Parcel taxes go front and center

Few issues spark more local controversy than the parcel tax, a levy on property that raises money for specific local programs, such as schools, roads and fire fighting.


But their size, scope and purpose vary dramatically. And despite the intense emotions they enflame locally, parcel taxes have rarely hit the state Capitol’s radar — until now.


The change stems from the efforts of some school districts to raise money through “split” parcel taxes. Critics contend the move would spell the beginning of the end of Proposition 13, the voter-approved initiative of 1978 that cut property taxes across the state by 57 percent and limited new increases. Proposition 13 foes say it’s about time.


Under Proposition 13, parcel taxes are flat or uniform — the same amount levied regardless of the size or function of the property — and require a two-thirds vote, as do special taxes and general obligation bonds. Efforts to alter that calculation now are under way, fueled by a December appeals court ruling that blocked split parcel taxes pushed by Alameda schools. The issue, which focuses specifically on school-district levies, is heading to the state Supreme Court.


“Unlike property taxes, which are very clear, parcel taxes are a lot murkier. That’s why the two-thirds requirement (for passage) was established by Proposition 13,” said Rex Hime of the California Business Properties Association, which opposes attempts to lower the requirement for passage.


But uniformity doesn’t necessarily translate into fairness, and supporters of the split parcel tax see a need for reform.


“What the Legislature has failed to do is put any criteria around what a parcel tax should like. Should my little postage stamp of a property pay the same as a shopping center? Should every apartment pay the same as a home?” said Lenny Goldberg of the California Tax Reform Association.


Efforts to lower the two-thirds requirement for voter approval on local parcel taxes across the board to 55 percent are already in the Legislature — Sen. Mark Leno, for one, introduced a constitutional amendment to do just that in December.  His plan currently requires voter approval, although changes to that requirement may be negotiated in the Legislature now dominated by Democratic supermajorities. In 2000, statewide voters approved Proposition 39, which allowed a 55 percent threshold for school construction.


Voters have sent mixed signals on new taxes: They approved the governor’s budget-balancing plan of sales and income tax increases in Proposition 30, while in Proposition 39 they approved closing a corporate tax loophole engineered by the Schwarzenegger administration in 2009.


But Proposition 13, approved in 1978 by the electorate, remains supported by most voters, according to the Field Poll. And on Tuesday in Los Angeles a proposed sales tax hike to raise $200 million annually for the strapped city was handily defeated in a low-turnout vote.


Assemblyman Rob Bonta, an Alameda Democrat, has authored legislation, AB 59, to nullify the appeals court decision, which blocked the Alameda Unified School District from taxing residential and small commercial properties at a different level than large commercial properties. Bonta’s legislation, if approved, applies specifically to the Alameda school district levies but there is discussion in the Capitol about whether the bill could be the precursor of statewide legislation.


Anti-tax activists see changes in the parcel tax as the first assault on Proposition 13 by the Democrat-controlled Legislature. Democrats have a two-thirds majority in the Assembly and are all but certain to restore their supermajority in the Senate following special elections to fill vacancies.


“Proposition 13 is still likely to remain on the law books for large statewide tax measures.  But it is about to be divided and conquered at the local level of government by local parcel taxes,” the CalWatchdog blog noted.


From 2002 through 2009, some 308 parcel-tax measures went before voters, according to financial consultant Michael Coleman, who advises the League of California Cities.


Of those, 136 were approved and 172 failed. Of those that failed, 80 had approval from more than 55 percent of the voters but failed to reached the two-thirds threshold required under Proposition 13. The other 92 measures that failed received less than 55 percent of the vote.


More than a third of the measures — 135 — sought funds for fire fighting and emergency medical services, while 33 targeted parks and recreation and 29 were for libraries.


“The parcel taxes can be used for any municipal purpose,” Coleman noted. “Over half of the proposed parcel taxes since 2001 have been for public safety or medical services, including law enforcement, gang suppression, fire suppression and prevention, emergency medical and hospital services, equipment and facilities.”


Coleman is among the few who track the parcel tax statewide. Neither the state Board of Equalization, the state Controller or the Franchise Tax Board, which deals with income taxes, collects data on parcel taxes. That information is kept locally by auditors, among others, in the 58 counties, officials said.


EdSource, a nonprofit education news and information service, reported in December that “during the past decade about a dozen school districts, mainly in the Bay Area, have adopted parcel taxes similar to Alameda Unified’s.”


The report noted that about 10 percent of California’s 1,000 school districts have passed parcel taxes, and that the month before “five districts in Los Angeles County, including Centinela Valley Union High School District, joined together to pass a parcel tax that charged 2 cents per square foot for residential properties and 7.5 cents per square foot for other classes of property. San Leandro Unified passed a measure taxing single-family, multi-family and business properties at different rates.”


The crux of the debate over parcel taxes isn’t only about what they are used for but how their burden is distributed.


“The fact is, right now the cities do have a fair amount of leeway,” Goldberg noted. “But there really is no guidance here and the court (blocking the Alameda parcel taxes) probably is wrong.”


In the Alameda case, the differentiated taxes overturned by the appeals court were approved in 2008 for Alameda Unified. The 1st District Court of Appeals, reversing a lower court and citing a 1986 decision that dealt with provisions of Proposition 13, threw out nearly all the taxes.

But Hime sees the issue as one of fairness, in which a split parcel tax roll is used to circumvent a constitutional amendment overwhelmingly approved by the electorate.

“So if you pass a parcel tax, for whatever the reason, it needs to be applied equally to all the parcels,” he said.

Ed’s Note: Clarifies in 4th, 11th grafs that focus is on school parcel taxes.

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