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Before you Vote, Consider The Real Cost of Marin’s Add-On Property Taxes
Before casting their usual “Yes” votes, Marin residents should question what’s up with the spate of add-on local parcel and bond taxes on the November ballot.
What exactly are these taxes paying for? Is the burden shared equitably? How do taxes that rise much faster than most residents’ incomes affect our communities?
Many Marin homeowners are already feeling the pinch of add-on property taxes that spike their basic Prop 13 tax bill by 50-100%.
Parcel taxes – levies in which every parcel owner pays exactly the same amount – hit owners of small single-family homes and condos especially hard. They pay as much as owners of mansions or large commercial properties.
Parcel taxes with above-inflation escalators fuel an affordability squeeze. Some tax measures -- like those currently proposed for school districts in Mill Valley and Kentfield, plus the one passed this spring in Larkspur/Corte Madera -- bake in 8-12 years of automatic 5% annual escalators. Ballot language sometimes misleadingly portrays these as cost of living increases. But 2016’s CPI is rising only 1.5% and inflation-pegged Social Security benefits are frozen.
Voters deserve a frank discussion of the elephant in the room: double digit pension and health benefit cost growth.
A big chunk of the incremental money from parcel taxes goes to pay for pension liabilities. The squeeze on school operating budgets recently got much worse thanks to state legislation (AB 1469) imposing a new, under-funded, mandate requiring local school districts to sharply escalate their contributions to the CalSTRS teachers retirement program. This money goes into the seemingly bottomless pit of CalSTRS’ pension liability. Between that and rising health insurance costs, it’s unclear how much, if any, of a rising parcel tax will be left over to enhance educational programs, hire more teachers, or improve their take-home pay.
Bond measures have their own issues.
Borrowing money for 25-30 years entails a large amount of interest expense, much of which falls on future generations. In some instances districts spend bond proceeds on assets and “technology” that don’t last that long. It’s often a challenge for the districts to maintain the assets in which the bond proceeds were invested because they don’t have sufficient operating funds or fiscal discipline. The buildings, equipment, and technology bought with the bonds may be worn out or obsolete well before the obligation is paid off.
Property owners pay a percentage of assessed value for bonds. While seemingly fairer than parcel taxes, bond measures (like Novato’s Measure G) are problematic too. The burden falls disproportionately on those who buy homes near current peak values: e.g., young people for whom first-time home-buying is a stretch. New bond measures strain older people whose income hardly grows.
Despite the add-on tax measures’ shortcomings, Marin voters almost always approve them.
One reason: add-on tax revenues usually specifically fund popular causes such as education, safety, and roads. Knowledgeable observers say popular programs are intentionally underfunded with the expectation voters will approve add-on taxes for them, lessening fiscal pressure on other programs.
Another reason add-on tax measures pass is that many voters think (sometimes mistakenly) they don’t have skin in the game. Renters, who comprise half the voters in some Marin jurisdictions, don’t receive property tax bills. However, their landlords raise rent commensurately. Homeowners over age 65 are exempt from school parcel taxes but get to vote for them.
Although Marin jurisdictions’ property tax rates are already among California’s highest, voters keep OK’ing additional layers of extra property taxes. Bond and parcel measures are often sized according to what consultants say voters will approve. Incremental tax measures reach the ballot before prior ones expire. Thin layers add up to bricks.
Add-on taxes make home ownership unaffordable to moderate income folks, the elderly, and young families. This diminishes our communities.
Unfortunately, we can’t eliminate add-on taxes. Our outstanding schools and vital public services depend on them. State law limits our ability to design taxes that are more “fair.”
What’s to be done?
Question the wisdom and necessity of adding more layers to the tax brick or greenlighting unsustainably large annual inflators. Call for financial projections that correspond to the length of the tax and that show specifically how the money will be used. Encourage public entities to find efficiencies so taxes don’t need to grow so fast. Support efforts to reform pension plans and make taxes fairer.
As you weigh November’s crop of add-on measures, consider carefully the long-term financial and societal consequences of your vote.