· On a per parcel basis,
· According to the square footage of the parcel or its improvements,
· According to the residential, multifamily residential, industrial, or commercial classification of a parcel, so long as the same rate of tax is levied on all properties of the same classification,
· At a lower rate on unimproved property.
But what it means, in practical terms, is that school bureaucrats could determine how parcels are categorized and thus what their taxes would be. For instance, if you own a home and a lot adjoiningg it, they’re taxed at different rates; the bare lot is taxed at a lower rate. But 1021 lets the bureaucrats lump them together and tax both at the same rate — and which rate do you suppose that would be?
Further, of course, it would give those with no skin in this game — non-property owners — no incentive to vote no on hikes. What’s it to them, after all?
Two years ago California voters passed Proposition 30, which hiked sales taxes on everyone and higher income taxes on the wealthy with the promise that additional revenue would go to beef up school programs. Opponents said at the time — we include ourselves here — that the money would go to higher teacher pay. And it did.
And so will the extra cash generated by SB 1021. Teachers — and teachers unions — will be the big beneficiaries, not students.
Support and Opposition of SB 1021 (04/03/14)
Support: Alameda Unified School District, California Association of School Business Officials; California Labor Federation; California School Boards Association; California School Employees Association, California Teachers Association; Davis Joint Unified School District, Larkspur-Corte Madera School District; San Diego Unified School District, San Francisco Unified School District, Wiseburn School District.
Opposition: Air Logistics Corporation; Apartment Association, California Southern Cities; Apartment Association of Greater Los Angeles; Associated General Contractors of California; Building Owners and Managers Association of California; California Apartment Association; California Association of Realtors; California Attractions and Parks Association; California Bankers Association; California Building Industry Association; California Business Properties Association; California Chamber of Commerce; California Grocers Association; California Healthcare Institute; California Hotel and Lodging Association; California Independent Petroleum Association; California Manufacturers and Technology Association; California Mortgage Bankers Association; California Railroad Industry; California Restaurant Association; California Retailers Association; California Tank Lines, Inc.; California Taxpayers Association; California; Chemical Transfer Company, Inc.; Council of State Taxation; East Bay Rental Housing Association; Family Business Association; Family Winemakers of California; Howard Jarvis Taxpayers Association; International Council of Shopping Centers; NAIOP of California, the Commercial Real Estate Development Association; National Association of Real Estate Investment Trusts; National Federation of Independent Businesses; Nor Cal Rental Property Association; Orange County Business Council; Orange County Taxpayers Association; San Diego County Apartment Association; Santa Barbara Rental Property Association; Silicon Valley Leadership Group; Superior Tank Wash, Inc.; TechAmerica; Tenet Health Care Corporation; West Coast Leasing, LLC; West Coast Lumber and Building Material Association.
The Usual Suspects pushing for SB 1021
Please call ALL these members:
Please register your opposition to SB 1021 by calling:
State Senator Jim Beall at 916-651-4015, and
State Senator Ed Hernandez at 916- 651-4024.
State Senator Mark DeSaulnier (D-Concord) (916) 651-4007
State Senator Steve Knight – (916) 651-4021
State Senator Carol Liu – (916) 651-4025
State Senator Andy Vidak – (916) 651-4016
State Senator Lois Wolk (author) – (916) 651-4003
RELATED: See also California Tax Addicts at it again
Analysis of SB 1021
The California Constitution requires 2/3 voter approval when a local agency wants to impose or increase a special tax (Proposition 13, 1978). However, the Legislature must authorizeschool or special districts to impose taxes because these agencies have no plenary taxing powers. Responding to Proposition 13’s reduction in local revenue, the Legislature generally authorized all local agencies to impose special taxes with 2/3 voter approval (SB 785, Foran, 1979), but voters subsequently approved an initiative requiring the Legislature to grant specific taxing power to local agencies to impose taxes (Proposition 62, 1986).
Prior to Proposition62, school districts imposed parcel taxes to fund education; however, the initiative prompted school districts to seek specific legislative authorization to ratify the existing taxes and clarify the authority to impose new ones. The Legislature allowed school and community college districts to impose qualified special taxes that applied uniformly to all taxpayers or real property within the district, and allowed districts to exempt persons over the age of 65 from the tax (AB 1440, Hannigan, 1988). In 1991, the Legislature additionally allowed 15 types of local agencies to impose similar taxes; however, the measure allowed local agencies to tax unimproved property at a lower rate than improved property, and contained no other exemptions. (SB 158, Committee on Local Government, 1991).
Parcel taxes are not ad valorem, or assessed based on the value of a property like property taxes; instead they are a flat rate assessed per parcel or per square foot, regardless of its size, meaning they are basically a flat tax on property ownership. Districts can use revenues in almost any way that serves local needs, such as ongoing expenses, programs, or buildings. Counties collect parcel taxes with property taxes, and then remit funds to the school district imposing the tax. Property tax law generally guides parcel tax collection.
Between 1983 and November 2012, voters approved 322 parcel taxes in 584 elections. At least eight school districts have passed variable rate parcel tax measures that utilize separate rates, based on square footage or other property improvements, according to the California School Boards Association. For example, the Mountain View-Whisman School District’s parcel tax contains six rates that increase according to the size of the parcel; other districts structure their taxes to account for multifamily and mixed-use housing by imposing the tax on those uses per dwelling unit, while imposing a different rate for single-family residential and other uses.
