OPINION: A Per Square Foot of Building Tax For Our Schools
School Board Discussion Wednesday, April 24 of Building Square Footage Tax Basis
Recently I published a letter advocating a progressive per square foot of building tax, that no owner pay more than $4,999, unimproved lots would be taxed at $1099, a SSI/SSIW exemption be included, a 2% annual cost adjustment and an optional income based senior exemption with at most a 2% revenue reduction. Locally the per square foot of building tax is used to support Alameda, Berkeley Emeryville, and West Contra Costa County Schools.
Mr. Raushenbush published a letter opposing my square foot building tax proposal; I first presented this to our School Board Jan. 9. The per square foot of building tax is a more equitable progressive tax than the previous five tier parcel with commercial differentiations levy that Piedmont used for 27 years. Mr Raushenbush also states that a per square foot of building tax is not legally viable despite it being in common use in other School Districts.
This Wednesday April 24, 2019 at 7 p.m. Piedmont School District meeting will include the results of a survey concerning a per square foot of building tax and the existing flat rate parcel tax. The final ballot result at p.15 of the report shows definite/probable yes at 73% for the per square foot and 62% for the flat rate. 67% is needed to pass.
Rick Raushenbush was Chair of the School Board at the Dec. 11, 2012 emergency meeting when the existing 27 year partially progressive tax was replaced with current Measure A flat rate tax. Chairman Raushenbush stated the 27 year tax “had a variety of progressivity to it.” (Dec. 12, 2012 video at 14:40) http://piedmont.granicus.com/MediaPlayer.php?view_id=3&clip_id=851
The result of going from the previous tax with “progressivity” in 2012 to a flat rate tax resulted in the following. Of the 3,921 School tax parcels in Piedmont, 76% of Piedmont homes are on parcels under 10,000 square feet (“sf”). The 2012 flat rate “emergency” tax raised their previous $1,989 and $2,260 taxes to $2,406, a 6% to 21% increase. Taxes on undeveloped parcels, another 2%+ of taxpayers, went from $1,009 to $2,406, a 238% increase. Today the $2,406 tax is $2,656. At the same time a small percentage of taxpayers received significant reductions. Owners of large parcels, commercial buildings and multi-unit buildings saw reductions of 7% to 80%. Some large commercial buildings previously taxed at $5,052 went to $2,406, a 52% decrease. Lots of 20,000 sf went from $3,378 to $2,406, a 29% decrease. A multi-unit building went from $11,907 to $2,406, an 80% decrease.
The 2012 Board expressed regret at creating the above inequities. When I presented my square foot progressive tax idea to the School Board earlier this year, the regret was again sincerely expressed. The School Board wants to adequately fund our schools and in the most equitable manner possible. The history of other School Districts and their use of a per square foot of building tax:
I. ALAMEDA’s June 2008 tax Measure H imposed different tax rates on residential and commercial property. Alameda was sued by Borikas (as the case is commonly identified) and Alameda prevailed in Superior Court. Borikas plaintiffs appealed and the Appeals court reversed in favor of Borikas Dec. 2012.
March 2011 Alameda passed Measure A which abandoned the previous Measure H tax and imposed 32 cents “per building square foot.” Measure A also has an annual $7,999 cap and unimproved lots at $299. The same Boricas plaintiffs sued (Nelco, Inc. v. Alameda Unified School District, Alameda County Superior Court, #RG 08-405984 Measure A) to invalidate Measure A. Sep. 2011 Judge Frank Roesch, Alameda County Superior Court . . . rejected all the Plaintiff’s claims and dismissed the petition in the case (Alameda Patch Sep. 13. 2011). The per square foot tax of Measure A remained in place.
Nov 2016 Alameda passed Measure B1 which duplicated and continued the “per square foot of building” tax of Measure A. Alameda was then sued on the same issues by the same Nelco plaintiffs that had opposed Measure A in 2011. In Feb 2018 Alameda prevailed in Superior Court. See May 4, 2018: http://www.alameda.k12.ca.us/news/view?d=x&id=1525422895157
Since 2011 Alameda School District has used and continues to use the per square foot building tax. Alameda has been sued twice specifically on it’s per square foot tax. Both times Alameda Schools prevailed in court and uses the per square foot of building tax since 2011.
