Permanent tax abandoned; “low income” exemption becomes  SSI “disability” exemption –

After concerns were raised by the League of Women Voters and other residents, the Piedmont School Board veered away from plans for a permanent (“evergreen”) school tax and, at its meeting on November 14, directed staff to draft a ballot measure proposal for an 8-year tax which authorizes annual increases of up to 2%.  

The draft tax plan eliminates the current independent citizens oversight committee (which will be absorbed into the Budget Advisory Committee), designates the Superintendent to identify and qualify BAC members to serve on a newly created BAC “parcel tax sub-committee”, and removes previous restrictions on use of the parcel tax funds.

The November 14 draft allows an option to offer an exemption to Piedmont residents who are both low-income and disabled and qualify for SSI Disability.  The draft language does not provide for the low-income exemption discussed and supported by 4 Board Members at the meeting and does not make a Disability exemption mandatory.

The tax levy will not automatically decrease if previously lost state or federal funding is restored to California schools in the future. 

The final ballot measure language is scheduled to be approved at a Special Board  of Education Meeting on Wednesday, November 28, in the City Council Chambers starting a 7:00 pm.  Input should be offered prior to this meeting.  See email list below of School Board Members & Superintendent.  Click here to send email to all School Board Members.

Summary of Draft Resolution

• 8 year term (not permanent)
• Up to 2% increase per year
• Independent oversight committee abolished
  • The current Citizens Advisory Committee (CAC) will become a Parcel Tax subcommittee of the Budget Advisory Committee (BAC).
  • The Superintendent will verify eligibility of the 3 to 5 Parcel Tax subcommittee members, who must be Piedmont homeowners and approved by the School Board President and Vice-President. (The CAC currently must have at least 7 members and generally has 9-10 members.)
  • The BAC is a committee consisting of staff, teachers, union representatives and parents chosen by the Superintendent.
  • Current District staff members are excluded from the sub-committee, but not former stafF
• As is current School Board practice, no mailed written notice of 2% increases to property owners will be provided.
  
• SSI Disability Exemption (not senior; not solely low income)
  • Homeowners will qualify for a PUSD tax exemption only if they are disabled and have very limited income and assets as defined by Supplemental Security Income (SSI).  Low income residents eligible for SSI based on age (over 65) will not receive a PUSD exemption under the resolution presented to the Board on November 14.  In response to a question, the Superintendent asserted that low-income residents who are blind (a separate SSI eligibility category from “disability”) would qualify for the PUSD exemption.
  • The Board acknowledged that few homeowners would qualify for the PUSD exemption.
  • Providing this exemption is discretionary, rather than mandated.
• Two School Board meetings to determine levy and up to 2% increases
  
  • At its first meeting in January, the Board will hold a public hearing to determine if the tax levy shall be maintained, decreased, or increased up to 2%.  At a following Board meeting it will vote on the resolution.
    

Homeowners attempting to determine their total school tax obligations can find their additional school bond assessments in the left column of their Alameda County tax statement.  Unlike Piedmont school bonds, however, the tax deductibility of the $2,000 to $3,500 school parcel tax may be in question, depending on current and future State and Federal regulations:  parcel taxes that vary by parcel size may not meet the IRS “like rate” requirement for deductibility.  (See Article).

PIEDMONT TAXES                                     AMOUNT                  INCREASES       TAX DEDUCTIBLE STATUS

• School bonds                               up to $146 per $100,000               0%                             DEDUCTIBLE
• School parcel tax                                $2,021 to $3,678                  up to  2%                                  ?
• City parcel tax                                         $342 to $576                  CPI up to 4%                              ?
  
• Sewer parcel tax                                     $471 to 849                    CPI w/o limit                              ?
  
• Private undergrounding                             $2,000+                           0%                                      NO

Excerpts from Draft Resolution Language

“Parcel Tax Exemptions: Parcels owned and occupied by individuals who receive Supplemental Security Income for a Disability, regardless of age, may be exempt from the tax.”  (Disability will include blindness per Superintendent Hubbard.)

