Jan 8 2016

OPINION: Parcel Tax Proposal Questioned by Former Councilmember Keating

Garrett Keating contends the City will have adequate revenue without the jump up in the Parcel Tax rate and funds are needed for school improvements.

In his last published column, Councilman Jeff Wieler challenged readers to propose changes to municipal services in lieu of supporting the proposed increase in the parcel tax.  To have that discussion, it would be nice if the Councilman stopped his harangue of others who don’t share his views.  The ink isn’t even dry on the proposal and Councilman Wieler already characterizes other views as “perverse” and negative.  

The basis of his column is the proposal from the Budget Advisory and Financial Planning Committee (BAFPC) that the annual parcel tax be raised by as much as 50%.  BAFPC analyzed the city’s facility maintenance needs and conservatively estimates that $0.5M is needed annually for deferred maintenance. Likewise, the city recently completed a review of its information technology and found that conservatively $0.5M is needed annually to upgrade its IT systems.  As an aside, these are “spreadsheet spending” analyses that need more work before they are used as the basis for a tax increase.  So a 50% increase in the annual $1.8M parcel tax brings in about the $1M needed to start facility maintenance and IT upgrades.    

The basis for the BAFPC recommendation is a projection showing that implementing this new spending will deplete the General Fund reserve by 2020. The BAFPC estimates that over this 5-year period, annual transfer tax revenues will be $2.8M, the average value for the transfer tax from the past 10 years.  Alternatively, using the 25-year trend in transfer tax increase, the tax has increased 10% annually to its present day value of $3.9M.  At that rate, the transfer tax will tax be $6.3M by 2020.  Even at 5%, the transfer tax will be $4.5M in 2020.  Transfer tax revenues for the past three years have been $3.2, $4.0 and $3.9M, respectively.

And there is no estimate in the BAFPC projection for the increase in revenue from property reassessment nor tax revenue from 8 new residences coming to Piedmont.  For example, there are 1000 properties in Piedmont assessed under $500,000 and if just 5% of those sold for $2M today (median 2015 Piedmont price), those sales alone would generate close to $1M in new revenue.  This property tax increase, coupled with the 25-year trend in the transfer tax growth, could likely exceed the revenue the BAFPC proposes to collect with the new tax.

As it happens, at its Monday meeting, the Council chose to go with only a 30% increase in the parcel tax, raising $500K annually with an increase of about $150 for the average Piedmont household.  The parcel tax increase will be on the June 2016 primary ballot and Piedmonters should review the BAFPC report and recommendations available on the city website:(http://www.ci.piedmont.ca.us/html/govern/staffreports/2015-12-07/parceltaxreport.pdf). 

As the debate heats up, consider these points. First, disregard any statements that not voting for the tax increase will lead to a reduction in public safety.  City reserve funds are at their maximum and the current parcel tax carries on until June 2017, leaving ample time to renew the tax should it fail in June.  References to cuts in public safety are simple fear-mongering.  Second, the spending estimates that justify the tax have not been fully researched and may be overstated.   As an example, estimates that the Sewer Tax needed to be increased by 50% were subsequently found to be inaccurate.  

Finally, Piedmont Unified School District (PUSD) is currently conducting a facilities assessment and will likely have a ballot initiative on the November 2016 ballot.   I hope the School Board brings forward a proposal to not only maintain school facilities but to modernize them.  Science and media laboratories, performance spaces and classrooms have all been identified as needing upgrades. 

Actually, maintaining the status quo with the city parcel tax and encouraging residents to support new school revenue might be the best strategy for the city.  Demand for Piedmont schools drives up housing prices leading to the historic increases in the city’s transfer tax receipts.

Councilman Wieler misses the point.  Opponents of the proposed tax increase don’t oppose better city services, they just don’t see why the tax need be increased when current and projected revenue will do the job.  Rather than argue about cuts, maybe we should be discussing revenues.

Garrett Keating, Former Piedmont City Councilmember

Editors’ Note: Opinions expressed are those of the author.

2 Responses to “OPINION: Parcel Tax Proposal Questioned by Former Councilmember Keating”

  1. Very well stated Mr. Keating. I totally agree with your assessment of the need for the City to “hold the line” on spending and reassess the revenue end. However, I’m concerned that the School District will jump on this as their justification for another huge increase in the already exorbitant school parcel tax.

  2. The City General Fund is likely in the best shape it has ever been and yet the City will try for a 30% tax increase. Go figure. Considering the robust financial state the City is in and the ever increasing trend of Real Estate taxes, both from ad valorem property taxes and the ballooning transfer tax, the coming year would seem again an appropriate time to not levy the parcel tax. This is allowed by the language of the tax and has been done in the past.

    As George Childs points out, the School District will likely ask for more taxpayer funding for facilities through more bond measures on top of our highest in the state school tax.

    No attention or understanding is apparent at either City Hall or the School District for those on fixed incomes.

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