Parcel taxes are once again in the news, as money-hungry cities look to the regressive home levies as a fool-proof way of padding their budgets.
The latest city to jump on the parcel tax bandwagon is San Francisco, with nearly $200 million to be raised for MUNI. But here in Oakland, officials also are eyeing a bevy of new parcel taxes: as Oaklandside puts it, “City leaders are considering a menu of potential taxes they want voters to approve next June.”
Oakland homeowners are right to fear their mayor and City Council. These are politicians who have long turned to them as piggy banks to help keep Oakland’s shaky finances from going broke. Parcel taxes are popular in the city where 58% of residents are renters, most of whom believe that their landlord is not allowed to raise their rent in response to a new property tax. This is not necessarily true, as a landlord will inevitably find a way to legally raise a tenant’s rent if he really wants to. But this fact somehow is not fully comprehended by renters.
My own belief is that there is no fair or equitable way to raise more money for government to spend through taxes of any kind. I have devoted a lifetime to understanding this. If there isn’t enough money for government to pay for all the things it wants to do, then the only alternative is for government to cut spending in other areas. Oaklanders are taxed out. They can give no more. Therefore we must cease all talk of more taxes—sales, parcel, payroll, whatever—and begin instead the process of deciding what to defund. And, no, that does not include the police.
However, since our officials are hell-bent on imposing more parcel taxes on us, I am republishing a piece I wrote in 2018 on the parcel-tax situation. Although it’s seven years old, it still rings true:
How to make parcel taxes fairer and more equitable
by Steve Heimoff
Dec. 14, 2018
BACKGROUND: I began this research when Measure AA qualified for the November ballot. As the owner of a small (605-square foot) condo in Adams Point, I believed it was unfair to impose the same $198 per year tax on me as well as on the owner of a 5,000-square foot mansion in the Hills. In my research, I connected with Alex Marqusee, who works for City Councilmember Lynette McElhaney, in my District. He suggested I prepare this report.
KEY FINDINGS:
I wanted to know why the City didn’t calculate the parcel tax for Measure AA based on the square footage of the parcel, rather than a “one-size-fits-all” model, which is patently unfair. I interviewed several people about this.
Kyra Mungia works for David Silver, in Mayor Schaaf’s office; Silver (who did not return repeated requests for an interview) was described to me, by Oakland’s City Auditor, Brenda Roberts, as “the mind behind AA.” Mungia told me, among other things: (a) “the City of Oakland has not ever based parcel taxes on the square footage of the parcel for residential properties [and] the authors did not consider it (and again, it would cause legal challenges).”
I asked City Auditor Brenda Roberts the same question: “Did the City consider basing AA on square footage for residential properties?” Her reply: “It would be problematic, because, say, if someone added a second story; I don’t know how much of that information is available. So from a practicality point of view, it’s simpler to do it by parcel.”
A key question is, Is it legal to base a residential parcel tax on square footage? The answer is Yes. The website ballotpedia clearly states, “These assessments can include taxing a parcel based on square footage or by dwelling unit, or the tax may be a flat rate per parcel.” In fact, although the majority of residential parcel taxes passed in California over the last 15 years have used flat rate, many municipalities have chosen the fairer route of using square footage.
For example, in 2016 Berkeley passed Measure E1, which benefitted the Berkeley Unified School District (BUSD). The Measure imposed a flat rate of 37 cents per square foot on parcels; it passed by an overwhelming 89% to 11%. I interviewed Natasha Beery, director of Community Relations for BUSD. Here’s what she told me: “The idea for square footage went back to a prior measure for funding libraries, so it may be that’s where the waters were first tested. There’s a longstanding practice in Berkeley…the one size fits all is not the most equitable way to go—it’s not fair to smaller property owners.”
I asked Ms. Beery why so many parcel taxes are based on a flat rate. Her response: “Folks are just doing what they’ve always done. They may also be worried about being challenged. But we’ve had good legal advice on this [square footage], and it has stood the test of time. We want to do this equitably.”
I asked Ms. Beery to comment on Brenda Roberts’ remark that determining square footage is “problematic” because records aren’t always up-to-date. Her reply: “I have been told Berkeley is fortunate in that we do maintain very good property records. We receive the tax rolls, with all the classification of properties. So, yes, we have very well-maintained, accessible records.”
I then interviewed William B. Tunick, attorney-at-law; his firm was legal counsel to the Berkeley Unified School District and, in his words, “assisted the district in preparing the measure (E1).” My central question to him concerned the legality of determining residential parcel taxes by square footage vs. a flat rate. Tunick acknowledged the difficulties of interpreting the law. “Each agency has its own rules for parcel taxes,” he told me. “For Berkeley Unified and Oakland, it’s probably different…those statutes aren’t all identical.” I asked him why his firm had told BUSD that using a flat rate was legal. “Well, we advised our client, if they wanted to continue their current tax [using square footage], they could do that. But I don’t think any attorney could say conclusively that beyond a doubt that square footage for parcel is legal.”
Why is this such a gray area, I inquired. “Good question,” Tunick replied. “The reason we don’t have more clarity is [because] the Legislature would have to amend the [current] law, which is politically problematic.”
MY CONCLUSIONS
Oakland could determine the actual square footage of residences, if it really wanted to. Ms. Roberts’ assertion that it’s “impractical” is not convincing. If Berkeley can do it, so can Oakland. Besides, it’s not the role of elected officials to have their jobs made “easier” or “more practical,” at the expense of unfair taxing policies.
Furthermore, Oakland could test the legality of using square footage, and thus help to clarify a situation that seems remarkably murky. Why don’t we have clarity as to what’s legal and what isn’t? Is it simply because the current system more or less works, despite its unfairness? Is it because no one wants to take the time to resolve this once and for all? Isn’t it the task of government to make the law clear and transparent?
The essence of the opposition to Measure AA, which was defeated in November, is that basing residential parcel taxes on a flat rate is, as Natasha Beery said, “inequitable.” In light of Prop 13’s restrictions, it’s understandable why politicians would turn to homeowners to fund their pet projects. But homeowners cannot indefinitely be the piggy bank for these politicians. At some point, the parcel taxes have to stop—at least, based on a flat rate. My own property taxes, including parcel taxes, increased nearly 20% between 2014 and 2018. That is an unsustainable rate of increase.
Finally, my understanding (not confirmed) is that the City Council and Mayor Schaaf are considering passing Measure AA, or a similar bill, anyway, regardless of the fact that it failed to obtain the necessary two-thirds majority in November. May I say that this amounts to a nullification of the results of an election, simply because the powers-that-be don’t like those results. This is something I’d expect from a Donald Trump, not from elected officials in Oakland! As the saying goes, “elections have consequences.” If Mayor Schaaf and her allies on the Council are disappointed by the results of the last election, let them try again, on the ballot. My own hunch is that, had they based AA on square footage, instead of going for a power grab that would have resulted in the largest tax increase in Oakland’s history, they might have had better results.
Steve Heimoff