“(e) Parcel Tax Subcommittee: An annual written report shall be prepared and submitted to the Board of Education by the School Support Tax Subcommittee (“Subcommittee”) of the Budget Advisory Committee (“BAC”). All residents of the Piedmont Unified School District are eligible to apply for membership on the BAC on an annual basis. Members of the Subcommittee must be homeowners in the Piedmont Unified School District community and subject to the School Support Tax and not current employees of PUSD. Each year there shall be no fewer than three (3) and no more than five (5) volunteers identified by November of each year to serve on the Subcommittee. It is the responsibility of the District Superintendent or designee to verify eligibility of the volunteers. The President and Vice President of the Board of Education shall approve all nominees to the Subcommittee. The Subcommittee shall work directly with the Chief Business Officer of the District to review School Support Tax uses and report to the Board of Education at the first public hearing held each year to determine the subsequent year’s levy. Members of the Subcommittee commit to regularly attend meetings of the BAC.”

~~~~~~~~~~~~~~

“Proposed parcel tax amounts:

Parcel with Single Family Dwelling:

0-4,999 sq. ft. lot $2,088/parcel
5,000-9,999 sq. ft. lot $2,373/parcel
10,000-14,999 sq. ft. lot $2,706/parcel
15,000-19,999 sq. ft. lot $3,107/parcel
more than 20,000 sq. ft. lot $3,547/parcel

Parcel with Multi-Family Dwellings:
Multi-family dwellings/unit, all lot sizes) $1,389/unit

Multiple Parcel Dwellings: $2,281/dwelling

Commercial Property:
0-10,000 sq. ft. lot $3,547/parcel
Commercial lots greater than 10,000 sq. ft. $5,305/parcel

Undeveloped Parcel $1,059/parcel

The uses and sizes of all parcels shall be determined according to the records of the Alameda County Tax Assessor. For parcels divided by Tax Code Area lines, the payment for the portion of the parcel within the Piedmont Unified School District shall be the same as the above square footage rates.”

Read the entire resolution prepared for the November 14, 2012 Board meeting.

Contact School Board Members and Superintendent:

• Richard (Rick) Raushenbush
  President rraushenbush@piedmont.k12.ca.us
• Andrea Swenson
  Vice President aswenson@piedmont.k12.ca.us
• Sarah Pearson   spearson@piedmont.k12.ca.us,
• Ray Gadbois  rgadbois@piedmont.k12.ca.us
• Roy Tolles  rtolles@piedmont.k12.ca.us
• Connie Hubbard,  Superintendent, Piedmont Unified School District chubbard@piedmont.k12.ca.us

Updated 11/19/2012

Will the State Turn a Blind Eye over the Next 8 Years?

Many California residents take their entire County property tax bill as a tax deduction, ignoring the question of whether some parcel taxes and assessments may be non-deductible.  But in the future this could lead to Piedmont residents receiving a “Notice of Additional Tax Due”.

While Piedmont School Bond assessments are clearly tax deductible, the proposed new 8-year Piedmont school tax and other city parcel taxes may not be:  they potentially fail the IRS “like rate” requirement for tax deductibility.  A recent IRS opinion letter states:

“Assessments on real property owners, based other than on the assessed value of the property, may be deductible if they are levied for the general public welfare by a proper taxing authority at a like rate on owners of all properties in the taxing authority’s jurisdiction, and if the assessments are not for local benefits (unless for maintenance or interest charges).”

The California State Franchise Tax Board (FTB) currently tends to overlook errors in property tax deductions for unaudited returns, but may take a more aggressive posture to limit deductibility as the State searches for new sources of revenue.

In 2011, the FTB posted strict new tax guidance on its website and planned to include 3 new lines on 2012 returns:  require California residents to identify their parcel number, “deductible” property taxes, and “non-deductible”property taxes.  While this new guidance was abruptly withdrawn after receipt of an IRS opinion letter rejecting the FTB’s overly narrow construction of deductibility, the FTB website indicates future limits are still on the table:

“We have removed material from our website that limits the deductibility of real property taxes to taxes imposed on an ad valorem basis. Once the IRS forms and instructions are revised, we will provide revised California forms and instructions that are consistent with the revisions made by the IRS.”

The FTB stopped short of telling everyone they can deduct their entire property tax bill and at some point intends to halt the improper deduction of all property taxes in order to capture an estimated $200 million in new tax revenues.

