Homeowners to pay more for school bond

Slower growth in tax base results in rate bump for facilities bond

It will cost the average Palo Alto property owner an additional $10 a year to repay the $378 million bond that is upgrading school facilities across the city.

The news came in a report to the Palo Alto Board of Education Tuesday night.

The economic downturn has slowed the growth of the district's property tax base, resulting in a bump in the tax rate from $44.50 per $100,000 of assessed valuation to $45.60 per $100,000 of assessed valuation to cover the bond repayment cost.

The average assessed value of a single-family home in the school district is $831,000. Such a homeowner pays about $378.50 per year toward the school bond.

The $378 million "Strong Schools" bond, approved in June 2008 by nearly 78 percent of school district voters, is supporting current major construction projects at Gunn and Palo Alto high schools, Ohlone Elementary School, and planned construction at Fairmeadow Elementary School, all three of Palo Alto's middle schools and Duveneck Elementary School. Other upgrades are planned for the remaining elementary campuses.

In other school finance news, the school board was told Tuesday that the district could face mid-year cuts of up to $3.1 million if state revenue projections fall short.

The state Department of Finance will analyze tax receipts in December to determine whether mid-year cuts will become necessary, the school district's Chief Business Officer, Cathy Mak, said.

The maximum projected cut of $3.1 million amounts to about 2 percent of Palo Alto's $162.4 million school operating budget.

Palo Alto is somewhat buffered from the ups and downs of state crises because it is among the 10 percent of California school districts known as "basic aid" districts. Those districts draw almost all their revenue from local property tax rather than per-pupil allocations from the state.

But when state revenues fall short, basic aid districts are asked to take what are known as "fair share" cuts from the smaller percentage of state funds they receive.

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Posted by Read-'Em-And-Weep
a resident of Another Palo Alto neighborhood
on Aug 24, 2011 at 10:08 am

So much for the hooey we were fed by the Vote-Yes crowd about this bond not costing taxpayers any more money than they were paying under the Measure B tax collections. The School Board bought hook-line-and-sinker into the claims of the Bond Consultants (Royal Bank of Canada) that there would be a 7% increase yearly in the base assessed value of the District's homes and commercial property for the next three decades, and five percent during the forth decade after the bonds were sold.

There were no serious recessions considered in the model that claimed that as the old bonds (Measure B) were paid off, then the new bonds could be "slipped in" without any additional rate increases to the property holders.

While $10 is not a big deal, it's likely that we will be seeing a number of rate hikes in the coming years (given that Measure A was a 40-year bond issue). Keeping in mind that 7% a year increase in property values means a doubling of property values every 10 years, a failure to meet the expected 7% (or more) increase in property values means a significant shortfall in the collections needed to retire bonds based.

People need to remember that the Measure A bonds committed the property owners of the PAUSD (Palo Alto, Stanford homeowners and half of Los altos Hills) to repay $750M over the next forty years. (Most of the people who voted for this huge authorization in public tax liability will not even be alive in 40 years.)

Expect your property taxes to go up and up, based on the flawed models used by the PAUSD School Board during the Measure A campaign. Prop.13 imposes a 2% increase in the assessment every year. This means that people buying into the PAUSD at the $2M level are paying $20K a year now, and over the next forty years, their base assessment will double--meaning those properties will be paying $40K a year in base property taxes. Since the MEASURE B and MEASURE A taxes are "ad velorem"--that means the people on the upper end will be paying more than those on the lower end (or property value assessment). So, this $20K base (plus add-ons) will grow over time to perhaps $50K a year. That is a lot of money to pay for property taxes--particularly as people get into their twilight years. The implications are clear--in the next two generations Palo Alto will be too expensive for anyone other than the very wealthy, and renters, to buy into, and live through their twilight years.

It's a real shame people did not do their homework before voting Yes on this behemoth spending authorization.

Like this comment
Posted by Me Too
a resident of Midtown
on Aug 24, 2011 at 10:31 am

I think a weakness in your analysis is that the tax is based on assessed value, not market value. As houses turn over, they often go from quite low assessed value to market. My neighbor down the block just sold the house she has lived in for over 40 years - the assessed value will go up about 16x.

I'm not sure how the numbers shake out, but I do know that assessed value will rise even if market values stay flat, just due to the sale of older homes.

Like this comment
Posted by parent
a resident of Barron Park
on Aug 24, 2011 at 10:36 am

My children are no longer PAUSD students. I did my homework and voted YES. Our schools need renovation and bonds basically are the only source of funds. As to whether I'll be here in 40 years, well I hope I am.

Like this comment
Posted by Need Schools
a resident of Midtown
on Aug 24, 2011 at 5:10 pm

Students need adequate teachers, books, space, etc. etc.
Be thankful we have a good school district.
I agree with "parent" in Barron Park.

Posted by Name hidden
a resident of East Palo Alto

on Jun 5, 2017 at 10:43 pm

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?

Sorry, but further commenting on this topic has been closed.

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