Mountain View Voice

News - March 19, 2010

Menlo Park mom wonders: Who wins with Prop 13?

by Renee Batti

Menlo Park resident Jennifer Bestor had long heard many arguments for and against Proposition 13, passed in 1978 to control rapidly rising property taxes in the state.

About three years ago, as treasurer of the parents' group at her son's school, questions about the property tax law's consequences, particularly on schools, became more pressing.

"I told myself, I can't just wonder about this — I have to figure it out," Bestor said.

Countless hours later — hours spent in the county assessor's office, in county and city archives, and poring over assessment rolls she had purchased — Bestor has come to the firm conclusion that, while Proposition 13 has generally worked for homeowners as voters had intended, "For commercial landlords, it's been an incredible windfall."

Commercial property tax, she says, "has evolved in a way that not even the direst opponents of Prop. 13 envisioned."

Bestor, a talented writer as well as a dogged researcher, took a whimsical approach to spreading the word about her findings: She composed an open letter to billionaire Warren Buffett, who famously said in 2003 that Proposition 13 was damaging the financial health of the state and needed to be repealed or changed — and was consequently told by then-gubernatorial candidate Arnold Schwarzenegger that he would have to do 500 sit-ups if he ever brought it up again.

She sent the letter last week, telling Buffett, "Please let me know how I can help you with the sit-ups."

Tax imbalance

Bestor, who has an MBA from Stanford and is a former high-tech executive, collected countywide tax statistics, but her most focused research was on properties in the Menlo Park City School District. She did a parcel-by-parcel examination of commercial properties on Santa Cruz Avenue, and residential parcels in her own Allied Arts neighborhood.

Before she started her project, she says, "I wrote down all of my bad assumptions." The most erroneous among them: Commercial property owners pay more of the property tax burden than residents.

What she concluded after gathering data and crunching numbers from the assessor's office was startling: Although the countywide property tax burden was almost equally shared between homeowners and commercial property owners in 1978, "By 2008, homeowners were paying two-thirds and commercial property owners one-third (of property taxes), despite the fact that the major development in the county over those 30 years was commercial property east of (Highway) 101."

The growing tax-burden imbalance reflects the fact that houses change hands far more frequently than commercial properties. Under Proposition 13, the tax rate is capped at 1 percent of a property's assessed value, and that value can be increased by no more than 2 percent annually. That formula is kept in place until the property is sold, at which time it is reassessed to determine its value at the current market rate.

Two streets

Bestor's research of Menlo Park properties — particularly of parcels on one commercial strip and one residential street — sheds light on how two provisions have created the lopsided tax-burden equation. The first provision is Proposition 13; the second is Proposition 58, passed by voters in 1986, which allows property to be passed from parent to child with no reassessment of the property.

Looking at Menlo Park's main downtown street, she found that of the 56 commercial parcels on Santa Cruz Avenue, 23 are at the 1978 assessment (plus 2 percent per year) level. Of those 23 parcels, only four are owned by the same people who owned them in 1978. Eleven have passed to a son or daughter, and in a number of cases are held in family trusts.

By contrast, of the 53 residential parcels in Bestor's neighborhood, 13 are owned by the same people who held them in 1978, and two are held by children of the 1978 owners, so are taxed at the 1978 level. The assessments of two other parcels were affected by other factors.

The other 36 parcels, including Bestor's, have been reassessed after changing hands, she says.

"My street is paying its way," Bestor says. For homeowners, she adds, "I think that Prop. 13 did what people hoped it would do. It allowed people to stay in their homes and families to plan their financial futures."

On the other hand, she says, commercial property owners who are assessed at 1978 levels are not paying their way. "Does it really make sense to subsidize family trusts, major real estate corporations and developers, who make smaller and smaller contributions (proportionally) to public services each year?"

INFORMATION:

To read the full letter by Jennifer Bestor, go to www.tinyurl.com/BuffettLetter. A longer version of this story is available at www.mv-voice.com.

