News


Guest Opinion: Closing the Prop 13 corporate loophole

Make It Fair California aims to bring $9 billion to local schools, services

In the same decade that Don Hoefler's column in Electronic News officially renamed Santa Clara County "Silicon Valley," another historic event happened in California: A taxpayer revolt carried Proposition 13 with a 64 percent majority, freezing property-tax rates to protect homeowners in reaction to the state's 1970s booming real estate market and escalating property tax burden.

Why are these two events linked? Because the final transition Santa Clara County made from agriculture, canneries and manufacturing to high tech innovation, research and industry has created some of the most desirable and expensive commercial property on the planet. Much of this property is owned or held by corporations valued well below market -- some at only 2 percent increases since 1976 -- creating an unfair tax burden on residential homeowners to fund public services.


Nancy Shepherd
When Prop 13 passed in 1978, most voters were thinking about their homes, but Prop 13 applies to all property, even buildings owned by large corporations. All is taxed equally at a fixed 1 percent of assessed value, with annual 2 percent increases. While people move and sell their homes, commercial property changes hands less frequently therefore avoiding re-assessment triggers.

Since Prop 13 passed, the property-tax obligation in virtually every California county has shifted from commercial to residential land owners. The Santa Clara County Tax Assessor reports that property valuation rolls in 1978 were equally split between residential and commercial property owners. Now, residential homeowners shoulder twice the burden of non-residential property, primarily because of a loophole that avoids re-assessment if less than 50 percent of ownership changes hands. In fact, corporate merges and take overs are not always considered a "sale" or "ownership change" as defined by Prop 13, and therefore real estate is not re-valued.

In a city like Palo Alto, with a 3-to-1 imbalance of jobs to housing units, it means that corporations do not pay their fair share toward city services like police, fire, parks and infrastructure or toward educating the next generation workforce.

Polling by the nonprofit, nonpartisan Public Policy Institute of California finds solid voter support to fix the policy that undervalues corporate property indefinitely, keeping an estimated $9 billion of much needed revenues annually from the schools, community colleges, cities and counties of California.

It is time to close the loophole.

In 2014 Palo Alto joined hundreds of other cities and school districts that endorsed the Evolve California campaign to correct the Prop 13 corporate loophole. On May 7th the "Make It Fair California" initiative launched in Sacramento. The Evolve website illustrates the issue of "Your Castle" v. "Sleeping Beauty's Castle." Property taxes owed by an average California family are about 40 cents per square foot, Disneyland pays a nickel; the average family income in California is about $62,000; Disney Corporate income is more than $42 billion.

On Wednesday, June 10, SCA5 was introduced to the California Senate by Loni Hancock of Berkeley and Holly Mitchell of Los Angeles that initiates the legislative process to close the corporate loopholes on non-residential commercial and industrial property while protecting homeowners, renters and small businesses from any change. The estimated new $9 billion in revenues will have accountability provisions to ensure it is spent on schools and local services we all depend on.

Correcting this part of Prop 13 is welcome news to me because I have seen firsthand the impact on our schools. Twenty years ago Palo Alto public schools faced the reality of long-term limited school funding based on Prop 13's mechanical taxing formula. District reserves and revenues from site sales had run out, and a strategic long-term plan forced cuts to classroom programs. In 1993, Superintendent Jim Brown asked each school PTA to work closely with their principal to identify budget cuts and choose which classroom programs to terminate. I was a PTA President at Walter Hays Elementary School at the time, and this meant cutting into the meat of student curricula. PTA was raising funds but not enough to save these programs, which required reliable and consistent revenues.

The PTA mission is to better the lives of children through advocacy. It was common for PTA to fund programs and augment school needs but not to sustain programs or have the district rely on voluntary funds. By the early 1990s, Walter Hays had a rigorous fundraising effort to augment site funds by about $40,000 to sustain "enrichment programs" like classroom aides, Junior Museum Science and art. Duveneck raised PTA funds to hire a tenured teacher. The era of fundraising Band-Aids ended, and the journey to reorganize into district-wide fundraising began.

Today, Partners in Education raises $5 million to sustain site-identified enrichment programs at each school. But this is not enough to fix the consequences of mechanical taxation formulas regulated by Prop 13.

A better re-assessment trigger for non-residential property is a simple fix but needs a 67 percent majority in the legislature. It will be a game changer for many cities, school districts and counties across California -- including Palo Alto, which is corporate property rich. It will wake up the Sleeping Beauty Castles and infuse public education and city services with billions annually -- and Make It Fairer in California.

The "Make It Fair California" campaign is limited to correcting non-residential corporate loopholes. More can be found at evolve-ca.org and makeitfairca.com. No other state in America budgets for public services using fixed property-tax rates. For a summary of Prop 13, refer to Santa Clara County Assessor's Annual Report at sccassessor.org. The 2004 documentary by John Merrow "From First to Worst" illustrates the change to California public education and can be found on YouTube.

Nancy Shepherd served on Palo Alto City Council 2010-2014, led the change in PAUSD district wide fundraising from 1994-2001, is a retired commercial real estate accountant, and serves on the advisory board for the Evolve campaign. She can be emailed at nlshep@pacbell.net.

Comments

23 people like this
Posted by common sense
a resident of Midtown
on Jun 12, 2015 at 6:44 am

This guest opinion has so many illogical arguments and half truths. It's the same old song of wanting more money so that politicians have more money to play with. See the Weekly editorial this week on the school board; part of the Weekly editorial is how the school board uses the public money to pay lawyers to fight AGAINST the Civil Rights case for Special Ed kids. And this is what Nancy wants to change prop 13 for?

But I would pose this to all who feel that businesses don't pay enough:

Just change the corporate income tax rate rather than try messing around with Prop 13. S-Corporations (typically small businesses) pay 1.5%, C-Corporations 8.84%, Banks & Financial C-Corporations 10.84%. If you want to make big corporations pa


26 people like this
Posted by Mike-Crescent Park
a resident of Crescent Park
on Jun 12, 2015 at 9:20 am

Mike-Crescent Park is a registered user.

The commercial part of Prop 13 isn't a loophole. It's the law.

It's in place for the same reason as the homeowners clause- to keep property taxes from rising unfairly because of market forces.

Politicians just want more money to spend. There is never enough and this looks to them like something they can rile uninformed voters against. Greedy corporate owners.

Increased taxes on commercial real estate will just get passed along to consumers. The very people that are being counted upon to overturn 13.


14 people like this
Posted by AlexDeLarge
a resident of Midtown
on Jun 12, 2015 at 10:00 am

Nope.


31 people like this
Posted by curmudgeon
a resident of Downtown North
on Jun 12, 2015 at 10:31 am

"Increased taxes on commercial real estate will just get passed along to consumers"

You mean Google would raise its web search charge if its taxes went up?

Savvy people know the purpose of P13 was to shift the corporate property tax burden to homeowners. Jarvis bet the rubes would buy it, and he was sooo right. Many still haven't figured it out.