An aggressive stance by the FTB could not only impact the deductibility of Piedmont’s proposed 8-year school parcel tax of $2,000 to $3,500, but other city parcel taxes that are also based on parcel size (see below).

The State has a strong pecuniary interest to interpret the term “like rate” as narrowly as possible.  Residents could eventually end up with an automatically generated Notice of Additional Tax Due (based on their property location and jurisdiction) for deducting parcel taxes improperly.  This would increase the effective cost of Piedmont’s non-deductible parcel taxes substantially.

PIEDMONT TAXES                                 AMOUNT                  INCREASES            TAX DEDUCTIBLE?

• school bonds                               up to $146 per $100,000               0%                           YES
• school parcel tax                                $2,021 to $3,678                      5%                                ?
• city parcel tax*                                       $342 to $576                   CPI up to 4%                    ?
  
• sewer parcel tax*                                   $471 to 849                      CPI w/o limit                   ?
• private undergrounding                             $2,000+                           0%                            NO

*May be tax deductible in whole or in part, depending on the extent to which revenues can be shown to be expended on repairs, maintenance or related interest expense.  Property taxes that cannot be deducted may be added to the basis of the property, if they tend to increase the value of the property.  Future school bonds are anticipated up to $146 per $100,000. The exact amount has not yet been determined. The legal limit is ~$146-$155 per $100,000 of assessed value.

Rewarding Friends and Punishing Critics –

Organized opposition to Piedmont’s parcel tax makes it very clear that the City Council presides over a divided electorate.  This divide opened only in the last 5 years after two decades of relative harmony.  Why?  Because many Piedmonters believe that the Council majority allocates benefits to friends at the expense of the rest of the community.  Under circumstances still unexplained, the Council provided utility undergrounding to the city’s most exclusive neighborhood at a cost of $2.3 million paid by the remainder of Piedmonters. The Council also gave a $2 million subsidy to sports lobbies by building a soccer complex at Havens School, paying consulting and legal fees for a private scheme to build another soccer complex in Moraga Canyon, and assuming responsibility for a swim facility.  And city staff, despite the recession, continued to enjoy benefit packages that two Council-appointed committees reported we could not afford.

Mere profligacy might not have evoked organized opposition, but resistance emerged when the Council majority began using its privileged position to punish those who questioned pork barrel politics. The Council spent hundreds of thousands of tax dollars for lawsuits to intimidate homeowners who resisted utility undergrounding.  Council members used their access to the local newspaper to attack citizens who dared criticize subsidies to sports lobbies, and to chastise voters who spoke out against the failed sewer surtax.

Now this abusive and divisive Council wants 66% of Piedmont voters to extend the city parcel tax.  The Council, however, continues to give voters new reasons to reject the tax.  The Council majority allowed those who wrote the ballot argument in favor of the tax to falsely claim that the Council unanimously endorsed the tax.  Council members have kept opponents of the tax from speaking at Council meetings, resumed attacking critics in public fora, and tried to extort support by threatening to cut police and fire services if the tax fails. The Council shamelessly persists in this extortion despite the fact that proceeds from the tax since the last extension have gone for undergrounding utilities in our wealthiest neighborhood, subsidizing private sports clubs, and pursuing vicious legal action against homeowners.

The Piedmont City Council, in short, continues to behave in ways that make it unfit to manage the proceeds of a voluntary surtax.  Those proceeds have become nothing more than a “slush fund” used to reward friends and punish critics. The residents of Piedmont deserve better governance and should withhold this tax until we get it.

 Ralph Catalano, Piedmont resident

Editors’ Note:  The opinions expressed are those of the author and not necessarily those of the Piedmont Civic Association.  The Piedmont Civic Association does not support or oppose candidates or ballot measures.

Long-Time Resident Voting NO on Measure Y-

