Monday Morning Thoughts: Parcel Tax Exemptions: The Legal, the Political and the Moral

Let’s get this out of the way – the parcel tax is the worst conceivable type of tax that could ever have been created.  Critics are right to point out that the parcel tax is extremely regressive.  You basically pay the same amount if you own a $100,000 assessed value home or a $1.5 million one.

The irony perhaps is that it was made worse by lawsuits like Borikas.  Prior to Borikas, the district had different rates – the main parcel tax rate (then it was $204 per year for single-family homes) and a rate for multi-family dwellings of $20 per unit per year.

But Borikas claimed that state law requires “uniformity” in a parcel tax and that the tax has to “apply uniformly to all taxpayers or all real property within the district.”

The result is that the district lost some money and the tax got even less fair.

The problem here is Proposition 13.  As it turns out, California is the only state in the country that uses this form of property tax to fund its schools.

The problem is that Prop. 13 “prohibits school districts from raising property taxes based on the value of property,” i.e. “ad valorem taxes.”  There is an exception for General Obligation bonds, but those can only fund facilities, not instruction.

So under Prop. 13, the parcel tax has become the only way to finance instructional money for local school districts.  That makes little sense – cities can finance through sales tax, TOT (transient occupancy tax), or utility user taxes in addition to parcel taxes, but school districts can’t.

Because the tax is so regressive, the law has permitted some exemptions:  exemptions for senior citizens (65 and older), for Supplemental Security Income (SSI) recipients, and for Social Security Disability Insurance (SSDI) recipients who meet the income qualification.

It is a little better than it used to be – it used to be just a senior tax exemption.  And once again the exemption holds whether the individual is of low income or not.  Again, it is not perfect.

But there was a “moral” reason for this and also a political one.

The “moral” one is that at least it allowed those poor seniors on a fixed income to take an exemption.  The hope would be that most people who could pay for the parcel tax probably wouldn’t opt out.  And when I last looked at the list of exemptions – it is a public record – that appeared to be the case.  But that was several years ago and the parcel tax has gone up.

There is a political side to this as well.  Seniors are the group that are least likely to support the parcel tax, in part because many are on fixed incomes and in part because their children having grown and they lack the self-interest.

In 2016, there was a poll for support of the parcel tax.  It was 60 percent for the 50 to 64 group, but 66 percent for the 65 and over group.  A good part of that was the senior exemption, where 47 percent of those over 65 considered it very important and another 25 percent considered it at least somewhat important.  Meaning 72 percent of seniors considered the exemption at least somewhat important, compared to less than 50 percent of those under the age of 50.

The support level for this parcel tax in the polling from last year was considerably lower than it was in 2016.  It is not tremendous, but if seniors alone voted, we would not pass parcel taxes.  So the district figures that they can trade perhaps half to a full million in exemptions for the increased possibility of passing a parcel tax.

The polling here gave the district little margin of error to begin with.

That leads us to newest exemption: DJUSD employees.

We seem to have forgotten that this was not permissible until September 2018 – effective in 2019.

Senator Bill Dodd carried legislation allowing DJUSD to provide this parcel tax.  It is a law that only impacts Davis.

“This new law will provide a small but meaningful incentive for public educators and school staff to live in the community of Davis where they work,” Senator Dodd said. “I thank Gov. Brown for recognizing teachers and the critical role they play in supporting their community.”

Davis schools trustee Alan Fernandes in Senator Dodd’s release said it would encourage more of the district’s more than 450 teachers to live in the community they serve. Now, about two-thirds of the teachers live outside Davis where housing is less expensive, he said.

“We in Davis applaud the efforts of the senator in recognizing the need to obtain greater flexibility with our local budget to become more competitive for our teachers and school employees,” Fernandes said. “We appreciate the governor’s recognition of that in signing the bill and look forward to continuing to work with our senator to explore other ways to ensure that we do everything to honor the service and commitment of teachers and school employees to our students.”

This exemption is probably less about the political and more about giving the teachers a small amount of money to help ease the compensation gap.

Someone wrote the Vanguard: “If it’s good for the Seniors and teachers, then why not for UCD faculty and staff as well – hey they’re all teachers/and/or ‘public school’ employees.”

The short answer is the law says you can’t allow for one rather than the other.  I think the longer answer is that the district saw the exemption as a way to provide a slight benefit (we are talking $200 a year) to district employees.

I am not sure why this is creating angst in some, but it clearly is.  For the me the tax is unfair to begin with.  The district has no other local funding options available to them.  And so, if they can find a way to make it somewhat more equitable for some while finding a way to get the measure to 66.7 percent of the vote, they have to take that route.

If this fails, then we will see a whole different sort of approach from the school district.

—David M. Greenwald reporting