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Buffett, who famously said in 2003 that Proposition 13 was damaging the financial health of the state and needed to be repealed or changed — and was consequently told by then-gubernatorial candidate Arnold Schwarzenegger that he would have to do 500 sit-ups if he ever brought it up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."
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.
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?"
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.