II. EMERYVILLE schools (“Emery”) passed a per square foot of building tax in July 2007. When considering a renewal of its previous 15 cent per square foot building tax, Emery relied on the legal opinion of two attorneys from Fagan, Friedman, Fulfrost, LLP and the opinion of a third legal expert on school tax challenges from Lozano, Smith. A fourth attorney that specializes in litigating educations issues, John Affeldt, was on the Emery board at the time. Measure K passed Nov. 2014 and imposes “fifteen cents of building area per square foot” for 20 years. In summary since 2007 the per square foot of building tax has been and is used in Emeryville unchallenged. Piedmont uses the same legal firm of Fagan, Friedman, Fulfrost, and LLP
III. BERKELEY passed School tax Measure H Nov 2010 which imposed a per square foot of building tax at 6.31 cents and 9.46 cents respectively on residential and commercial buildings. Nov 2016 Berkeley passed Measure E1 which imposed 37 cents per square foot of tax on “all taxable buildings.” Likely Measure E1 eliminated the residential commercial differentiation because of Borikas. Berkeley Schools use the per square foot building tax and has not been challenged.
IV. WEST CONTRA COSTA COUNTY started using per square foot of building tax in 2004; the tax imposed 7.2 cents per square foot of building and $7.20 on unimproved property. An identical tax was renewed 2008 with Measure D and again Nov 2012 with Measure G. 1/4/2013 plaintiffs Bypass 93 Properties & American Standard properties represented by David Brilliant, the Borikas attorney, sued to invalidate Measure G ( Contra Costa 1/4/2013 MSC13-00024). The same plaintiffs also sued the San Leandro School District. The result of the litigation against West Contra Cost is that in 2016 West Contra Costa passed Measure T which retained the 7.2 cents per building square foot and eliminated the unimproved property differentiation. Unchallenged Measure T renewed to 2024 and West Contra Costa continues to use a per square foot building tax. (Legislation AB2954 passed Sep 2018 now allows a different unimproved property rate. The plain language is readily understandable as I am not an attorney.)
Dannis, Woliver & Kelley, a noted Law Firm that drafts and administers Parcel taxes, commented on Donlinger, a Jan. 2019 appeals court decision concerning per square foot of building tax: “Last week (Jan 2019), a California appellant court validated a local agency’s special tax calculated on the basis of square footage of improved structures. In Donlinger . . . the statute involved mirrors the statutory authority used by school and community college district to levy parcel taxes, including the requirements that the tax be “uniform” . . . The court concluded: “We do not read the statute to require a uniform effect or outcome, but rather uniform application.”” https://www.dwkesq.com/per-square-foot-parcel-taxes-upheld-by-court-of-appeal/
Mr. Raushenbush states the per square foot of building tax is legally suspect. The per square foot of building school tax is used in Alameda which prevailed in 2011 and 2018 to legal challenges specific to its per square foot tax. There have been no legal challenges to per square foot school taxes in Berkeley and Emeryville. West Contra Costa after litigation uses a per square foot of building tax. Mr. Raushenbush raised the issue of litigation cost for Piedmont schools; all School Districts take litigation costs as seriously as Piedmont, they will not invite litigation and the per square foot tax is now unexceptional. There is no case of a per square foot building school tax being litigated which forced the School District to abandon the per square foot tax.
The groups of Plaintiffs in the various actions against Alameda Schools are large commercial property owners. In Piedmont a litigant would most likely be a homeowner who would then likely suffer a significant social stigma. With a reasonable cap in place, I suggest $4,999, the very few commercial owners that previously paid $5,052 before 2013 would have no incentive to sue. While virtually anything can be contested with a financially willing client, the likelihood of a per square foot of building School tax being challenged by a Piedmont resident is unthinkable.
Mr. Raushenbush states that unimproved lots should be taxed the same as homes “as the Piedmont schools make those parcels valuable.” A few examples of the 100+ unimproved lots currently taxed at our $2,656 flat rate:
Assessor’s Number Lot Size Tax Value Address
11-855-28 nine sf $729 558 Crofton
11-878-40 21 sf $1,056 1110 Portal
11-882-56 38 sf $1,557 1370 Sunnyhills
48C-7180-23 200 sf $729 5474 La Salle
There are at least 40 unimproved lots smaller than 1,000 sf. The owner/taxpayers of these low value unbuildable lots will never enjoy the increase in value created by our schools. Unimproved parcels and especially those that can never be improved should not be taxed at the same flat rate as a home.
