Apr 17 2019

OPINION: A Fair and Legal School Support Tax

Our Piedmont community will soon be asked to renew the School Support Tax that funds roughly 25% of the Piedmont Unified School District’s (PUSD) budget. Because the State does not adequately fund education, the School Support Tax is critical to maintaining the excellence of Piedmont schools.

The current School Support Tax (Measure A), approved by the community in 2013, taxes each taxable parcel the same amount. In recent letters, Mr. Rick Schiller advocates what he terms a “progressive tax” to replace Measure A. Mr. Schiller proposes that the next tax: (1) apply a uniform tax rate to the square feet of buildings on a taxable parcel, rather than a uniform amount to each taxable parcel, thus shifting more of the cost of schools to owners of large homes; (2) impose a lower rate on unimproved lots; (3) include an “income based senior exemption”; and (4) continue to include “compassionate SSI and SSDI exemptions,” which exempt property owners below certain poverty levels.

The next School Support Tax should fairly allocate a community cost and must indisputably comply with the law. Mr. Schiller’s proposal exposes PUSD to litigation risk that I believe would be imprudent to accept. Further, I do not consider Mr. Schiller’s proposed tax to be “progressive.”

I must start with the litigation risk (excuse the detail), which could impose unaffordable costs on PUSD and potentially leave our schools unfunded. Piedmont’s School Support Tax is a “qualified special tax” authorized by California Government Code § 50079, which provides such a tax “means special taxes that apply uniformly to all taxpayers or all real property within the school district, except that unimproved property may be taxed at a lower rate than improved property.” (Emphasis added).

In Borikas v. Alameda Unified School District, 214 Cal.App.4th 135 (2013), the Court invalidated Alameda’s school parcel tax (Measure H), which taxed residential and commercial properties, and commercial properties above and below 2000 square feet, differently. The plaintiffs argued that Section 50079 “means all taxpayers and all real property must be treated the same, and school districts are not empowered to treat different kinds of taxpayers, and different kinds of real property, differently.” Id. at 147. The Court agreed, holding that Section 50079 “does not empower school districts to classify taxpayers and property, and impose different tax rates.” Id. at 151. The Court found it could “sever” the invalid parts of Measure H, and upheld a parcel tax of $120 per parcel. Id. at 166-67.

Mr. Schiller, and others before him, have argued that Borikas does not bar a tax under Section 50079 based on a uniform rate per square foot (either of land or buildings). Borikas did not expressly rule on such a tax. However, Borikas found it must follow Section 50079’s text, and the text refers to “special taxes that apply uniformly to all taxpayers or all real property.” It does not refer to a uniform rate, but to a tax that applies uniformly.

The tax imposed on small vs. large parcels/homes would be different under a “per square foot” tax. Further, looking to Section 50079’s legislative history, Borikas rejected Alameda’s claim that it would be unfair for “all parcels [to] bear the same tax, regardless of size,” noting: “The Legislature was aware, however, that uniform parcel taxes were considered ‘more inequitable’ than ad valorem property taxes because all parcels, regardless of size, are subject to the same tax. … Nevertheless, the Legislature made no adjustments or provisions in this regard.” Id. at 158 (emphasis added); accord id. at fn. 27.

Nothing since Borikas has removed the risk that a Piedmont “per square foot” tax under Section 50079 will be ruled invalid. In 2014, SB 1021 was introduced in the California Legislature to amend Section 50079 to expressly authorize a “per square foot” tax—it did not pass. In 2018, the Legislature adopted AB 2954, which amended Section 50079 to allow school districts to tax unimproved property “at a lower rate than improved property,” but did not authorize a “per square foot” tax.  While the reference to a “rate” rather than an “amount,” provides an argument that uniformity refers to “rate” also, there is no ruling on point.

Mr. Schiller notes that the Alameda Superior Court has twice upheld Alameda School District’s later parcel taxes, which impose a “per square foot” taxes. However, the Alameda Superior Court also upheld Measure H, and the lawsuits against Alameda’s later taxes were settled before the First District Court of Appeals, which issued Borikas, ruled on appeal.

Mr. Schiller also relies on Dondlinger v. Los Angeles County Regional Park, No. B284932 (2019), but that case addressed Pub. Resources Code § 5566, a different statute, which expressly states that a park district may establish a “rate” which “is to be applied uniformly.” Further, Dondlinger is a Second District decision; Piedmont is in the First District, which is governed by the Borikas decision.