48 people like this
Posted by GoneOnTooLong
a resident of Barron Park
on Jun 12, 2015 at 11:24 am

So much wrong with this article.

Reform government spending.
Eliminate the waste in the political system.

As a poster above said:
"the school board uses the public money to pay lawyers to fight AGAINST the Civil Rights case for Special Ed kids"

... and now they want to hire a lawyer. The waste in the system is just shameful.


22 people like this
Posted by Robert
a resident of another community
on Jun 12, 2015 at 12:49 pm

"It's in place for the same reason as the homeowners clause- to keep property taxes from rising unfairly because of market forces."

Well be clear, it was to insulate themselves from these "unfair market forces", the next generation of businesses or homeowners be damned...


75 people like this
Posted by The Counties got Homes for Free
a resident of Esther Clark Park
on Jun 12, 2015 at 1:57 pm

I was still a child when Prop 13 was enacted, but I do remember this: MANY, MANY retired and elderly people lost their homes because the value of their homes rose so fast their fixed incomes could not keep up. Some had all
But stopped eating to pay their property taxes.

But what stands out most in my memory was that, although there were young homeowners whose incomes couldn't handle a mortgage payment + rapidly increasing property taxes, most if not all of the older folks lost homes they had PAID FOR IN FULL.

It was criminal that counties were foreclosing on homes for the price of six months' property tax, then selling these homes at outrageous profits that the assessors' offices kept! Those poor homeless elderly people never got their money or their home back after Prop 13 passed!


40 people like this
Posted by JarGan
a resident of East Palo Alto
on Jun 12, 2015 at 6:22 pm

I voted for Prop 13 and now regret it. It was ill structured and ill conceived and now we have a number of unintended consequences. First the comment that the county foreclosed on homes with delinquent taxes is just false. Complete nonsense. The fact is that taxes were increasing as rapidly as home prices in the 70's and people wanted to put a stop to it. Now 40 years later we see that the economics have shifted the tax burden to new purchasers and the disparity among home owners is acute. We see many instances where a neighbor pays less than one tenth of the property taxes paid by their neighbor for a similar house. Many elderly people who chose to remain in their houses do so at the expense of their neighbors. These people would ordinarily have sold their houses and moved to a less isolating residence that does not require the use of a car. That would be safer for everyone and would free up single occupant houses for families. That might help alleviate the acute housing shortage. Something to think about?


27 people like this
Posted by Compromise
a resident of Another Palo Alto neighborhood
on Jun 12, 2015 at 7:18 pm

I do not agree that retired people on fixed incomes should be forced to sell their homes because of rising property taxes. Prop 13 has some shortcomings, and maybe it's time to address that, but simply expecting people on a fixed income to give up their homes and move is unfair.

One thing that might help is reassessing properties when they are "sold" or given to children and grandchildren. When a property is passed down directly, it retains the original prop 13 tax valuation, which allows another full generation to not pay their share. Even if they met halfway between the prop 13 tax and the current, it would be more fair.


25 people like this
Posted by CrescentParkAnon.
a resident of Crescent Park
on Jun 12, 2015 at 8:23 pm

Common Sense:
> It's the same old song of wanting more money so that politicians have more money to play with.

Play with, huh?

Funny how the policians want more money when we have huge challenges to face
like a major drought and maybe a long extended period of climate change.

Like a state infrastruture that needs huge investments to maintain itself and more
investment if we want to avoid totally destroying this area with over development.

Gosh, how evil of those old tricky politicians.

Why doesn't the problem of playing with money ever get directed at some of the
corporations that play with cities and states to reduce their tax debt to nothing
causing disinvestment and decay in local areas? There have been plenty of
bad decisions and playing around with other people's money by the private
sector ... let's hear you rant about that for a while, just to be balanced.


10 people like this
Posted by JarGan
a resident of East Palo Alto
on Jun 12, 2015 at 9:57 pm

Compromise your suggestion is a move in the right direction but I don't think that it goes far enough. what we have here is a subsidy in the form of lower taxes for the people who have been here a long time. It is blatantly unfair and combined with the ability of those over 65 to opt out of paying school bond assessments it creates a special class that has voted itself a perpetual financial inequality. Many of these people don't want to pay taxes for anything, period. New roads, infrastructure, schools, transit, all the things that make this place livable. They feel that they are entitled to get a free ride simply because they have been here a long time They have such distrust of the people and policy makers that their solution to everything is to say NO! That may be fine for them because they don't really commute on the overcrowded roads or see the challenges faced by our schools dealing with children of the working poor who are in our school system. For an example of this attitude see comments by Mike in Crescent Park. I bet I pay more property taxes here in EPA for my $650K home (assessed value) than he does for his $4 Million home in Crescent Park. I don't mean to be unfair to another poster but I bet my numbers are not too far off


30 people like this
Posted by Compromise
a resident of Another Palo Alto neighborhood
on Jun 12, 2015 at 11:24 pm

JarGan,

I understand your perspective, and thank you for disagreeing respectfully. If only all posters on this forum were as polite we could have much healthier discussion/debate!

I do still disagree though, about older people on fixed incomes. Real estate is an investment, but it is also a home when it is a primary residence. Many longtime Palo Altans are not rich and do not have high incomes, but they have their homes that they worked hard for, even if in a different time and economic circumstance that we cannot comprehend. I don't think people should be forced to sell their homes and move just because they got old and their fixed incomes cannot keep up with crazily rising property values and economy. If we allow that to happen, we will find ourselves steadily moving our seniors farther and farther away, and creating "senior slums." We need the diversity the seniors provide as much as we need ethnic and socio-economic diversity.

With respect to the school bonds, I would not force seniors to pay, but neither would I include them in the vote. It is a farce that Measure A allowed all residents to vote when many (~20%) would not have to pay, particularly given the fact that seniors turn out in higher numbers in special elections because they have the time! I blame the government though, not the seniors.

You mention having voted for prop 13, which means you are at least 55 years old, so I'm surprised you are not more supportive of older residents who do not want to be taxed out of their homes. I think some properties have appreciated at greater rates than some others, so while some people's property taxes may almost keep pace with their retirement income, others are blown out.

I pray you are able to stay in your home as long as you wish!


23 people like this
Posted by common sense
a resident of Midtown
on Jun 13, 2015 at 6:19 am

CrescentParkAnon writes "... a state infrastruture that needs huge investments to maintain itself and more investment if we want to avoid totally destroying this area with over development."

For example the politicians deciding to spend $100 billion on the High Speed Rail, rather than spend on maintaining our current infrastructure?



51 people like this
Posted by GoneOnTooLong
a resident of Barron Park
on Jun 13, 2015 at 7:48 am

I think many of these posts just show how backwards and wrong the property tax is in the first place.

While paying a "sales tax" based upon the cost of a purchase makes sense to me - since it is an informed decision by the buyer based upon a one time purchase decision. I believe that paying ever increasing taxes every year based upon a paper value of the property makes no sense and has no basis in fairness.