Having lived in Piedmont for over 40 years and thus placing a high value on the services provided by the city, I am concerned about the controversy surrounding the parcel tax renewal. Over the last few months I have attempted to educate myself regarding the arguments posed by both sides of this important public policy issue.

The supporters of Measure Y have insisted that it is necessary to pass Y to ensure continuation of the essential services that the citizenry of Piedmont have come to expect. Opponents of Measure Y contend that the City will be able to provide the necessary services without the revenue from the parcel tax. Furthermore, their view is that the city council and the city administration need to be held to account for the mistakes over the last few years that endanger the future financial well-being of our community.

It is clear to me that the council and the administration have not performed up to expectations in recent years. The undergrounding debacle that cost the citizens of Piedmont several million dollars and the attempt to create athletic playing fields in Moraga canyon in the face of significant detrimental environmental impacts are but two examples of poor decision-making on the part of the City. In addition, failure to deal adequately with the looming employee benefit crisis reinforces my concern regarding the management of the city’s resources.

To arrive at these conclusions I have relied on, among other sources, Michael Rancer’s comprehensive assessment of Piedmont’s financial situation made when he was Chair of the 2011 Municipal Tax Review Committee. In particular, Rancer’s analysis suggests that the current administration has failed to address the escalating costs associated with City employees’ salaries and benefits. These costs have increased by over $6.4 million over the last decade, an amount greater than the overall increase in city expenditures.

Currently a quarter of the city budget goes to pay for employee benefit costs. A “No on Y” vote will begin the process of holding the council and the administration accountable for bringing costs under control and laying the groundwork for a sound fiscal future for Piedmont.

Ken Jensen, Piedmont Resident

Editors’ Note:  The opinions expressed are those of the author and not necessarily those of the Piedmont Civic Association.  The Piedmont Civic Association does not support or oppose candidates or ballot measures.

With respect to Vice Mayor Fujioka’s recent opinion piece on Measure Y, I’d suggest that threatening yet again the ambulance service brings to mind Ronald Reagan’s famous comment in his debate with Jimmy Carter: “There you go again.”

Any Council member who says the ambulance service is on the chopping block is basically telling the voters that the service isn’t important enough to be among the top 93% of the City’s priorities.  So in the final days of this contentious election, let’s try to keep a grip on the reality of budget making.

I honor Vice Mayor Fujioka’s stated commitment to make necessary changes, but the evidence of real progress is minimal 14 months after MTRC delivered its final report.  Short term agreements have been reached with some City employees, but when the contracts were brought to the Council, no savings were projected.  The two-tier pension system will have no significant effect for maybe a decade, while our pension liability grows unchecked.

The Council chose to proceed with  the Municipal Tax Review Committee (MTRC) report’s sewer tax surcharge and parcel tax recommendations, and not the recommendations on controlling spending.  Although the MTRC endorsed the sewer tax surcharge, the voters disagreed.  We’ll see on November 6 what they think about renewing the parcel tax without significant progress on reining in spending.

A core issue is benefits whose costs have been growing at double digit rates for the last ten years.  Today for every $10,000 of salary we pay a public safety employee, we incur at least $6,600 in benefit costs.  For a public works employee, every $10,000 in salary can mean $8,000 in benefits.  And these costs keep on growing as does our future liability, so that one day we may see benefit costs greater than salaries.  These are not only staggering numbers, but they are double the size of anything that is considered reasonable in other cities.

Some may think that those opposing Measure Y don’t care about Piedmont.  On the contrary, it is because we love this town that we volunteered to help with City governance.  And our involvement has caused us to conclude that the only way to get significant movement on this problem is to turn off the spigot until the problem is addressed, because uncontrolled benefits spending is a major risk to our valued public services.  It doesn’t mean the City will lose the parcel tax forever, or even for 4 years.  With meaningful Council initiative on the spending problem, maybe it only means for one year, which the City can easily weather with reserves.

