Taxes, taxes, taxes!

The Oakland City Council’s Finance and Management Committee has a busy meeting (PDF) to look forward to tomorrow. Below is a summary of four proposed measures they’ll be considering placing on a future ballot.

  • Amending the Transfer Tax Ordinance: When you sell property in Oakland, you have to pay something called transfer tax. In Oakland, that comes out to $15 for every $1000 of the value of the property sale price. Collection of transfer tax is expected to generate about $29 million (PDF) for the City of Oakland’s General Fund in the next fiscal year.

    As it stands now, transfers of real estate resulting from corporate mergers, consolidations, and acquisitions are not subject to the transfer tax. Well, the City thinks they should be, but the language of the law doesn’t make it entirely clear that they are, which meant we lost out on about $12 million of transfer tax over the last few years that should have been generated by these types of transactions. This measure would change the transfer tax ordinance (PDF) to clarify that it applies to all forms of property transfer, explicitly including corporate mergers, consolidations, and acquisitions. This would probably generate an extra $500,000 to $1 million for the General Fund next year.

  • Hotel Tax increase: The Committee will also be considering placing a measure on the ballot that would increase the City’s Transient Occupancy Tax (PDF), usually known as the hotel tax, from 11% to 13%. This isn’t an unreasonable rate – Berkeley’s hotel tax is 12%, Emeryville’s is 12%, San Francisco’s is 14%. Problem is, since we don’t have very many hotel rooms, the hotel tax doesn’t really generate very much money – it brought it a little over $12 million in 2008.

    The tax hike would bring in about $2 million extra dollars a year, which would be evenly divided between the Oakland Zoo, the Oakland Museum of California, the Chabot Space and Science Center, and Cultural Arts Programs and Festivals. If the tax passed, the money would be extra money for the purposes, not a replacement for the current General Fund contribution. In fact, if it were to pass, the tax could not be collected unless the City maintained the same appropriation for the Zoo, Museum, and Chabot Space and Science Center as allocated in the FY09-10 budget. So passage would effectively mean earmarking funding for these institutions, which would give the Council even less flexibility than they currently have in trying to address deficits.

  • Repealing Measure OO: November’s passage of Measure OO means that the City will be forced to take significant amounts of money away out of the General Fund and set it aside to be distributed as grants to organizations providing services for youth. This contribution would start at around $5 million and then rise to roughly $17 million per year. With the City already facing massive General Fund deficits, it really isn’t something we can afford.

    Councilmembers Jean Quan and Pat Kernighan are now proposing three options (PDF) for addressing the budget problems created by Measure OO. The first, and most reasonable, would simply repeal Measure OO. Passage of this measure would return set-asides for the Oakland Fund for Children and Youth to the original levels established by Measure K in 1996, 2.5% of all unrestricted General Fund revenue. That would be around $10.1 million next year, and rise to $13.6 million by 2021.

    The second option also put the set-aside at 2.5%, but would establish a minimum contribution from the City. So in the event of General Fund shortfalls, if 2.5% of the unrestricted revenue was lower than the amount spent in FY07-08, the City would have to cough up extra cash to cover the difference. The fund got $13.5 million in FY07-08, but 2.5% of the expected revenues for this year would be only $10.1 million. So we’d have to pay an addition $3.4 million on top of the 2.5%. Budget projections don’t show 2.5% of revenue amounting to more than $13.5 million until 2021. The third option would set aside a higher portion, 3% of unrestricted General Fund revenue to start, then 4% in 2013, 4.5% in 2017, and 5% in 2021. That would mean $12.1 million next year, an $24.6 million by 2021.

    The Council should have worked harder to defeat Measure OO in the first place. It would have avoided the need now to spend extra time and money trying to repeal it. Furthermore, advocates of the repeal would now be placed in the unfortunate position of having to convince people to reduce money allocated for youth, a much more difficult sell than saying we shouldn’t increase it. But of the three options, the first is the only rational one. Frankly, when we’re facing the huge budget deficits, I can’t even fathom the logic behind a decision to try to repeal Measure OO, but increase the set-aside anyway.