One poster said: "I bet I pay more property taxes here in EPA for my $650K home (assessed value) than he does for his $4 Million home in Crescent Park."

If folks want fairness and paying ones fair share, then the taxation of property owners should be based upon use of city state and county resources (utilities consumed, city and county services accessed/used, number of residents in the unit, registered cars on the property using the roads, etc.). The home value is not a good indicator of the owners/residents impact on city and county resources at all.

Why should a single male (one car) living in a $10M house pay five times more taxes than a house filled with ten people (three adults, seven kids in PA schools, four cars, pets, ten time the utility consumption, etc) that only cost $2M ?

The system is wrong.
It should be changed to tax the consumption of services and consumption of resources of the occupants/owners, not on the paper value of the land and box that they own (as it currently is).

Lastly, Parcel taxes and special assessments have pretty much negated the Prop 13 2% increase cap. My property tax bill goes up 5 to 7% a year (that's faster than my income) and so, I am being priced out of my home even with Prop 13 in place.

Abolish the annual Property tax.


22 people like this
Posted by Crescent Park Dad
a resident of Crescent Park
on Jun 13, 2015 at 7:48 am

What is lost in the long-term homeowner vs new homeowner argument is that it all evens out over time. The complaint about the property taxes on newly purchased home...the long-term homeowner went through the same thing 30 years ago. The new homeowners will receive the same benefits over time.

There should be some adjustments. Fix the commercial property exemption and eliminate the generational exemption. I would allow the generational exemption for disabled children of the original homeowner.


29 people like this
Posted by mauricio
a resident of Embarcadero Oaks/Leland
on Jun 13, 2015 at 10:34 am

mauricio is a registered user.

The ideologues behind Prop. 13 were libertarians, yet they sought to "keep property taxes from rising unfairly because of market forces." In my naïveté, I assumed libstrarians believed that only markets forces should be the arbitrators of any economic and financial activity.

Prop. 13 was of course a ruse to shift the tax burden from corporations to future (typically young) home owners and business. Prop 13 is a startling example of our very warped and immoral crony capitalism system:socialism for corporatiesons, capitalism for the rest.


116 people like this
Posted by Even more taxes
a resident of another community
on Jun 13, 2015 at 11:02 am

Any changes to Prop 13 that *increase* taxes should accompany changes to income and sales taxes that *decrease* taxes. *That* is "fairness", and it's noteworthy that people who are proponents of changing Prop 13 always conveniently ignore the fact that income and sales tax rates are higher than they were in 1978. They want to increase property taxes, but want to keep our high sales and income taxes and bonds exactly where they are...at a minimum.

California has the 4th-highest tax burden for citizens in 1978. It has the 4th-highest now. Web Link The state is nowhere near starving for tax revenue.

I actually would consider modifications to Prop 13, but any increases in property taxes would have to include the following:

1) A permanent reduction in sales taxes;
2) A permanent reduction in income taxes;
3) The elimination of all school bonds currently being paid by homeowners (this one should be a no-brainer...right? With proposed changes to Prop 13, schools have increased funding so these bonds are no longer necessary ... right?).
4) Restoration of a 66% voter approval for all future bonds. After all, property taxes have gone up, so bonds should be less necessary and be needed less often...right?

If proponents of increasing property taxes are promoting "fairness", then reducing sales & income taxes and eliminating the current school bonds is a "fair" adjustment to the tax structure.


42 people like this
Posted by My take
a resident of Adobe-Meadow
on Jun 13, 2015 at 12:22 pm

I do not understand why the conversation is mostly about homeowners when the real scandal is how Prop. 13 has been mostly benefiting commercial real estate owners. The tax burden has increasingly shifted from the latter to the former since Prop. 13.

Let us not pit homeowner vs homeowner. The reform we really need is a reform to how Prop. 13 applies to commercial real estate.


85 people like this
Posted by Jesse
a resident of Ventura
on Jun 13, 2015 at 1:21 pm

"The reform we really need is a reform to how Prop. 13 applies to commercial real estate.

No. Its like you let them tinker with it and next you know they kill it. Like guns, you let them ban some kind bullets and then they take all guns. Let them take some of 13 they will take it all.


31 people like this
Posted by Make It Fair California is Right
a resident of Duveneck/St. Francis
on Jun 13, 2015 at 3:13 pm

I agree completely with Ms. Shepherd's OpEd and with the Make It Fair California Campaign. The fact that before Prop 13, homeowners paid half of all property taxes, but now they pay two-thirds of all property taxes says it all. Commercial property should not be subject to Prop 13. Making that change would reverse the increasing percentage of property tax burden borne by homeowners and also reduce California's dependence on other forms of tax revenue.


78 people like this
Posted by Read my lips, NNT
a resident of Menlo Park
on Jun 13, 2015 at 5:02 pm

I completely agree with "Even more taxes, a resident of another community".

I potentially support adjusting Prop 13 moderately for commercial real estate, but only if it comes with permanently lower income taxes and sales taxes, and guarantees that Prop 13 cannot be modified further. Any change should be tax revenue neutral for state, counties and cities.

I sincerely doubt Ms. Shepherd and the others promoting this are interested in a tax neutral solution.


14 people like this
Posted by CrescentParkAnon.
a resident of Crescent Park
on Jun 13, 2015 at 7:15 pm

This quote bears repeating

>> before Prop 13, homeowners paid half of all property taxes, but now they pay two-thirds of all property taxes says it all.

This is the problem, stick to it, solve it, then move on. It is not the whole idea of Prop. 13 that is the problem, just this one aspect.


9 people like this
Posted by mauricio
a resident of Embarcadero Oaks/Leland
on Jun 13, 2015 at 7:16 pm

mauricio is a registered user.

" Like guns, you let them ban some kind bullets and then they take all guns." Not going to happen, but what a great idea.


7 people like this
Posted by Gunn Mum
a resident of Greater Miranda
on Jun 13, 2015 at 8:50 pm

How long has Nancy Shepherd owned her home and what is the disparity of homeowner taxes on her block? Maybe instead of the mail in ballot for school parcel tax some PIE members and long time home owners should have looked at the hypocrisy of their tax rates. Do they consider their neighbors who have bought their homes in the higher market and are paying 5 fold or more in property tax?

I challenge those who have household income over 200k to augment their PIE donations to match up to the amount of tax they would pay if they bought their home at present the market value. I do not have any statistics but assume this would be a large influx of benefit to our schools..

I would like to see Prop 13 rescinded.


11 people like this
Posted by Resident
a resident of Crescent Park
on Jun 13, 2015 at 10:41 pm

We all should know that "Make It Fair California aims to bring $9 billion to local schools, services", really means $9 billion more to the civil servant trough.


18 people like this
Posted by Mike-Crescent Park
a resident of Crescent Park
on Jun 14, 2015 at 12:00 am

Mike-Crescent Park is a registered user.

