In response to a reversal by Santa Clara County Counsel on its interpretation of a legal statute regarding parcel-tax exemptions and having missed the deadline to make any formal amendments itself, the Palo Alto school board Tuesday decided to reaffirm its superintendent's authority to make changes to the language of a new tax coming to voters in May.
Though the district's attorneys disagree with County Counsel's reading of the law that school districts must offer all, rather than a selection of, three optional tax exemptions, the board unanimously passed a resolution that buys the district more time to talk with County Counsel, along with wiggle room to potentially offer all three exemptions instead of one.
The tax, which the board approved in late January and if passed by voters would increase the amount residents pay to $758 per parcel, includes only one exemption -- for taxpayers who are 65 and older as of July 1 of this year. County Counsel informed the Palo Alto school district -- as well as the Campbell Elementary School District, which also has a mail-in ballot measure with a sole exemption for seniors going to voters in May -- last Thursday that including only one exemption and not all three offered in state law might be illegal. County Counsel assistants indicated to both school districts' legal representation, firm Lozano Smith, that this opinion would show up in the county's impartial analyses of the ballot measures, which are included in the pamphlet sent out to voters.
Until 2013, there were only two exemptions allowed: seniors and taxpayers who are receiving Supplemental Security Income (SSI) for a disability, regardless of age. Legislation passed in 2012 that went into effect Jan. 1, 2013, added a third exemption: taxpayers receiving Social Security Disability Income (SSDI) benefits, regardless of age, whose yearly income does not exceed 250 percent of the government's 2012 federal poverty guidelines. The statute reads that there can be an "exemption from those taxes for all of the following taxpayers"; with the word "all" now being the sticking point between County Counsel and the school district.
"We have understood that from the beginning to mean 'any or all,'" attorney Harold Freiman of Lozano Smith told the board at a special meeting Tuesday afternoon. "So you could have one; you could have two; you could have three. That is how it's been applied around the state."
Palo Alto Unified's existing parcel tax, which voters passed in 2010, also allowed for the sole senior exemption. Freiman said that since the third exemption was added in 2012, other school districts, both within and without Santa Clara County, have successfully passed parcel-tax measures with an exemption only for seniors, including Evergreen School District in San Jose and Emery Unified School District in Emeryville.
Freiman said his firm provided about 20 pages of legislative history to County Counsel that illustrate "clear as can be" that the intent is to provide school districts with more flexibility on exemptions, not less.
Freiman was seemingly surprised by County Counsel's new interpretation of the word "all," though in limited talks since last Thursday County Counsel now has come to agree that the "legislative intent of the bill was to allow a school district to pick any one of the three or up to all of the three exemptions." Counsel will still write in its impartial analysis that the legal question exists, however, Freiman said.
He acknowledged this as an improvement, though marginal.
"It's gone from saying 'may be illegal' to 'there is a legal question,'" Freiman said.
Freiman offered three options to the board on Tuesday: do nothing, and let the impartial analysis be published with a statement that there's an open question about the single exemption; file a lawsuit against the county; or, in a move more symbolic than action-driven, pass a resolution to reaffirm the superintendent's authority to make the change from one to three exemptions.
Superintendent Max McGee could make this change under the interpretation that when the board approved one exemption, they approved all of them.
"The analogy I've been using in my own head -- if you order a turkey sandwich, you usually don't say, 'I want it on bread.' You say, 'I want turkey on my sandwich,' and with that, necessarily, comes bread," Freiman said. "If it were the case you'd have to do all three (exemptions), if it's determined along the way, arguably you've already decided that because you decided you wanted the turkey, and with it comes the two slices of bread -- the SSI and the SSDI."
Assistant County Counsel Steve Mitra told the Weekly that the district has 10 days, starting Wednesday, Feb. 18, to challenge his office's impartial analysis and have a judge rule on the interpretation of the statute.
"If they feel like that position is incorrect, it's up to them to challenge it," he said. "We don't have a stake in the outcome other than to be accurate."
District Chief Budget Officer Cathy Mak told the board Tuesday that there are about 2,000 seniors in Palo Alto who take advantage of the exemption. There is not data available on the number of taxpayers who might apply for the SSI or SSDI exemptions, but district consultant Charles Heath said he's seen fewer than a dozen applications for the disability-related exemption in other school districts that aren't in a city as well off socio-economically as Palo Alto.
Mak said adding the two exemptions would have a "minimal" fiscal impact on district revenue.
The resolution the board passed is more of a "back up" to have something in writing while the district's attorney continues talks with County Counsel, Freiman said.
"We're talking about issues that are unprecedented, so it's just belt and suspenders," he said.
Board President Melissa Baten Caswell said as talks with County Counsel continue and other pieces might have to be adjusted, she wanted to formalize the superintendent's authority to make changes.
The board also also added a clause to the resolution, as suggested by member Ken Dauber, to make clear that "potentially adding the disability exemptions would not in the board's view constitute a significant change to the parcel tax measure."
The proposed parcel tax, now dubbed Measure A, would begin on July 1 if passed and last six years with 2-percent annual increases. It would raise the $638 per-parcel tax that voters now pay by $120 to $758 per parcel. (Voters approved in 2010 under Measure A a $589 parcel tax, which included automatic annual increases of 2 percent.) The proposed $120 increase would generate an additional $2.3 million in parcel-tax revenue, initially providing $14.7 million in total revenue in the 2015-16 year.