Comments

Posted by Chris, a resident of North Whisman
on Mar 24, 2010 at 5:38 pm

Repeal prop 13! Well, at least fix the commercial property side of it.


Posted by Dennis, a resident of another community
on Mar 26, 2010 at 5:41 am

If Ms. Bestor is a "life-long Republican" why are her only campaign contributions the past several years to Democrats? A simple search on OpenSecrets.org shows her donations to a DNC group, John Kerry and Barrack Obama, not donations a "life long Republican" makes. So her letter is deceptive. It is also ignorant. Ignored are the payroll taxes, sales taxes, income taxes and business licenses and fees paid as a result of the commercial properties. Ignored is the growth in number of residential housing units in the area that increased the number of parcels paying property taxes in the past 30 years. Ignored are the taxes by new commercial developments in the area, instead she conveniently cherry picks certain parcels to try to prove her falacious argument. Bestor appears to be another tax and spend liberal with no knowledge of the relationship between taxes, employment, and government spending. Instead of trying to over turn Prop 13 she should go to her supposed Republican roots and support candidates that would cut Sacramento's spending. She did not mention her city, and our state, are broke because the Democratic controlled legislature doubled spending and the budget from 1998 to 2008 when Prop 13 tax revenues were pouring into the treasuries.


Posted by Jennifer Bestor, a resident of another community
on Apr 1, 2010 at 4:03 pm

Dennis, Well, why do you think a life-long (check the voter rolls) Republican's campaign contributions have been to Democratic candidates over the past few years? Any chance that life-long Republicans might think that "tax-cut and spend" is not fiscal conservatism? That gutting and defanging oversight boards of federally insured industries is not sound financial management? That going to war in Iraq 'off' balance sheet was irresponsible?

And sorry you think I'm ignorant. Can you tell me how it is that businesses pay sales taxes without customers? I sure thought it was me paying that tax. Do I get to take it off my bill next time and tell the merchant to pay his own tax? Or are you talking about the sales tax that a business pays on its own purchases?

And can you explain the difference in payroll, income and business license taxes paid by businesses in properties bought in the last ten years (i.e., full assessed value, full tax) vs. those in properties bought over 30 years ago (i.e., paying one fifth the property tax of their competitors')?

Do you even know which property is which? Most people can't tell. I was sure surprised as I found old businesses in properties with new bases (our iconic Golden Shears) and new businesses in properties with old assessed bases (Miyo Yogurt -- just opened three weeks ago, fabulous mix-ins).

And, finally, which new commercial developments in the area did I ignore? Indeed, I dutifully included the Glenwood Inn for Seniors (which had been exempt property and is paying a lot of tax -- lest seniors always be blamed), I noted that Menlo Center (housing Kepler's -- our beloved bookstore) is ponying up $200K+ a year), ... indeed, if I missed a commercial development in our school district, so did the Assessor.

So, yes, the Almanac chose a small number of facts to print out of the landslide I provided them with -- including the fact that, in all the Menlo Park City School District parcels that I analyzed, the percentage drop was from 20% to 9% for commercial parcel tax contribution. But I was looking at total assessed land and improvements value -- not number of parcels. And these were facts. And they are germane to the discussion of property tax.

If you want to fix government spending and pensions, go for it! Go do it, Dennis. I salute you. I'll fix revenue, if you'll fix spending. Between us, we might just create a stronger state with a fair and productive business climate.


Posted by Bob Holmgren, a resident of another community
on Apr 21, 2010 at 4:35 pm

Bestor is concerned about short changing Menlo Park schools, which is odd considering that construction never stopped in any of the MP schools my children went to between kindergarten and high school graduation. And the construction continues as witness the Encinal and Hillview construction projects not to mention the recently completed and hideously designed MA Performing Arts Center. My guess is with the repeal of prop 13 Democrats like Bestor will never find enough money to spend until they've succeeded in driving every business from California.


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