According to the Center for Governmental Analysis, between fiscal years 2000 and 2005 property tax revenue has increased 22.11%, while personal income per capita has increased 13.80% and general per capita revenue 21.93%.

If you understand numbers this tells you that with 13 in place property tax revenue STILL increased MORE than individuals' income and at a higher rate than aggregate non property tax revenue. So it still rakes in big money at a higher rate than growth of personal income despite that anti-13 supporters will tell you it's starving government.

The example of Google not passing through costs is silly. Google is a business like any other- free stuff for you is paid for by others. Bottom line, search is paid for by advertisers. There is no free lunch. And the vast majority of commercial real estate is not owned by Google. It's businesses that will have to pass on increased expenses or die. We will all pay but since you will pay a little every transaction most will not notice until after a year or two and it's noticeable that your spending power is diminished.

Figure out a way to kill 13 and generate billions in extra California tax dollars and an early result will be our state will not have two part time drivers for intoxicated legislators- each have their own full time driver.


24 people like this
Posted by Bob
a resident of Palo Verde
on Jun 14, 2015 at 7:02 am

I support fixing Prop 13 to fix the commercial property tax problem.

The way I think about it is that for residential owners, because people don't live forever t hey eventually sell, but commercial entities live forever. So the commercial property values are never reset to market rates like what happens for residential property.

This is very broken and needs to be fixed.


7 people like this
Posted by Michael O.
a resident of Gunn High School
on Jun 14, 2015 at 10:18 am

Michael O. is a registered user.

Reading this comments remind me that Prop 13 was and is a completely insane way of taxing real estate (both for residential and commercial properties -- not sure why people are hung up on the difference) and that people sound psychotic when discussing it.


2 people like this
Posted by Wayne Martin
a resident of Fairmeadow
on Jun 14, 2015 at 10:50 am


The following is a paper produced for the California Business Alliance back in 2008, that attempts to analyze what might happen if the voters were to try to dismantle Prop.13--first by allowing higher corporate tax rates, and then by attacking the residential protections at a later time--

The Economic Effects of California Adopting Slip Property Tax Rolls--
Web Link

Given the recent events affecting California businesses--$15/hour minimum wage, higher water costs, reduced availability of water, higher utility costs in general, the ever increasing number of Federal and State regulations concerning just about everyting that businesses do--this paper's analysis, and conclusions, are no doubt dated, and need to be reconsidered.

> Reading this comments remind me that Prop 13 was and is a completely
> insane way of taxing real estate

The paper provides a quick background to property taxation here in California--which might not fully offset comments like this one, but at least will demonstrate that the whole area of property taxation is poorly understood by many people.



10 people like this
Posted by Wayne Martin
a resident of Fairmeadow
on Jun 14, 2015 at 11:24 am

> Since Prop 13 passed, the property-tax obligation in virtually every California county
> has shifted from commercial to residential land owners.

> The Santa Clara County Tax Assessor reports that property
> valuation rolls in 1978 were equally split between residential
> and commercial property owners.

In the 1970s, housing prices were a lot lower than they are today. Homes here in Palo Alto that sell for $1M to $2M today sold for $100K, or less, at the time. Also, since 1978, a lot of homes have been built, whereas business development is restricted to business zones.

> Now, residential homeowners shoulder twice the burden of
> non-residential property, primarily because of a loophole that
> avoids re-assessment if less than 50 percent of ownership
> changes hands.

Without actual real estate transaction/assessment data from the Assessor’s Office—claims like this one are mere conjecture. It’s a shame that so-called “community leaders” can make these sorts of statements in public, and not be obligated to prove the truth of their words.


3 people like this
Posted by Robert
a resident of another community
on Jun 14, 2015 at 12:21 pm

What I find most interesting about these discussions is how theres no referring to those relying on Prop 13 tax rates as "entitled" and no suggestion that if they can't afford to pay market rates they should just move to Stockton or Detriot.


4 people like this
Posted by Wayne Martin
a resident of Fairmeadow
on Jun 14, 2015 at 12:45 pm

The LA Times is doing a series on San Bernardino at moment. The first article outlines the City’s problems, but does not identify Prop.13 as one of the main reasons for the City’s demise—

San Bernardino/Broke City:
Web Link

As the economy unspooled, the police and fire unions kept shoveling money into council members’ campaigns. In 2008, over Morris’ objections, the council gave them a generous gift. Employees of the Police and Fire Departments could retire at 50 years old and their pensions would give them 3% of their final pay for every year they had work

A fire battalion chief making $148,000, could retire at that age and collect $133,000 a year for life — with increases for cost of living.

By 2012 the city was spending 72% of its general fund on the Police and Fire Departments, mostly on salaries and pensions — compared to Los Angeles, which spends 59% of its general fund on those services. More than half the sworn fire personnel earn more than $150,000 a year according to city records.
---

Notice that high labor costs, driven in large part by Police and Fire Department (unions) are called out as a large part of the City’s inability to keep itself afloat.


4 people like this
Posted by common sense
a resident of Midtown
on Jun 14, 2015 at 1:08 pm

The US census says the population of Santa Clara County increased from around 1.2+ million in 1980 to 1.7+ million in 2010. The number of housing units had a similar growth. The land for the residential units came from conversion of non-residential land.

More land for residential use, less land for non-residential use means a larger percentage of taxes from residential properties.


2 people like this
Posted by Robert
a resident of another community
on Jun 14, 2015 at 1:30 pm

@common sense

That implies that those new residents came or stuck around as a result of new housing being built. Sorry, but you (and unfortunately so many others) have it backwards.


6 people like this
Posted by Curmudgeon
a resident of Downtown North
on Jun 14, 2015 at 1:46 pm

"As the economy unspooled, the police and fire unions kept shoveling money into council members' campaigns. In 2008, over Morris' objections, the council gave them a generous gift."

Well-targeted legalized bribes come through again. Those council wannabes took the money with their eyes open. In addition to listening to what candidates say, voters need to consider who is paying their bills.


6 people like this
Posted by darrel
a resident of Midtown
on Jun 14, 2015 at 4:15 pm

what's really unfair is that people who bought their homes here 30 years ago paid a LOT less than they would pay for the same house today.

Fairness dictates that every few years there should be a new appraisal on their homes. They should be required to pay the difference in the price they paid and that of the new appraisal. Half of that payment should go to government and the other half to the original seller to help address this terrible wrong. Now that's economic justice!!


4 people like this
Posted by darrel
a resident of Midtown
on Jun 14, 2015 at 4:30 pm

Robert-"entitlement" requires that some people are treated differently than others and can rely upon its continuation-otherwise there is no entitlement.

Prop 13 treats everyone the same. When you buy a property the real estate tax clock increases your valuation 2% each year. You know what you are going to pay and I know what I must pay. If you don't like your projected annual tax do not buy the property.