In 2013, George Borikas successfully challenged Alameda Unified School District’s Measure H, which imposed a variable rate parcel tax, at rates of:
· $120 per parcel per year for residential parcels, and commercial and industrial parcels under 2,000 square feet, and
· 15 cents per square foot for commercial and industrial property above 2,000 square feet, not to exceed $9,500 per year.
The Court determined that because the school district statute didn’t also contain the language in SB 158 allowing for a lower rate on unimproved property, districts couldn’t differentiate property by classification and assign different tax rates to each class. (Borikas v. Alameda Unified School District, 214 Cal. App. 4th 135). The Court pointed specifically to the differences between the two statutes in its decision:
“Section 50079.1 (the Community College District Statute) does not include exemptions for senior or disabled taxpayers. It does, however, provide that “unimproved property may be taxed at a lower rate than improved property.” The inclusion of this additional language – expressly allowing community colleges to classify and differentially tax real property – makes manifest that the definitional language alone does not allow [school] districts to establish rational classifications and impose different tax rates. “
In Borikas, the Court eliminated school districts’ ability to apply different rates to property based on its classification, or based on whether the property has improvements. School districts want to restore flexibility they thought they had before the Court’s decision.
State Revenue Impact of SB 1021
1. Purpose of the bill. According to the author, “Under the recent court decision, school districts can no longer apply higher or lower rates to parcels based on commercial, industrial, or residential classification of the parcel. Districts can’t even tax an empty property at a lower rate than an oil refinery or a research and development campus. SB 1021 restores this needed local control by allowing school district boards to structure its tax according to local values and priorities. Because these taxes must be approved by 2/3 vote of local voters, school district boards must forge a communitywide consensus to ensure voters approve the tax, evident by the high approval rates in parcel tax elections. The bill simply returns local control to its state before the court case, and conforms the school district law to 15 other laws that allow local agencies to impose parcel taxes. The bill doesn’t grant any additional powers to districts they didn’t have before the case. The choice SB 1021 presents is clear: the Legislature can decide who should and shouldn’t pay local taxes, or local voters can choose at the ballot box whether the tax placed on the ballot by the locally elected school board after a full, public process is worth it.”
2. Back to the future. An old piece of tax policy wisdom attributed to Louisiana Governor Russell Long states that, “Don’t tax you, don’t tax me, tax the man behind the tree.” Landowners who own property in the school district imposing a parcel tax must pay it regardless of where they live, but resident non-landowners, like renters, can vote in the election, but don’t pay it, except to the extent that property owners can pass through the taxes in rents. In addition, districts may exempt taxpayers 65 years or older or who receive SSI income, creating another class of voters who do not bear the incidence of the tax. The Borikas case didn’t eliminate parcel taxes, but it did ensure that owners of commercial and industrial property won’t pay parcel tax rates for their parcels that exceed rates applied to residential ones, who are more likely to have children who attend schools in the district imposing the tax, thereby creating a demand for services. SB 1021 would restore the ability of districts to assign more of the tax burden to those who can pay more by virtue of owning commercial and industrial property, but aren’t as likely as residential property owners to consume the goods and services the tax pays for. The Committee may wish to consider whether SB 1021 strikes the right balance.
3. Ups and downs. Under Borikas, school districts can only impose truly uniform taxes by applying the same rate to all parcels, regardless of use or improvements, not uniform rates that apply to each property in the same class. School districts design these taxes to suit local needs, and enact an ordinance in a public meeting, likely after a robust public process because voters must approve them by 2/3 vote. While SB 1021 restores the ability districts used in the past to apply higher rates to commercial and industrial use, the measure similarly enables districts to apply lower rates too, which Borikas currently prohibits. Additionally, districts cannot apply lower rates on unimproved property under Borikas, unique among all statutes authorizing qualified special taxes. SB 1021 also allows districts to combine and tax as a single parcel those parcels under common ownership that constitute one economic unit, such as a winery with production, agricultural, and open space uses.
4. The old gray mare. SB 1021 restores some, but not all, of the flexibility school districts enjoyed prior to Borikas. Under the bill, a school district cannot simply classify property as it wishes; instead, it can only classify property into four different classifications (commercial, industrial, single family residential, multi-family residential), and must apply the same tax to all properties within the classification, unlike Alameda’s Measure H that applied a higher rate to commercial parcels above 2,000 square feet. Additionally, SB 1021 doesn’t retroactively bless previously imposed taxes that don’t comply with the decision, which previous unsuccessful bills attempted (AB 59, Bonta, 2013). Instead, districts currently contemplating new taxes to submit to voters in the future would need to comply with SB 1021’s new rules.
5. Vote key. While the California Constitution requires a 2/3 vote to increase state taxes on any taxpayer, the Legislature can authorize local agencies to impose new or higher taxes by majority vote. As such, Legislative Counsel assigned SB 1021 a majority-vote key.
Career politicians like State Superintendent of Public Instruction in California Tom Torlakson and Ms. Wolk stands as a prime examples of why both state government and the state’s education system are at best dysfunctional. Both are dominated by those who seek power first, and the public good only secondarily. And the people who rule those organizations are, almost without exception, union puppets.