) only require a majority of votes for approval. The contention is based on an ambiguity in the law, which is currently under court review.
Oakland City Measure Q
Measure Q adds a parcel tax of $148 per home, $101 per residence in multi‐unit dwellings and an amount for commercial and hotel properties that is determined based on a formula. It applies to all residences within the City of Oakland for 20 years, adding about $21 Million to annual taxes. Provisions of the tax hike include auditing requirements.
About 64% the tax is targeted at safe and clean parks and recreational services for underserved communities, 30% is for increased homeless services with 5% for water quality improvement and litter reduction and 1% will be spent for auditing. Only 55% of funds for parks must be spent, and the remaining 45% may be spent for other priorities.
This measure was put on the ballot by a unanimous vote of the Oakland City Council. An increase of a parcel requires that two‐thirds of voters agree to pass it.
Measure Q is another one of those temporary tax increases for apparently well‐intended but ill‐ conceived programs. There are too many reasons to vote no to cover here.
Oakland already has an unusually high number of parcel taxes (10) plus growing property tax due to soaring property values. That is coupled with an especially high sales tax rate. And because the tax imposes a flat rate across all residential properties it is regressive. At some point it is all too much.
Oakland’s economy is doing very well: during the past five years tax revenue increased by a surprising 28%. But Oakland’s leaders tend to find new ways to spend ever more taxpayer money while important priorities like debt repayment and a backlog of infrastructure maintenance are deferred. Of special note is Oakland’s significant $2.8 Billion of unfunded liabilities for pensions and retiree health care.
This tax comes on the heels of a 2018 tax on vacant parcels to fund homeless services and resources, a 2016 property tax increase and bond measure that included $100 million for affordable housing. A 2016 countywide $580 million bond issuance and 23 year temporary property tax increase to provide up to 8,500 units of affordable rental housing, supportive housing for homeless people, and help for low‐ and middle‐income households to purchase a home (Oakland’s share is an estimated $50 million).
Ironically Oakland’s planning and permitting fees and rules add significantly to the cost of new housing.
Advocates of Measure Q hope to test the limits of California’s 2/3 (66.7% of votes) requirement for tax increases. Counties and cities contend that measures placed on the ballot by voters (who signed the petition) only require a majority of votes for approval. The contention is based on an ambiguity in the law, which is currently under court review.
Unsurprisingly, local unions support this tax, presumably because most or all money spent on labor will be for union members.
In a cynical ploy, the homeless component was added to the original tax proposal after authors realized that addressing the homeless issue would poll well with voters. And authors originally proposed a tax of $68 or $98 per home but increased it to $148 when polling showed that the higher rate would not affect voter approval. That is clearly a terrible way to make tax policy!
Rather than seeking yet more revenue Oakland city leaders should reprioritize and balance existing spending and pay for parks and homeless programs from the general fund and existing taxes if that is a high priority.
For details see https://www.mercurynews.com/2020/02/12/editorial‐curb‐oakland‐mayor‐schaafs‐ insatiable‐property‐tax‐appetite/.