Many of these people whose real estate taxes are not high enough to suit you have been paying them for 30, 40 and 50 years. They have paid in a cumulative total much more than you likely ever will. And many of them have provided community services through work in PTA, coaching and other volunteer activities for years. They have built equity that will take you a very long time to match. Read the obits of these old folks to see what they did for this community on top of paying taxes.


3 people like this
Posted by musical
a resident of Palo Verde
on Jun 14, 2015 at 5:50 pm

Money the government gives me is an "entitlement".

Money the government lets me keep is a "loophole".


10 people like this
Posted by Robert
a resident of another community
on Jun 14, 2015 at 6:27 pm

Darrel, basically all you're saying is "they're old so they deserve it". Many of us pay more property taxes in a single year than they will in their entire lifetimes. Your interpretation would only make sense of home prices rose in a linear fashion.


Like this comment
Posted by musical
a resident of Palo Verde
on Jun 14, 2015 at 6:53 pm

@Robert, don't forget that $500 in 1980 is $25,000 today.


4 people like this
Posted by Robert
a resident of another community
on Jun 14, 2015 at 7:02 pm

@musical

Well BLM puts that $500 to less than $1500 today, so you're off by an order of magnitude. And I highly doubt the price increase of homes in the past few years is any way related to inflation.


Like this comment
Posted by musical
a resident of Palo Verde
on Jun 14, 2015 at 7:08 pm

Well, that's what $500 in my IRA has done since 1980, just in S&P 500, dividends reinvested.


5 people like this
Posted by competition
a resident of Downtown North
on Jun 14, 2015 at 7:34 pm

One important aspect of this relates to business competition. If you're an old stodgy business that's been around for a long time, you pay way less in property taxes than a brand new and innovative one. We're essentially subsidizing and entrenching the old at the expense of the new. That's really problematic since new businesses, no matter how awesome their ideas are, already have an uphill climb to get the name recognition that they need to succeed. Understanding that, I don't see how a place that prides itself on innovation can NOT support fixing Prop 13.


4 people like this
Posted by more info
a resident of Green Acres
on Jun 14, 2015 at 7:41 pm

I came across this a while ago and thought it was a really interesting read on Prop 13: Web Link


2 people like this
Posted by Steve T.
a resident of Barron Park
on Jun 14, 2015 at 10:08 pm

@musical, generally people consider inflation or purchasing power parity to be the way to compensate for change in the value of money over time. So I agree with Robert. But I alsdo don't see how your investments in just S&P 500 could have returned 500x over the last 30 years. As it happens, there's an easy way to check, and that shows a 10.5x return, in nominal dollars over this time. Web Link


1 person likes this
Posted by musical
a resident of Palo Verde
on Jun 14, 2015 at 10:41 pm

@Steve, actually my returns were more erratic, so I did use the calculator you linked, and see your 10.5x. But I entered 1980 for 35 years, and used the "dividends reinvested" box, which says 4885%. (Starting and ending month defaulted to May.) So that's the 49x gain. ($500 becomes $25,000.)

That's the "time value of money" as I understand it, what money can earn over a period of time, but I'm no economist.

More to the point, for anyone who scraped together $50,000 to buy a house in 1980, $500 was as hard a tax to pay as $25,000 is to someone who can scrape up $2.5M today.


2 people like this
Posted by HR
a resident of Leland Manor/Garland Drive
on Jun 14, 2015 at 11:43 pm

In Palo Alto, how much property is owned by local corporations? I'm sure HP owns a bit and my guess is that a very large percentage is owned by Stanford. I always thought most of the corporations leased their sites? My guess is that we have lots of commercial leases out there with private "citizens" or "investors" owning the property they lease. So it's not just the corporations who are getting tax breaks. It's all commercial property owners.


5 people like this
Posted by SteveU
a resident of Barron Park
on Jun 15, 2015 at 8:25 am

SteveU is a registered user.

What is broken in Prop 13 is that it allows charging Market Rate on rental property while keeping the base assessment.

What I hear here, is those that made good investments 30 years ago should give them up because some other folk were not born yet or made bad choices.
I watched my moms retired friends scrimp because The County Tax Assessor said 'If you Sold Today...' and had doubled the Tax. They intended to last out their lives there. They did.
Home canning done to save money went bad...

Prop 13 may be broken, but I do not trust that any 'fixes' done will not be riddled with loopholes in the Governments favor.

Re-assessment should be done when some activity ESTABLISHES a new value. Rental rates, removing Equity above the Original base.


2 people like this
Posted by Neilson Buchanan
a resident of Downtown North
on Jun 15, 2015 at 8:58 am

Thanks, Nancy, for laying out an issue. The range of opinion in Palo Alto alone tells me that third rail of politics is very alive for Prop 13. Current distrust in all levels of government does not bode well for any change in Prop 13. Commercial property owners alone have the economic and political power to obscure any voter cohesion if it actually exists. The logical step is to fully explain the 10 year projections for school and city revenues and get general consensus of who pays what. There is no common understanding or sense of community re Prop 13.

PS I predict that many R1 and condo owners in the Bay Area will take advantage of the generational skip provisions and we will see slow, steady rise in rental properties...thus changing the sociology of neighborhoods...not necessarily negatively but change nevertheless. Rental ROI on long held R1 and condo properties is clear incentive to inherit and hold. Simple, imponderable economics at this point in time.


11 people like this
Posted by Wayne Martin
a resident of Fairmeadow
on Jun 15, 2015 at 10:17 am

A number of comments from posters who probably are under forty years of age cause me to want to remind everyone that that salaries were much lower in past, than today. The following lists the average househould median income from 1067 until today:

Web Link

People who are old enough to have lived and worked in the 1950s and 1960s bought their homes, put their kids through school, and paid taxes from these small sources of revenue.

Suggestions that homes should be reassessed at market rates frequently could well see some folks faced with yearly tax bills that exceeeded what they paid for their hommes. Prop.113--regardless of any "flaws" that some might see--provides a guarantee that older people will not be driven out of their homes as prosperity unknown in the past brings vast wealth to younger people.


2 people like this
Posted by Chris
a resident of University South
on Jun 15, 2015 at 10:46 am

The 2% annual increase is artificially low. Since it will be next to impossible to overturn the Prop 13 concept, change the annual increase to 4% and let seniors 65+ defer any increase over 2%.


11 people like this
Posted by Wayne Martin
a resident of Fairmeadow
on Jun 15, 2015 at 11:00 am

For the record—

If someone buys a house in California for $1M today, and lives in that house for up to forty years, the following are the base taxes that will be paid on that property per Prop.13—

Years...Taxes
10......$109,497
20......$133,476
20......$162,707
40......$198,339
Total...$604,020

Other taxes, such as parcel taxes can not be predicted, but will increase the total tax obligation.

This begs the question—how much property tax should a home owner be expected to pay for a $1M home over forty years?


