Public Comment

Commentary: More Taxes for Berkeley Homeowners?

By Barbara Gilbert
Friday April 25, 2008 - 09:52:00 AM

City officials are considering a panoply of new tax measures for the November 2008 ballot. The measures under discussion include the following projects, either separately or bundled in some fashion: public safety-police; public safety-fire; public safety-youth violence prevention; watershed management; warm water pool; (the forgoing are referred to herein as “the city measures”); and a very big general parks and recreation measure, including all pools, several playing fields, a new skate park, and more. Additionally, the library and BUSD are each very interested in substantial capital improvement measures ($25 million for the library), but appear to have made a deal to hold off until the city gets a first crack at the voters this coming November. Note that there will also likely be some regional and state revenue measures, as well as some potential changes (to extract more dollars) in the way that the State of California taxes property owners.  

The city measures alone (excluding library, BUSD, and the bundled parks and recreation measure), taken together, would add at least $360 to the average homeowners annual property tax bill (average is defined as 1,900 square feet and assessed value of $330,500) and substantially more for the many newer homeowners with higher assessed values. At this time, no final decisions have been made as to the final scope and shape of the measures for the November ballot. 

In 2004, the numerous tax measures on the city wish list fell far short of the required votes. The Real Property Transfer Tax for Youth Services, Library Tax Increase, and Paramedic Tax Increase each required a two-thirds majority, but received, respectively, 54.3 percent, 51 percent, and 45.4 percent. The Utility Users Tax Increase required 50 percent plus 1 vote, but received only 37.4 percent. Note that the UUT is the only tax burden that would have been shouldered by the entire Berkeley population, not just property owners, and it failed the most miserably! So, this time around, city officials are shunning any measure that would ask students and renters to help shoulder the burden of increasing local government, and these officials are clearly counting on increased voter turnout of non-property-owners, lured by the national election, to vote in higher local homeowner taxes. 

Following are some considerations for Berkeley residents with respect to new Berkeley taxes. 

• There undoubtedly is a limitless menu of worthy services that could be provided by the city, the library, and BUSD. Are they all necessary, affordable, and properly prioritized? Has the city properly spent its $300 million in total annual revenue? Has BUSD done likewise with its $113 million budget? Are there other ways to generate revenue that have not been properly explored or implemented? Should the approximately 45 percent or so of Berkeley property-owning households be asked to exclusively pay, in addition to the general taxes and fees imposed on all residents, almost 40 percent of the entire city General Fund?  

• In this time of collapsing real estate and asset values (including homeowner retirement assets), skyrocketing health care costs, employment insecurity, and municipal near-bankruptcies, is it appropriate or wise to further burden Berkeley homeowners? What is the “ability to pay” of the average Berkeley homeowning household, whose average income is approximately $100,000?  

• The City of Berkeley’s revenues have risen exponentially since 2000 due to the exploding real estate market that produced vastly increased assessments and transfer tax revenue, and to utility tax revenue increases due to rising PG&E and utility bills. Without any new real property taxation, local real property revenues will continue to increase by millions of dollars annually due to built-in inflators to the ad valorem and special local taxes. 

• The city has not prepared a proper and complete analysis of the local tax burden relative to other cities, as requested by various citizen groups. Although figures were given for Oakland and Albany indicating near parity with respect to real property based taxes, these figures are actually quite misleading. Generally, Berkeley uses (and should use) a 10-city comparison, which would add the cities of Alameda, El Cerrito, Fremont, Hayward, Mountain View, San Leandro, and Vallejo to the chart. Further, Berkeley imposes many unique local taxes and fees that add substantially to the local tax burden and should properly be part of a true comparison chart. These include the real property transfer tax of 1.5 percent, Berkeley sales tax, Berkeley utility users tax (on all utilities, and quite a city windfall given steeply rising utility prices), a hefty sewer service fee (billed for City by EBMUD), and refuse collection and disposal fees (now set to be raised, but probably will be delayed until after the November election!). Many Berkeley citizens who follow city tax and budget issues are convinced that the local tax burden, taken as a whole, is among the highest, if not the highest, in the state. This was shown to be true in 2004 and there is no reason to believe that much has changed.  