Mr. Raushenbush misstates my income based senior exemption proposal by writing that a senior exemption will “impose a significant burden on remaining taxpayers.” A “significant burden” would be concerning to taxpayers if it were true, however Mr. Raushenbush omits key parts of my letter. I wrote: “The tax may (underline added) include an income based senior exemption at a rate to be determined and would not cost the District more than 2% of what the total tax revenue would be without this exemption.” My specific proposal is if the exemption is included, the Board can set qualifying income levels so that the total revenue reduction is no more than 2% or less; or not have any senior exemption which is traditional in Piedmont. Mr. Raushenbush’s concern of a senior exemption “significant burden” is baseless.
While no tax can be uniformly fair to all taxpayers, a per square foot of building tax is the best option Piedmont has to continue providing adequate revenue for our schools in the most equitable manner available. The final ballot results of the Tax Survey P.15 shows definite/probable yes at 73% for the per square foot and 62% for the flat rate. 67% is needed to pass.
I ask the Board to put a square foot of building tax before voters this year.
Rick Schiller Piedmont resident
April 22, 2019
Thanks to Rick for this detailed analysis. I just wish that the Board would take us seriously and act accordingly.
Hello Rick: For the most part, your position and my position set the issues for the Board and citizens to consider with respect to the structure of a parcel tax. You think it “unthinkable” that a Piedmont resident would challenge a per square foot tax, and I do not believe the District’s ability to pay its teachers should depend on such a gamble.
However, I will note that I accurately portrayed your senior exemption proposal as “income-based,” and my reasons for disagreeing with it.
Also, with respect to undeveloped parcels, to the extent that they are separately taxable parcels, they seem likely to be minor contiguous parcels adjacent to larger parcels (if not, I wonder why anyone would hold on to such small parcels). These owners are free to contact the Alameda County Assessor’s office to combine such contiguous parcels with the larger parcel, and create only one taxable parcel. I don’t think we need a rule to help little “undevelopable” parcels that also protects developable parcels. In my view, owners who are not developing a developable parcel, thus depriving the town of residents and reducing its ad valorem tax base, should not be rewarded with a special tax break.
Hi Rick,
The Tax Survey presented Wednesday, April 24, 2019, shows the best path to increasing school funding is use of the square foot per building tax. “Final Ballot Results” p.15 shows definite/probable voter approval as:
Square Foot of Building $1.25 at 73.4% Flat Rate $3,056 at 62.1%
I detailed the tax history of four local Districts. Since and including the Borikas litigation, there has been no litigation that has forced any district to abandon its existing square foot tax. No litigation has prevented a District from implementing a square foot tax. In some instances other aspects of a District school tax were dropped to comply with Borikas and the square foot building tax remained. This June 4 the Los Angeles School District, largest District in the State, will be putting a 16 cents per square foot building tax before voters. No doubt LAUSD attorneys carefully considered what is permissible in today’s legal environment.
As to an income-based senior exemption option, you characterized that it would “underfund the schools or impose a significant burden on the remaining taxpayers.”
You omitted key elements; I placed a 2% maximum revenue loss should the exemption be implemented and that the exemption is optional. While most Districts have a senior exemption, Piedmont has never embraced this.
While there are tiny taxed parcels, there are other tiny lots near that are not taxed. There are large multi-lot estates where all lots are taxed and other estates with untaxed lots. Some untaxed lots are 17,400, 21,888 and 26,276 square feet, larger than most resident lots. In 2013 Connie Hubbard stated all parcels would be taxed by Measure A; they are not. Capping a square foot per building rate at $4,999 per taxpayer (or whatever the Board feels appropriate) would alleviate some of these issues and bring equality. Another solution is implementation of a contiguous parcel applied for exemption similar to the San Marino Schools exemption. Many of the very small parcels are adjacent to the Oakland/Piedmont border so there are likely other issues that make combining these through the County Assessor complex or possibly unrealistic. Owners of large untaxed lots entirely within Piedmont do not want lots combined as the properties would then have zoning issues in terms of building additional homes.
All unimproved lots should be taxed uniformly and the current inconsistencies eliminated. There are other issues involved and this complex part of the tax levy is an ongoing discussion.