Schools grapple with finance crisis Schools grapple with finance crisis (March 14, 2003)

Businesses question school tax

By Julie O'Shea

Members of the business community are raising stiff opposition to a $2.5 million tax measure that the Mountain View-Whisman School District says is the only way to prevent a rash of teacher layoffs.

While businesses say the measure is too harsh in the midst of an economic collapse, school officials say the state's finance crisis makes the measure necessary. Facing state cuts that could leave them $2.2 million in the hole, the school board says the tax -- which would levy a 5 cents per square foot fee on all buildings in the city -- is the only way to prevent teacher cuts.

Superintendent Jim Negri said this week -- just days after the board decided not to cap the tax -- that the district plans to lay off more than 30 teachers as a precautionary measure.

If the parcel tax, called Measure E, doesn't pass at the polls June 3, Negri said he likely won't be able to hire the teachers back, and will therefore have to increase class sizes. Measure E will need a two-thirds majority vote to win.

The proposed measure is the first of its kind in Santa Clara County, since most parcel taxes charge a fixed per-parcel fee, rather than a fee based on a building's size.

The tax would cost the average homeowner about $70 a year. Senior citizens over 65 could apply for an exemption. But for a property like the SGI campus, a 500,000-square-foot complex on Amphitheatre Parkway, the tax would cost $25,000 a year. SGI grossed about $1.3 billion last year but didn't make profit, according to a company spokesperson.

Microsoft, with a 450,000 square foot building on L'Avenida, would pay $22,500 a year. And a 7,500-square-foot Tishman-Speyer office building on Castro Street would pay $375 annually if the parcel tax passed.

Carol Olson, president of the Mountain View Chamber of Commerce, said it is too early to tell what kind of opposition the school district may face, but she did say she heard some business owners are seeking legal advice.

"I'm here to say there are concerns and that concerns me, because we want this to pass," Olson told the school board last Thursday night.

Representatives of the business community continue to argue that the tax dumps on them an unfair financial load, and the ballot language should be revised to include a cap.

"We want $2.5 million. What kind of compromise do we have to make? We certainly don't want to aggravate the business community," Trustee Rose Filicetti said during last Thursday's board meeting.

However, despite the risk of upsetting businesses, the school board decided against not to cap the tax.

"To get a two-thirds vote in this economy, you have to have business owners behind you," said Kathy Thibodeaux, a school district parent and CEO of the Tri-County Apartment Association, a landlord advocacy group.

"This economy has hit the business community very, very hard," said Thibodeaux, who noted the commercial vacancy rates are skyrocketing, and this parcel tax would have some business owners paying four times what residents would shell out.

Comparable to other communities?

Charles Heath, a consultant hired by the school district, said the average commercial building in Mountain View is 7,420 square feet, according to the county assessor's office. And a 7,420-square-foot building would be taxed at $370 a year, which is comparable to Palo Alto Unified's flat annual parcel tax of $293, Heath said.

"We don't want a tax that is onerous," Heath said. "(This) seemed to be a fair tax, where everyone contributed a fair share."

"I think [the tax] is more the norm for Silicon Valley than the exception, said State Assembly Rep. Sally Lieber, who represents Mountain View. Lieber said she supports the tax, and that with many surrounding communities already levying such a fee, it makes sense for Mountain View to pursue the measure.

After listening to nearly two hours of public testimony -- most of which was in favor of the tax that would go toward teacher salaries, class-size reduction and music and art programs -- school trustees said last week they couldn't justify lowering the threshold.

"I won't go for anything less than what's on the table," Trustee Fran Kruss said to the nods of her colleagues.

Pre-campaign polls show 47 percent of residents feel the school district, which has an operating budget of $30 million, is in dire need of more cash.

District officials said they would need at least $2.5 million to make the parcel tax worthwhile. Anything less, they said, wouldn't make a "noticeable difference."

City Council member Matt Neely, an assistant principal at Mountain View High School and former Chamber of Commerce board member, said he thinks Measure E will be hard to pass, but the tax will provide "a revenue stream for a district that is very poorly in need of it."

"I am totally for this measure," Neely said. "It's going to test this community.

"The debate got spun out in a polarized way."

And now the question that must be answered is: what will this mean to downtown business, Neely said.

"I don't believe it's going to halt businesses," he added.

Although the county has never had a per-square-foot school parcel tax before, Heath said the district's proposal is "very consistent with what other school districts have done." He cited the Albany and Berkeley Unified School Districts' parcel tax campaigns as examples.

Albany residents are charged a flat rate of $134.42 a year, while businesses are taxed 2 cents per square foot. The school district pulls in about $1.3 million annually from the tax.

Marsha Skinner, a former Albany school board member who helped run the 1999 parcel tax campaign, said she remembers the school district was faced with strong opposition, but the tax still passed with a 78 percent margin in a special June election.

Berkeley residents have a 12 cent per square foot tax on their homes, while businesses pay 18 cents per square foot, according to school district officials. The tax, passed in 1994, generates about $10.3 million for the 9,200-pupil district.

The tax originally went out to voters in 1986 where it won by a 78 percent voter margin, said Monica Thyberg, who manages the district's Excellence Program, which oversees the tax funds.

When the measure was renewed in November 1994, 92 percent of voters were in favor of it, Thyberg said.

"It was kind of unprecedented in the state of California," she said.

Business caught off guard

Commerce President Olson said businesses knew the school district was planning to go out for a parcel tax, but that the proposal wouldn't be a flat rate caught everyone by surprise.

"The fact that this hit us so suddenly took us unaware," she Olson said.

Jeff Duke, a broker with Exuus Associates in Sunnyvale, has been in the real estate business for 22 years and said he has never come across a tax like the one Mountain View-Whisman is proposing.

"I don't think it will be across the board negative," he said of potential backlash from the business community.

Still, Olson said the school board might have moved too quickly when it voted to put the tax on the June ballot just three days before the county elections deadline.

"They are putting this tax before the business community before having a dialogue," she said. "I don't think that is a good way to make the right decision. ... We need to work in partnership."

The decision to forego a price cap seemed difficult for school trustees, who bounced the idea around for quite awhile last week.

"I think the one thing we, as a board, need to look at is the political reality of this," Board President Carol Fisher said last Thursday, right before she made a motion to place a cap on the tax.

Fisher's motion failed to get a second.

"Being realistic is not something I'm often accused of," Trustee Gloria Higgins said. "If we lose, we'll fight another day."

E-mail Julie O'Shea at joshea@mv-voice.com