Another important area for analysis would be the Berkeley homeowners “ability to pay.” The median annual household income in Berkeley is about $44,500 and the median annual household income for Berkeley homeowners is about $100,000. Compare this to Marin County where the median household income is well over $200,000. In interesting analysis would be to compare, for high-taxing jurisdictions, the local tax burden with local income, the idea being that there should be a reasonable correspondence between the two. 

Remember that California has a steeply progressive state income tax, so higher-income Berkeleyans do get to pay a fair share, and a goodly portion of this state money does come back to the city and BUSD. 

Residents are entitled to a “taxpayer impact report” that would cover these matters, as well as the long term detriments of and the alternatives to more local taxation. Too, our City Council should be privy to and mindful of such information before deciding on ballot measures, rather than focusing on voter opinion surveys that are often designed to mislead respondents and elicit preordained positive responses. Four years ago we had a Citizens Budget Review Commission that made some sensible recommendations to Council on budget and tax matters. This commission is the only one of the 45 city commissions to ever be disbanded! 

For the last few years, even before the recent drastic downturn in the economy, City Manager Phil Kamlarz was strongly advocating for 0 percent compensation increases to city employees through 2010. Nevertheless, the city recently entered into city labor contracts providing approximately 15 percent increases over the next three to four years. Be assured that city employees are very fairly compensated, have good working conditions and total job security, and are blessed with a guaranteed retirement income and generous lifetime city subsidy for health insurance. 

Property taxation is disproportionately weighted toward homeowner as compared to commercial and industrial property owners. This is due to the ability of commercial/industrial property transfers to occur sub rosa and without a reassessment, by means of intercorporate maneuvers. A ballot measure to simply change the commercial/industrial tax rate for existing taxes could raise substantial dollars without hurting homeowners.  

Following are but a few examples out of many of poor city spending decisions, missed revenue opportunities, and bad community relations:  

• The expensive new city labor contracts. 

• $30M subsidy plus lost economic development opportunity in connection with the Downtown Oxford/Brower Center. This prime piece of city-owned land, valued at about $8M and perfect for retail/commercial development, was sold for $1 to the developer. 

• Failure to implement a workable condominium conversion scheme that would bring in millions of dollars in new real estate tax revenues and create housing ownership opportunities at a relatively affordable level. 

• Failure to achieve any viable economic development that would bring in millions of dollars in new sales tax revenues and generate vitality in our commercial areas. Sales tax revenues have fallen precipitously, and this decline started well before the current economic downturn.  

• In-your-face land use decisions promoting high-density unattractive development that negatively impacts neighboring homeowners and neighborhoods, and subsidizes developers with “free” zoning upgrades, cash, loans, and fee waivers. 

• Failure to properly manage sensitive policy decisions, such as the Marine Recruitment Center and the homeless outreach initiative, to minimize wasteful spending and the damage to the city’s reputation and economic development potential. 

• Construction of a failing and contaminated $800,000 skate park only six years ago, failure to timely pursue litigation against the property sellers and contractors, and the chutzpah to discuss a $2.2 million rebuild before litigation is completed. 

• Collusion with BUSD in its plans to demolish the existing Nationally-Landmarked and adaptively-reusable gym/warm water pool building in connection with a $45M scheme for all brand new facilities, to be paid for by local taxpayers. Many residents and design professionals are convinced that this National Landmark structure can and should be saved, renovated, and accommodated to most BUSD facility needs, and that this can be accomplished at far less than $45 million and paid for with outside funds available to National Landmarks along with the $3.2 million warm water bond measure already approved by Berkeley voters in 2000. 

Our city officials and all Berkeley residents, whether or not they pay real property taxes and whether or not they stand to directly benefit from the various tax measures, need to have and consider all of the facts and ramifications of increased local taxation at this difficult time.  

 

Barbara Gilbert is active in several Berkeley civic organizations and closely follows local government.