8 people like this
Posted by 38 year resident
a resident of Old Palo Alto
on Jun 15, 2015 at 11:06 am

Within the last few days the California legislature presented their counter to Gov. Brown's budget for the year. They want to spend more than Brown proposed because of an apparent surplus of funds from income taxes. Typical of liberals in charge. Approximately 74% of the state's income comes from individual income taxes. They claim they have a surplus so why try to get more? Maybe because the governor wants to build a high speed rail system to nowhere while water management should be the first priority. I could go on and on but I won't. California's governing body will continue to try to squeeze every nickel they can from everyone they can to fund many useless projects. It's the progressive liberal way. That's how they roll.


7 people like this
Posted by Illogical thinking
a resident of Old Palo Alto
on Jun 15, 2015 at 11:16 am

[Post removed.]


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Posted by Wayne Martin
a resident of Fairmeadow
on Jun 15, 2015 at 11:21 am


Property taxes paid at 4% over 50 years on $1M home--

Years...Taxes
10......$120,061
20......$177,720
20......$263,069
40......$389,406
50......$576,416
Total.$1,526,671

Property Taxes paid over 50 years--35 years @4% and 15 years at 2%--

Years....Taxes
10......$120,061
20......$177,720
20......$263,069
40......$377,080
50......$467,883
Total.$1,405,813


4 people like this
Posted by xPA
a resident of another community
on Jun 15, 2015 at 12:20 pm

I don't understand why Mr. Martins calculations have any significance in view of the failure to conduct a sensitivity analysis for different inflation scenarios.

I don't understand why Mr. Martin's median income data support his point given that his cite data show the real (inflation adjusted numbers) median family income is almost unchanged over 40 years (even though 2 earner families have increased in number).

I don't understand why Mr. Martin fails to consider the difference between asset inflation, e.g., homes, versus commodity inflation. Only commodity inflation is part of the CPI.



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Posted by Wayne Martin
a resident of Fairmeadow
on Jun 15, 2015 at 12:25 pm

@xPA --

Why don't you provide this information for us?


1 person likes this
Posted by Gale Johnson
a resident of Adobe-Meadow
on Jun 15, 2015 at 1:36 pm

@ Bob, common sense, Compromise, and competition...thank you and many others also, for your inputs. Funny how they match up with my thoughts on the subject. I disagree with many other posters.

Whatever the faults were with P13, at the time it passed it served a good purpose, altho I guess I got duped by how much of a bigger benefit it would be for corporations than for us older home owners. They had better lobbyists at work in Sacramento.

I'm not sure who said it, but this will all get corrected/adjusted over time because us old folks, that were allowed to live in our homes and benefitted from P13, thank you very much...will die. You know that is a certainty and so then the next generation of homeowners will get the big hit at first, but then they too will also get the benefit of the continued benefit of P13 as their property increases in value.


15 people like this
Posted by Former Gunn Parent
a resident of Charleston Meadows
on Jun 15, 2015 at 1:54 pm

The original stated purpose of Prop 13 was to protect seniors on fixed income. Based on that, if we could go back in time when Prop 13 was originally passed, it should only have applied to a person's primary residence. Not to commercial, investment, second homes, or inherited properties. Best now is to chip away at the inequity that's developed.


8 people like this
Posted by Neighbor
a resident of Duveneck/St. Francis
on Jun 15, 2015 at 2:34 pm

Could we introduce a tax on leases? Many of the residents in Palo Alto are living in rental housing. The owners may have owned the house for 40+ years and have low property taxes, but the renters may have children and thus use public services at a higher clip. With current rental prices, the owners most likely pay all their property taxes and maintenance expenses with one month's rent, then pocket the other 11 months as profits. By renting and not selling, they decrease the turnover of housing in Palo Alto and thus the increases to the property tax rolls that would occur when the house is sold are not occurring.

Therefore, why not charge a renter's tax for non-owner occupied houses? A simple way to calculate the tax would be to compare the assessed value of the house to a pro forma value of the house based on the amount of rent charged.

For example, assume that a 30-year mortgage has a rate of 5%. The monthly payment on $100,000 borrowed is $536.82. Let's say that in addition to the mortgage payment the owner also pays $63.18 for insurance and maintenance, for a monthly cost of $600 per $100,000 borrowed.

Now, if the owner rents out the house for $6,000 a month, the owner is putting a pro forma value on the property of $1.25 million. That is, a $6,000 per month payment would equate to a mortgage of $1,000,000 (including the insurance and maintenance) [$6,000/$600=10; 10x$100,000=$1,000,000], and when the person got the mortgage, you assume that they put 20% down [$1,000,000/.8=$1,250,000].

So, if the owner has an actual assessed value of $250,000, we could say that he has a pro forma assessed value of $1,250,000. He then should pay $12,500 in property taxes instead of $2,500.

Here's the beauty of this: the owner himself has determined what the pro forma value is by charging the rent that he does. If he wants to keep the low property taxes, he could simply charge $1,500/month in rent [$600 x $250,000/$100,000]. Of course, at $6,000 he is taking in $72,000 for the year. In the low cost scenario, he only receives $18,000. If you look at it this way, the owner is able to make $54,000 in excess because of his low property taxes. If he paid a pro forma value, the city could recapture $10,000 of that $54,000.

When it comes time for the actual property tax payment, the owner would pay the higher of his actual assessed value or the pro forma value determined by his rental income.

What impacts could there be? Well, elderly who live in their own homes would not be affected. Elderly who have moved but rent their houses will receive less in rental income: perhaps that will motivate them to sell and thus increase the property tax rolls through the sales. Renters may or may not pay more in rent: it depends on how much of the increase in property tax the owners believe they can pass on to the renters. At some point, the rent will simply be too high and renters will refuse to pay.

I don't know if this is possible, but perhaps the city attorney could explore this renter's tax as a way to increase property tax revenue for the city.


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Posted by jerry99
a resident of Barron Park
on Jun 15, 2015 at 3:47 pm

[Post removed.]


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Posted by @jerry99
a resident of another community
on Jun 15, 2015 at 4:21 pm

[Post removed.]


8 people like this
Posted by Gata
a resident of another community
on Jun 15, 2015 at 6:59 pm

In San Diego we were paying $20K/year in property taxes on a $1.3M home. We know people (who, btw, vote agressively to tax others), who pay $800/year (yes, eight hundred dollars) for a $3M home in Coronado. Their son attended the Coronado school system, and benefitted from all its perks, without paying for it. And their son will benefit from their grandfathered status once they die. They moved in that home many years ago (it was a lifetime gift from the wife's father), but didn't record the transfer until his death to benefit from the lack of reassessment. It strikes me as deeply unfair that my husband and I who are young have to subsidize those who were lucky enough to be alive and purchase a home for close to nothing back in the 60's and 70's. My mother-in-law is paying $900/year for a $550K home purchased for $47K in 1975, for which she still owes $120K. I think she would have been better served paying market value property taxes, instead of using her home as an ATM while other like her son are paying for it to the detriment of our and future generations. I am in favor of amending Prop 13 to encompass ALL real estate. That will drive down prices, and speculation in the California real market.


