For seven years Mountain View has been home to Google, the hottest company in the world. But for all that time its substantial property taxes — and those of other major companies in the area north of Highway 101 — have been diverted into a special city fund through something called the Regional Shoreline Park Community.
It's an arrangement that some local school officials would like to see reevaluated.
Craig Goldman, CFO of the Mountain View Whisman School District, says his district hasn't been getting the full benefit of those companies' property taxes. This year alone, he said, Mountain View's elementary and middle schools are missing out on $5.8 million in property tax revenue from Google and other big-ticket Mountain View companies located in the Shoreline area. Another $4.3 million would go to the Mountain View-Los Altos High School District.
The Mountain View Regional Shoreline Park Community, also known as the "Shoreline Community," was created in 1969 to funnel property taxes into paying for Shoreline Park maintenance and for improvements to the surrounding industrial neighborhood. Today the area, bordered by Stevens Creek to the east and San Antonio Road to the west, is home to the city's wealthiest companies.
As a result, "We have an incredible white-collar commercial industry in Mountain View, but we receive a relatively small contribution of tax revenue for our local schools," Goldman said. Although he is not calling for the tax district to be abolished outright, Goldman says he would like to reassess ways that local schools might receive a larger slice of the city's biggest pie.
City officials say that without the Shoreline Community tax revenue, the city would not be able to operate Shoreline Park or maintain and improve Shoreline's industrial area, which is central to the city's economy. The Shoreline Community is expected to bring in $26.8 million in revenue this year and has $19 million in ongoing expenses.
They also say that the Shoreline Community tax district is the reason those big companies came to Mountain View in the first place.
"If the Community did not exist, it is unlikely the property taxes would be at the level they are at," said city finance director Patty Kong in an e-mail. "Before the (tax) district was created there was basically nothing there but landfills."
But school officials believe circumstances have changed since then. Today, Goldman said, the money diverted from local elementary and middle schools equals about a quarter of Mountain View Whisman's entire $24 million general fund budget — at least another $1,000 in annual revenue per student. With that money, he said, the district could have more competitive teacher salaries, smaller classroom sizes and more funding for programs that serve the district's poorer students.
Part of the reason Goldman is singling out the Shoreline Community now is that last year Mountain View Whisman was designated a "basic aid" district, meaning it can benefit from increases in local property tax revenue.
The city does make sure that some of those funds make it back to the schools. In 2006 it agreed to give $450,000 a year from the Shoreline Community to each of the two school districts in Mountain View, and that amount increases by 3 percent a year. As part of the agreement, those funds must be used for technology-related programs, and the high school district uses it to fund the Freestyle Academy, a supplemental program emphasizing multimedia education.
Local schools also get a portion of the Shoreline Community's property tax revenue based on 1969 property values. In 1969, Shoreline Community properties were worth $200 million, but now total over $3 billion.
City manager Kevin Duggan pointed out that the city also gives back by providing services for local schools which are uncommon in other cities, including after-school programs, field maintenance, sports facilities at Graham and Crittenden middle schools, crossing guards and two police school resource officers. School officials say they are grateful for those services, but that it doesn't make up for the many millions in lost tax revenue.
It's not unusual for a redevelopment area to siphon funds from schools. There are almost 400 such areas in the state, including another one in Mountain View, also created in 1969, that is soon expiring: The "downtown revitalization district" will sunset in 2011, releasing $832,000 in property taxes to Mountain View Whisman by 2019.
But the Shoreline Community was created by a state Assembly bill which allows it to exist forever — basically for as long as the Shoreline Community has debt. Right now the Shoreline Community is on the hook for about $38 million in bonded debt, Kong said, and over $50 million more has been proposed.
Largely thanks to Google's increasingly valuable property, the Shoreline Community's property tax revenues have been increasing. In 2005, its property taxes totaled $17.1 million, but are estimated to have grown to $26.8 million this year.
According to county tax assessor Larry Stone, Google is behind only Cisco and Lockheed in Santa Clara County when it comes to having the most valuable "business personal property," which is everything a company owns besides real estate. Google has about 10,000 employees in the city.
History of success
Without the Shoreline Community, the Shoreline area would not be what it is today. The Highway 101 overpasses at Shoreline Boulevard and Rengstorff Avenue were built with its funds. Every extension of the Stevens Creek Trail was paid for, at least partially, by the Shoreline Community. The area's street maintenance, along with numerous city employees, are covered by Shoreline Community funds.
Probably the most unusual costs in the Shoreline Community are the ongoing maintenance of three closed landfills under Shoreline Park (about $200,000 annually) and Shoreline Park itself.
"The city's general fund would not be able to sustain the costs associated with operation and maintenance of its hundreds of acres" without the Shoreline Community, Duggan said in an e-mail.
In total, the Shoreline Community's ongoing costs this year are $18.7 million. That includes $3.7 million in "direct operation costs"; $6.9 million in debt payments; $5.2 million in "reimbursements" for ongoing police, fire and administrative services; and $2.8 million in payments to local schools and the county, which also forgoes taxes to the Shoreline Community.
Once all the bills are paid, the city expects to have about $20 million in the Shoreline Community fund at the end of the fiscal year, Kong said.
City staffers have proposed using a bond to fund a series of recently approved Shoreline Community projects, including a $9 million athletic field on a former landfill along Garcia Avenue, a $10 million fire station on Shoreline Boulevard and a $4 million crossing for the Permanente Creek Trail over Highway 101.
The most expensive Shoreline Community project in the works is a boutique hotel and conference center next to Google, which would be subsidized with a $31.5 million no-interest Shoreline Community bond. In return, the city's general fund could receive $1.5 to $2 million a year in new land lease and hotel tax revenues, which Duggan said is "probably the best alternative we have to continue to generate new general fund revenues."
Google backed out of deal to develop the hotel in 2008, but another developer has since stepped in and negotiations are underway. City officials say the project will help Mountain View compete with other cities to attract new business.
Other expensive projects may be needed to support the major growth expected in the Shoreline area. A transit system for the Shoreline area that connects to the downtown train station seems likely, and planning director Randy Tsuda has suggested the city help pay for it with Shoreline Community funds. The city may also have to help pay to mitigate increased flood risks predicted in the coming decades for the Shoreline area.
The Prop. 13 problem
Goldman said he could see why the Shoreline Community appeared to be a workable idea when it was created in 1969. But in 1978 it became unworkable, he said, when Proposition 13 passed, making it difficult for local schools to increase property tax revenue.
No renegotiation of the Shoreline Community fund was made then, and it became a case where "one hand didn't account for the other," Goldman said of the city and local schools.
Goldman says he understands that the city has some very expensive obligations for the Shoreline Community funds. "We're not interested in picking a fight with the city," he said, only in looking at "ways the school district can see greater benefits without having a negative impact on the city."
Meanwhile, Mountain View-Los Altos officials had a different take on the issue. Thanks in part to substantial Los Altos property taxes, the high school district has the highest paid high school teachers in the state.
Joe White, the district's assistant superintendent of business, said he did not know exactly how much money his district was losing to the Shoreline Community. But when it comes to the $450,000 MVLA gets from the Shoreline Community, via the city, "We are satisfied with the agreement we have entered into," he said.