Until the First District Court of Appeals or the California Supreme Court upholds a “per square foot” school parcel tax, or the Legislature amends Section 50079 to expressly allow such a tax, I do not think it is prudent for PUSD to take the litigation risk of asking Piedmonters to approve such a tax. Litigation could cost $100,00 to $500,000, depending upon motions, trial and appeals. PUSD does not have that to spare. Moreover, to feel secure in spending the tax revenue, PUSD would have to file a validation action, but that simply ensures any litigation starts quickly.

While it is possible that no Piedmont property owner would challenge such a tax, there is no way to remove the risk. (Note that Alameda’s parcel taxes have been challenged three times). PUSD could not spend the tax revenue until any litigation is resolved, as PUSD would have no way to pay back the taxes collected if the tax ultimately were held invalid. Further, because PUSD cannot fund its school budget without a parcel tax, if the tax was challenged, PUSD would have to run another parcel tax election immediately, at additional significant expense. Under Mr. Schiller’s proposal, PUSD (and every Piedmont family with school children) would take this risk so that owners of small homes could pay less than owners of large homes. There are times when accepting litigation risk is necessary. This is not one of them.

I also believe that the School Support Tax must be fair to Piedmont residents. The Piedmont schools benefit every resident. For nearly everyone, our children have gone, are going, or will go to school. Piedmont residents have shared the cost of public education no matter where they are in this cycle. Moreover, the excellence of the Piedmont schools is why Piedmont homes are so valuable. Further, an available and excellent public education is fundamental to civil society, and we all have a civic duty to ensure it. Asking the owner of each taxable parcel to pay the same amount seems fair to me. I include unimproved parcels as the Piedmont schools make those parcels valuable.

A “progressive” tax generally is perceived as taxing wealthy people more by increasing the tax rate at higher levels of wealth or income, and is supported by the notion that those who have more money can afford to pay more tax toward community needs. In claiming his proposed tax is “progressive,” Mr. Schiller equates a building’s “square feet” as equivalent to wealth or income, and assumes that owners with more “square feet” can afford to pay more. That may be true in some cases, but certainly not all.

Square feet alone does not establish the value of a home (consider age, quality or location). Owning a large home does not establish wealth other than the home itself (it may have been bought long ago) or a ready ability to pay higher taxes (a young family may have stretched to buy a home with sufficient bedrooms, or a retiree bought a large home years ago).

I also do not support an “income-based senior exemption.” Age does not determine whether a homeowner has a ready ability to pay the School Support Tax.  Nor is current income a true measure of wealth or ability to pay.

Moreover, per the last census, roughly 20% of Piedmont residents were over 65. Assuming roughly 20% of homeowners also are over 65 (it could be higher), exempting any significant number would either underfund the schools or impose a significant burden on the remaining taxpayers.

Further, under Proposition 13, those of us who have owned a home here longer (and are usually older) pay less property tax than young families who have bought a home more recently.  PUSD’s existing income-based SSI and SSDI exemptions (see Section 50079(b)) provide relief to those who are truly in severe financial distress, regardless of their age. That seems an appropriate balance between a homeowner’s ability to pay and the needs of the community.

I support the current Measure A structure—each taxable parcel paying the same amount to support our schools, with narrow exemptions for those truly in financial distress.

Richard W. Raushenbush, Former Piedmont School Board Member

2 Responses to “OPINION: A Fair and Legal School Support Tax”

  1. Despite Mr. Raushenbush’s rather lengthy legal explanation, a simple realty remains: Alameda Schools never abandoned the per square foot of building tax and continues to use it today. Other school districts including Emeryville, Berkeley and West Contra Costa County use the per square foot of building school tax. All Districts are careful with their funds and no school district welcomes litigation. A per square foot of building tax is now used without legal challenge elsewhere and such a tax is equally viable in Piedmont. Let’s get beyond what some attorneys love, that anything can be contested.

    Mr. Raushenbush states Rick’s income based senior exemption will impose a significant burden. This is an unseemly scare tactic as Rick’s letter states the exemption is optional and if added must not exceed 2% of total tax revenue.

    The 2012 parcel tax was pushed forward when Mr. Raushenbush was on the school board. This tax raised the school tax of 76% of homeowners by 6% to 21% while the large parcel and business owners enjoyed discounts of 7% to 80%. This is not fair. Mr. Raushenbush should now own up and support a progressive per square foot of building tax.

  2. While I am not qualified to dispute Mr. Raushenbush’s legal analysis, it is clear that there are differing opinions on the legality of per square foot parcel tax. I note that Dan Walter’s column, 2 days ago, said that the LAUSD [Los Angeles Unified School District] will be voting on a parcel tax this June with a $.16 per square foot of building. Presumably, the largest school district in the state knows the law.

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