26 people like this
Posted by GoneOnTooLong
a resident of Barron Park
on Jun 15, 2015 at 7:11 pm

If "property taxes" are used to pay for City, County and State services, then we should be taxing the residents of the property based upon their proportional consumption/usage of those services. The estimated value of the land and box sitting on it have no correlation to the costs of the services consumed/used.

Eliminate the annual property Tax.
Institute a consumption/usage tax instead.
Poor people and the elderly can claim the usual exemptions.


44 people like this
Posted by trojan horse
a resident of Menlo Park
on Jun 15, 2015 at 10:45 pm

It's pretty clear from (a vocal but fortunately small minority of) the comments that they're not interested in just increasing property taxes on commercial property. They want to to increase taxes on EVERYONE.

Those of you on the fence need to keep this in mind. Increasing taxes is the goal, and increasing taxes on commercial property "for fairness" is just a trojan horse as part of a larger strategy to take even more money out of your pocket.

The funny thing is, I'd be supportive of modifying Prop 13 on commercial property provided:

1) Income and/or sales taxes were reduced;
2) Existing school bonds paid for by parcel taxes were eliminated;

Effectively, if taxes were changed to be revenue neutral, I'm a big supporter.

What is abundantly clear from the comments is that this approach is completely unacceptable to them. Not one...NOT ONE...of the pro-commercial-tax crowd has voiced support for reducing income or sales taxes as part of making taxes "fairer" for residents, despite "fairness" for "residents" being the thrust of the Op-Ed piece.

The people that rail against Prop 13 would be better served by focusing their frustrations at the right problem: the state gets plenty of revenue for funding schools and whatever revenue shortcoming that initially came about from Prop 13 were long rectified by increases in income and sales taxes. So the money is there to get school funding in California in closer alignment to other states; Sacramento just choses to not put additional money there.

You people should be complaining about Sacramento lawmakers, not property tax taxpayers.


4 people like this
Posted by musical
a resident of Palo Verde
on Jun 16, 2015 at 12:27 am

I was intrigued by a claim in Wayne's link from yesterday ("The Economic Effects of California Adopting Split Property Tax Rolls") that commercial property assessments are closer to current market value than homeowner's properties are. (60% vs 53%) Data are supposedly from the California Board of Equalization. This would indicate that commercial properties are already paying more than their share, given the premise that "fair share" should be based on current value.

Maybe the property tax burden has shifted from commercial to residential because there is just relatively less commercial property now. Did the factories and canneries and semiconductor fabs of the olden days have more property value per employee than today, relatively speaking? Today's salary per commercial square foot, however you want to adjust it, must be much higher, fueling the higher residential property values.

All I could find on the State of California website so far, is last year's total assessed value of nearly $5 trillion, resulting in property tax collections of $56 billion. No estimates of current market values, or how they've evolved by segment over the years.


11 people like this
Posted by Scholar
a resident of Menlo Park
on Jun 16, 2015 at 12:13 pm

[Post removed.]


3 people like this
Posted by @Scholar
a resident of another community
on Jun 16, 2015 at 2:25 pm

[Post removed.]


2 people like this
Posted by Michael O.
a resident of Gunn High School
on Jun 16, 2015 at 10:16 pm

Michael O. is a registered user.

Psychotic! Prop 13 makes people psychotic! The best reason I know of to repeal it. All of it. Public health measure, you know.


6 people like this
Posted by Bunyip
a resident of Adobe-Meadow
on Jun 17, 2015 at 8:25 am

$24k a year in property taxes, as a new owner, and we still choose a private school, drive very little <10k miles, and very small impact on services (which we also pay for, gas, electric, garbage). Someone explain WTF I am paying $2000\month for?

Why does a police chief or fireman in Palo Alto make over $200,000/yr? When was the last fire you saw in Palo Alto? Do we need $200,000 police officers to book the usual drunk in public or unlicensed driver? Cut the so-called hero wagers of these services and the council staff. If you pay private school tuition you should be exempt from the school tax, and your parcel of land should be a flat fee. I.e. An outside agency audits council books, identifies waste, sets a minimal budget threshold and then average that out per sqft of occupied space (office and commercial - same rate) then everyone shares the burden. Some may go up, but including commercial in a $for $ assessment based on sqft will result in all paying a relatively distributed tax burden.

Abu other way is a special interest influencing politics. Why should google be able to make a sweetheart deal and pay no property taxes? Or other big named tech firms?


4 people like this
Posted by fair
a resident of Fairmeadow
on Jun 17, 2015 at 10:10 pm

really--- what is fair? old time property buyers who made very little and scraped everything that they had to be able to purchase a nice property with a known proerty tax. or is it fair to be making hundreds of thousands of dollar and buy high end homes with known property tax and then complain that someone else isn't in your category. instead of complaining--share your salary with your neighbors--then we all can afford to live here.


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Posted by mention
a resident of Triple El
on Jun 17, 2015 at 10:12 pm

[Post removed.]


6 people like this
Posted by Mike-Crescent Park
a resident of Crescent Park
on Jul 19, 2015 at 9:54 am

Mike-Crescent Park is a registered user.

Are the people here in favor of dismantling Prop 13 for commercial properties not aware that once hit with dramatically higher real estate taxes the owners will pass the cost along?

That means leasees will have much higher monthly lease payments. Increasing more than they already do. And they will pass those along to their customers or die.

What do you think that will mean for the many local Palo Alto businesses you like to patronize so much? Places like Bells Books, University Creamery, the clothing, shoe and optometrists stores? The local restaurants.

Big or little they will all have to pay much more which means sooner not later we will too. Or they will close and/or relocate.


31 people like this
Posted by san mateo county real estate
a resident of Menlo Park
on Jul 19, 2015 at 12:35 pm

"Property taxes owed by an average California family are about 40 cents per square foot, Disneyland pays a nickel; the average family income in California is about $62,000; Disney Corporate income is more than $42 billion."

Prop 13 was marketed to protect Granny, giving her a chance to stay in her home.

It was never presented as a corporate loophole.

Out of state money funds are making a killing at our in-state residents' expense:

In 1978, commercial and industrial property paid 60 percent of property taxes, while residential paid 40 percent. Residential now pays 60 percent, and commercial and industrial pays 40 percent.

Brutal.



38 people like this
Posted by san mateo county real estate
a resident of Menlo Park
on Jul 19, 2015 at 12:39 pm

"commercial properties not aware that once hit with dramatically higher real estate taxes the owners will pass the cost along"

Bull. They will charge the same market rate as they are now charging. Just the gravy train on our dime will be over.

Show me two buildings, one with almost non-existent prop taxes, and one that just turned over.

The one with lower taxes isn't offering a discount. He/she is charging market rates.

Silly argument.


30 people like this
Posted by san mateo county real estate
a resident of Menlo Park
on Jul 19, 2015 at 12:40 pm

" or is it fair to be making hundreds of thousands of dollar and buy high end homes"

read the article - this is about corporations, not residential.


