Bruce McMurray’s home in the Berkeley hills is a testament to frugality.
On Tuesday evening every light in the house was turned off except for the kitchen, where the television set was equipped with rabbit ear antennae, the floor was lined with several bottles of Charles Shaw (aka Two Buck Chuck) wine, the produce on the counter came from the Berkeley Bowl and the cat food was purchased at Costco.
But as hard as McMurray tries to pinch pennies, he said that once again he will have to dip into his depleting savings to pay his $5,421 property tax bill that came in the mail last week.
“It’s tough to make it when you get bills like this,” he said.
In an election that could turn over one-third of the City Council, the most contentious local battle has been over five proposed tax increases. Supporters insist city and school district programs would suffer without the inflow of cash and opponents insist another round of tax hikes could break their bank.
On the November ballot are a 1.5 percent increase to the Utility Users Tax that would raise $2.7 million for the general fund and expire in four years, a one-half percent increase in the tax on properties that sell for over $600,000 to raise $2.2 million for youth programs and expire in six years, a $1.2 million increase in the Emergency Medical Services Tax and a $1.7 million increase in the library tax.
McMurray, who lives alone and whose only source of income is a $631 monthly disability check which adds up to about $8,000 a year, is an opponent. At age 63, McMurray, a former roller skate vendor in Golden Gate Park who is HIV positive, gives himself five years before his savings run out and he defaults on his property taxes for a home he acknowledges has quadrupled in value since he bought it in 1979.
“Yes, I can sell my house and I’ll be rich, and yes, I can move to Oklahoma or South Dakota where taxes are low, but these are my roots,” he said.
For McMurray, there are a few options that could keep him in high-tax Berkeley long term. The state controller’s office allows qualified homeowners age 62 and older to postpone taxes in return for the state recording a lien against the property. A more common financing plan is a reverse mortgage, which offers a homeowner monthly income payments that are paid back with interest when the homeowner no longer owns the property.
McMurray said he looked into a reverse mortgage, but because he is relatively young at 63, he wouldn’t be eligible for enough of a loan to make the mortgage viable, though it might be enough to pay his taxes. “If I can stick it out here a few more years, a reverse mortgage might make sense for me,” he said. He has already sent in his absentee ballot voting no on all the new tax measures.
He will not be alone.
After years of passing new taxes with relative ease, Berkeley voters have done an about-face. In 2002, without a formal anti-tax campaign, voters turned back three out of four proposed measures for new taxes or bonds. Last year vocal public opposition kept a proposed $7 million parcel tax off the ballot and this year anti-tax forces have mobilized to mount a campaign that has raised over $6,000 to fight most of the measures.
“They shouldn’t ask us to pay more when they haven’t done enough to cut back,” said Bob Migdal, a member of Budget Watch, one of several anti-tax increase groups to spring up this year.
Data released by the city this spring showed that last year the average Berkeley homeowner paid $4,128 in local taxes and assessments compared to $4,008 in Albany and $3,703 in Oakland.
All of the taxes excluding the library tax would help close a $7.5 budget deficit in the city’s general fund for next year and projected deficits in future years. The deficits are caused in large part by increasing costs for the state employees’ retirement program, cuts in state aid and sagging commercial sales tax revenues.
Additionally, the Berkeley Unified School District has placed an $8 million measure on the November ballot (set to expire in two years) which is supposed to lower class sizes and bolster funding for music and library programs that have been cut in recent years as the district struggled to close its budget deficit.
In all the five new taxes would cost the average homeowner in Berkeley $302 dollars next year and when other proposed tax increases and outstanding bonds are factored in, property taxes for the average new home buyer will rise by $688, according to figures compiled by Councilmember Gordon Wozniak.
City voters haven’t passed a tax increase since 2000, but that doesn’t mean local tax bills have remained stable. McMurray’s bill for city assessments rose $96 dollars from last year and over $800 from 1997.
He is actually a beneficiary of a state tax system that is anything but equitable. Since he bought his home the year after California voters passed Proposition 13, which limits increases in property valuation to no more than two percent a year, McMurray’s property is valued for tax purposes at $286,444—roughly one-third of its market value.
If he were to sell his home for $800,000, the new homeowner would pay taxes well in excess of $10,000 on the same property.
Homeowners in Berkeley are taxed a fixed percentage of the assessed value of their property and then pay city and local taxes based on the square footage of their homes.
“It’s an uneven, unfair taxing system, but it’s the only the one the government has,” said Mayor Tom Bates, who is supporting all five tax measures and said he is among the 65 percent of Berkeley homeowners who receive benefits from Proposition 13.
A search on the Alameda County Assessor’s website shows that Bates’ property is valued at $54,840 for a total tax this year of $1,993. Most other members of the City Council are also big beneficiaries of the law. Betty Olds’ property is valued at $71,715 for a total tax of $1,989 and Maudelle Shirek’s property is valued at $40,525 for a total tax of $1,471. Councilmember Wozniak, whose property is valued at $587,975, pays the highest property tax among councilmembers at $9,856.
Trina Ostrander, director of the Berkeley Public Education Foundation, defended the tax proposals on grounds that California taxes are generally lower than those of other states with high personal incomes.
“There should be room for local taxes because we’re undertaxed at the state level,” she said.
The Tax Foundation, a nonpartisan research group that advocates a simple tax code, ranked California 24th in the nation with a per capita tax burden at 10 percent of personal income. New York ranked first with a tax burden of 12.4 percent.
Like other California cities, Berkeley lost precious state dollars—$1.6 million—this year from Governor Schwarzenegger’s repeal of the vehicle license fee.
Frances Medema, a management analyst with the League of California Cities, said state cutbacks had caused more cities than usual to put new taxes on the November ballot. An incomplete list compiled by the league shows that 58 cities have proposed tax measures, the majority of which are increases to the sales tax or utilities tax.
Among them are a parcel tax and public parking tax in Oakland to pay for more police officers and public safety programs, a sales tax increase in San Francisco, a utility users tax in Fremont and a hotel tax increase in Santa Monica.
In Berkeley, the four city taxes would raise $8 million, which supporters say would go to reopen the libraries on Sunday, guarantee that every fire engine is equipped with a trained paramedic, preserve programs for youth, including crossing guards and replenish the city’s general fund.
Tax opponents, like Migdal argue that many of the programs could already be paid for from the city’s coffers, and that the special taxes are part of a bait and switch tactic whereby the city takes popular programs to the voters to fund separately so regular city revenue can pay for less popular programs.
Migdal also charged the city hasn’t done enough to rein in the cost of the city bureaucracy, whose skyrocketing pension benefits are blamed for $6 million of the city’s $10 million general fund deficit this year.
Berkeley required its unions to forego roughly $1.2 million in scheduled raises this year, but the city still pays contributions for employees to the state retirement fund in full. Richmond, which is facing a $20 million deficit, signed a better deal with one of its largest unions. Service Employees International Union Local 790 Richmond members will pay the full eight percent contribution beginning next July in return for a 2.5 percent raise in 2007.
Maureen Katz, a Berkeley resident and public school parent, insisted the programs at risk were too vital not to vote for the taxes. Without the tax on home sales, she said Rosa Parks Elementary School would lose its family resource center and students would lose after-school programs.
“Berkeley is a great place to live because of the services we provide,” said Katz. “The people who are complaining have all seen their houses double in price. It’s all greed.”