A “NO” vote on Measure Y supports Piedmont’s long-term financial health by sending the Council a message that stopgap fixes are unacceptable.

Kathleen Quenneville, Piedmont Resident, Member of Undergrounding Task Force

Editors’ Note:  The opinions expressed are those of the author and not necessarily those of the Piedmont Civic Association.  The Piedmont Civic Association does not support or oppose candidates or ballot measures.

Resident urges discussion of financial issues, not “punishment” –

Respect the Facts, Vote NO on Y.

Rather than implement needed cost cutting measures, the City Council has put Measure Y on the ballot and supported it with a “gloom and doom” scenario should the tax fail. First we hear the three-minute ambulance response is at risk, then the Oct. 18 Piedmonter cited Mayor Chiang: “public safety services will be preserved.” Proponent “facts” are constantly shifting.

In 2004, City Hall chose the most expensive Pension plan in the state. Our compensation plan is so generous that a recent Piedmont Police Chief retired at an initial monthly pension of $18,918, 28% more than the final monthly salary of $14,791. This type of spending is wholly unsustainable, yet the City Council refuses to take meaningful action.

Beyond the structurally unsound compensation system, financial missteps have exacerbated the failing financial picture. Six weeks into the Undergrounding Debacle, the overruns were already $161,000 more than the contract amount and contingency! City Hall’s response: don’t tell anyone and keep digging. Total taxpayer cost: $3,100,000 in overruns and litigation costs.

Not learning from its mistakes, the City Council then approved the failed Blair Park Sports Fields with the same lack of risk assessment that had taxpayers picking up overruns in the Undergrounding.

Failure of Measure Y will leave Piedmont’s quality of life entirely unaffected and will encourage the Council to implement needed cost cutting measures.

Respect the facts, ignore the scare tactics and vote NO on Measure Y.

Rick Schiller, Piedmont Resident

Editors’ Note:  The opinions expressed are those of the author and not necessarily those of the Piedmont Civic Association.  The Piedmont Civic Association does not support or oppose candidates or ballot measures.

City Hasn’t Made Progress on Reforms-

I received our property tax bill this week. Included is $471 for the Municipal Services Tax. In the big scheme, it’s not a lot of money. Oh, I know that the entire $6 million raised over the last several years with the current parcel tax was wasted on an undergrounding project and an aborted sports field project, and was misspent on excessive employee compensation, especially fringe benefits. But that’s water under the bridge. Institutions, including City Councils, make mistakes. As long as they learn from their mistakes, progress, albeit costly, has been made. But wait – What project management practices have been put in place so these mistakes are avoided in the future?

And wait – What about the $40 million unfunded liability for future employee benefit costs that I’ve been reading about? That’s not water under the bridge; it is a torrent of water rushing at and possibly devastating the bridge. Who’s going to pay for that? That’s $10,000 per household. What happens when that bill comes due?

The City Council says we’re making good progress. A two-tier pension system for newly hired employees that will not have a material effect for 10–20 years and will have no effect whatsoever on the $40 million unfunded liability for current retirees or the 94 current employees. Doesn’t appear to be much progress to me. The City Council notes employees are paying $100 per month towards their retiree health benefit.

Let’s see:
That’s $112,000 per annum applied against a taxpayer funded benefit package of $5.7 million. Not much progress there. Employee contracts expire soon; for miscellaneous, non-safety employees in December 2012 and for fire and police in June 2013. Let’s see what progress can be made by our City Council in labor negotiations to rein in benefits costs funded by taxpayers.

If the City Council moves to lessen the burden on taxpayers for employee benefits and develops a plan for fiscal responsibility, the Municipal Services Tax can be put up to a vote in early 2014. This coincides with the next City Council election and provides an opportunity to vote on candidates and the tax at the same time.

So, for now, I’ll vote NO on Measure Y.

It is not “business as usual”.  It is time to demand fiscal responsibility from our elected officials. Visit www.NoOnMeasureY.com.