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Posted by common sense
a resident of Midtown
on Jul 19, 2015 at 4:15 pm

san mateo county real estate @ Menlo Park,

Many commercial properties that are leased have a "triple net" clause written into the terms of their lease, which means the business leasing the property is paying the real estate taxes. Depending on the nature of the business, they may or may not be able to pass along an increase in expense; if they are not able to pass along the increase cost, then more likely than not go out of business - like the local neighborhood serving retail.


10 people like this
Posted by san mateo county real estate
a resident of Menlo Park
on Jul 19, 2015 at 4:30 pm

"then more likely than not go out of business"

Not necessarily - gross speculation, as is your triple net comment. Again, if one business is paying a lower (residential prop tax payer) subsidized rate, then they enjoy an advantage, yes, but does not indicate they will lower their prices.

And besides, your argument shows the fallacy of the loophole, erecting a barrier to entry for new businesses - the lifeblood of the community.

It's not a fair system to have this loophole for commercial property owners. It's easily fixed, and it will return the equilibrium of the residential/commercial property tax contributions (albeit slowly.)


5 people like this
Posted by Corparate Elite
a resident of Old Palo Alto
on Jul 19, 2015 at 11:26 pm

Just Another name for Gentrification.


5 people like this
Posted by Neighbor
a resident of Old Palo Alto
on Jul 19, 2015 at 11:40 pm

[Post removed.]


7 people like this
Posted by Crescent Park Dad
a resident of Crescent Park
on Jul 20, 2015 at 5:53 am

It's amusing to read some rants (Bunyip) and then wonder why this (assumingly mature and intelligent) adult made the decision to purchase a home in this town. A town known for being one of the most expensive real estate markets not the planet. It's not like the financial obligations were unknown or a surprise.


10 people like this
Posted by Java
a resident of Community Center
on Jul 21, 2015 at 8:16 pm

Close the commercial loophole. Does not negatively effect residential.


4 people like this
Posted by N Valley
a resident of Barron Park
on Jul 22, 2015 at 11:40 am

Disney should not get a discount on property taxes that pay for the infrastructure that Disney depends upon...


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Posted by Crescent Park Dad
a resident of Crescent Park
on Jul 22, 2015 at 11:51 am

Disneyland has a tax deal with the city of Anaheim, not with the state of California. Big difference. I read an article two weeks ago that covered the latest negotiations between Anaheim & Disney. Largest employer and the highest tax contributor...I'm sure both parties know what they're doing.


2 people like this
Posted by Good Points
a resident of Another Palo Alto neighborhood
on Jul 22, 2015 at 12:23 pm

@Jargan,
"Compromise your suggestion is a move in the right direction but I don't think that it goes far enough. what we have here is a subsidy in the form of lower taxes for the people who have been here a long time. It is blatantly unfair and combined with the ability of those over 65 to opt out of paying school bond assessments it creates a special class that has voted itself a perpetual financial inequality. Many of these people don't want to pay taxes for anything, period. New roads, infrastructure, schools, transit, all the things that make this place livable. They feel that they are entitled to get a free ride simply because they have been here a long time"

You make some really good points. In fact, I have lived in places where my property taxes were 30 times what my next door neighbors' were.

Here's the problem no one thinks about. The original beneficiaries of Prop 13, the elderly who were already living in homes they purchased before Prop 13 -- they've been the beneficiaries of this huge disparity. New homebuyers, however, have usually made painful sacrifices up front with the calculation that it will even out over time. They're paying for it, they're just front-loading their input essentially. They'll pay 20/30 times in taxes what their neighbors pay in the beginning, and as housing prices rise, at least their commitment is stable. But at the start, it's usually as great a load as anyone can bear. To remove the long-term benefit from them would be to penalize them by changing the rules mid-stream.

We were in the red for the first decade (still Silicon Valley house poor), knowing that buying a home was the only way to have any long-term stability here. The original beneficiaries of Prop 13 never had to contend with that. In speaking of reform, the two groups are not in the same circumstances. Those who bought in later at a premium were in a sense buying the later stability of Prop 13 and taking that away from them would now be very unfair (especially after they, like you, paid so much more in their taxes than the original beneficiaries).


4 people like this
Posted by peninsula resident
a resident of Atherton
on Jul 22, 2015 at 2:43 pm

Reading through the comments, a few things are very clear:

1) At no point has any change-prop13-proponent suggested the change include a dollar-for-dollar reduction in income or sales taxes. If they were truly interested in making taxes "fairer" to residents, I can think of no better way to do that than to reduce income and/or sales taxes.

Their silence on making income and/or sales taxes "fairer" is telling.

1) while the Op-Ed piece was about corporate property taxes, notice how quickly change-prop13-proponents included residential property tax increases into the conversation.

That's no accident. That's what they want, to increase property taxes on EVERYONE, corporate property taxes are just a ruse to gut Prop 13 entirely.


Those of you on the fence should pay close attention to the real goals and real intended effects of the change-prop13 crowd: to take more money out of your (and everyone else's) wallets.


Like this comment
Posted by resident
a resident of Midtown
on Jul 22, 2015 at 4:06 pm

The logic behind changing Prop 13 for corporations is flawed because there are so many different forms of taxation in Califonia:

* Property Taxes
* Individual Income Taxes
* Corporate Income Taxes
* Inheritance Tax
* License Fees
* Severance tax (Oil & Gas)

If the proponents of changing Prop 13 were being "fair", then they would also want to decrease one or more of the above taxes, so that the same "proportion" is being paid as 37 years ago when Prop 13 first took effect. For example, in 1974 individual income tax was 30% of the general fund revenue; in 2012 it was 49% of the general fund revenue; so why aren't the prop 13 folks campaigning for a reduction in the individual income tax rates?

Politicians and special interests are always wanting more money, and are always trying to find ways to raise taxes to fund their pet projects.


2 people like this
Posted by Robert
a resident of another community
on Jul 22, 2015 at 4:19 pm

"the real goals and real intended effects of the change-prop13 crowd: to take more money out of your (and everyone else's) wallets"

Except for, you know, people who may not have bought 30 years ago and are already paying taxes on the full values of their properties. Interesting definition of "everyone"...


Like this comment
Posted by xPA
a resident of another community
on Jul 22, 2015 at 4:34 pm

I think the last to comments are confusing the concept of "fair" with the entirely different concept of "revenue neutral." Fair relates to the ability to pay and the benefits received. California has an unfair property tax system that give many corporations absurdly low taxes, unrelated to the ability to pay. To compensate for the absurdly low property taxes for some,California has high sales taxes, which hits everyone equally, irrespective of the ability to pay. Although "fair", the California income tax is offensively high. The low property taxes (for some) causes the state to depend on incomes, which are extremely variable at the high end, making budgeting impossible. The last time I looked, 70% of state revenues came from the top 5% of incomes, with 50% coming from the top 1%. The CA income taxes may be fairer than CA property taxes, but it is not a rational way to run a government.


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

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