Eric Lindquist
Member, 2011 Municipal Tax Review Committee

Editors’ Note:  The opinions expressed are those of the author and not necessarily those of the Piedmont Civic Association.  The Piedmont Civic Association does not support or oppose candidates or ballot measures.

Parcel Tax Defeat Will Not Solve Problems-

 I too have been reading the pamphlets and news articles searching for the logic behind a no vote for Measure Y.  The opponents have cited three main reasons to vote no:

1. A few years ago the staff and council was in charge of an undergrounding project that went very wrong;

2. Employee pension obligations are unsustainable;

3. The tax is unnecessary because it won’t lead to cuts in emergency services.

I don’t dismiss the importance of these three issues, but nixing the parcel tax cannot address the first two and is beside the point on the third.

Money lost on the undergrounding fiasco can’t be recovered, and so we must learn from our mistakes and move on. I guess the idea with a no vote is to “send a message” to elected officials and department heads.  But if the council didn’t hear the message loud and clear by now, then we need a new council (see below).

Secondly, like many local governments across the state the city employees’ compensation seems to be out of scale with revenue and public support and probably should be adjusted downward. But negotiating with employees and their unions is a long-term process that can’t be fixed in a single year. So if we can’t afford to keep them with present revenues, how are further cuts going to make things better?  The city has already taken steps to reduce its future obligations and may need to follow that course of many years if not decades.

Lastly, the idea that a defeat of Measure Y won’t cut police and fire services suggests that the rest of city government is unimportant. As is typical in cities around the country, when cuts finally are made, it is fire and police services that are the last things to be touched. Which means that everything else is on the chopping block, from recreation programs (including the pool) to street maintenance.  And I think Piedmont is a great city because of ALL the city services, not just its 911 services.

If this debate has taught us anything, it is that financing a city is complicated.  But you cannot “vote with your pocket book” to change government policy.  The way to change that is by electing hard working and intelligent leaders to make good decisions.  I think we have some of those kinds of people running the city right now, but if you disagree, you’ll have your chance to change that when the next election rolls around.

Tom Gandesbery, Piedmont Resident

Editors’ Note:  The opinions expressed are those of the author and not necessarily those of the Piedmont Civic Association.  The Piedmont Civic Association does not support or oppose candidates or ballot measures.

Vote No on Y to stop City intimidation and silencing of residents –

For the first time in my 21 years as a Piedmont resident, I will vote against the city’s parcel tax. I do so for several reasons that other dissenting voters have described at this website and elsewhere.  These include reckless growth in the cost of city government and incompetent management of capital projects.   But another reason arises from a darker, more insidious circumstance that I, perhaps like other Piedmonters, had until now chosen to ignore rather than confront.  I refer to the City Council’s use of its privileged position and of city resources to intimidate citizens who speak out against Council catering to special interests.  The most egregious example of this reprehensible behavior came when a Piedmont homeowner objected to the Council’s attempt to manipulate the results of a neighborhood vote on utility undergrounding.  After the Council refused to comply with its own rules on the fraction of positive votes needed to implement undergrounding, a homeowner in the proposed district went to court to ask for relief.  Rather than defending the city’s interests in the suit, the Council instead chose to counter sue under provisions that would have inflicted heavy financial penalties on the homeowner.  The court, in ruling for the homeowner, noted that no competent lawyer would have brought the city’s suit.  The Council, however, included 3 presumably competent lawyers and had a City Attorney on staff.  As Piedmonters, therefore, we can draw no inference other than the Council intended to intimidate the homeowner, and any others who resisted undergrounding, into silence.  That attempt to intimidate a citizen cost Piedmont taxpayers over $600,000 in legal fees and settlement costs.

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