  • New Parcel Tax: The final ballot measure being considered on Tuesday, proposed by District 4 Councilmember Jean Quan, would ask voters to approve a new parcel tax (PDF), $46 a year for single family homes and $34.50 per unit in multi-family properties. The tax would generate an estimate $8 million annually to fund park maintenance, landscaping, lighting, and tree services. It would need to be approved by a two-thirds vote.

    I don’t even know why they would bother. After two failed attempts to raise the LLAD, an assessment district where the vote structure and weighting is far more favorable to passage prospects than a parcel tax, any Councilmember who seriously thinks that 67% general voting population is going to support this is straight up delusional. Oakland voters didn’t even come close to approving a new parcel tax for police. Why on earth would anyone expect them to do it for trees?

Complicating the issue is the fact that when these items were introduced, it was expected that the State was going to hold a special election on June 2nd. The deadline for the Council to place local measures on that ballot would have been March 6th. However, the recently approved State budget package moved the date of that special election up to May 19th. This means that we are already passed the deadline to place our own measures on the ballot. I have no information whatsoever about why this decision was made, but I imagine it was probably done at the insistence of one of the handful of Republicans who agreed to support the budget, specifically so local governments couldn’t load up the ballot with their own new taxes.

So if the Council decides to approve any of the proposed measures, they would either have to wait until the next election, which does nothing to address today’s budget problems, or they would have to pay for their own special election. With the City already facing ginormous budget deficits, funding a special election for new taxes that probably won’t pass anyway is pretty much like just throwing money in the trash, a stupid thing to do under any circumstances, but especially so when you don’t have any cash to spare.

A City that has the highest paid municipal workforce (PDF) of any large city in the country, and that awarded employees cost of living increases over six years that amounted to 10.1% more than CPI (PDF) has no business whatsoever asking voters to hand over anything else. The Council is in a tough position, no doubt, but they simply have to start learning to make do with what they have. District 5 Councilmember Ignacio De La Fuente has already declared his opposition to any increase in taxes. As for the rest of the Committee, we’ll have to wait until noon tomorrow to find out.

24 thoughts on “Taxes, taxes, taxes!

  1. Max Allstadt

    Well I certainly like the first one. Other than the fact that it is yet another indicator that the Council has serious trouble vetting their laws before they pass them. Clearly they intended corporate transfers for be included, and clearly they screwed up.

    As for the Hotel Tax, the cultural arts funding shouldn’t be earmarked, but general. The council is probably going to slash arts funding in the next budget cycle, so it’s short sighted to target this funding at any particular faction of the arts rather than at the whole department.

    OO – absolutely. Obliterate it. It was a cynical, manipulative money grab. I think that if we can’t get a repeal on the ballot, the Council should simply ignore measure OO, get sued, and get a retroactive repeal on the ballot while the lawsuit is tied up in court.

    New Parcel tax? Only if it also funds a multi-city lobbying initiative to pass a statewide ballot initiative repealing prop 13 for all properties except owner occupied first homes.

  2. Becks

    Thanks for the detailed analysis of these tax proposals.

    FYI – I believe the reason the Legislature chose a May 19th special election is because that’s when Los Angeles is holding its local election. If the budget hadn’t taken months to pass, a May 19th date would not have been prohibitive for local municipalities seeking to add tax items to the ballot.

  3. V Smoothe Post author

    Thanks, Becks. I liked my paranoid conspiracy theory about the explanation for the special election date change better, but your reasoning makes sense. I will note that the date was not changed to May 19th from June 2nd until February 16th.

  4. das88

    The flat 1.5% transfer tax always seemed really high and not very well-thought out to me. I think other than Berkeley it is about the highest in the country.

    It seems to me the city has certain fixed-costs in real estate transfers, so a formula like used for business tax might make more sense — i.e. $X for up to $Y in value, then some percentage over that.

    It might also make sense to reduce or remove entirely transfer tax in areas with a lot of vacancies/foreclosures/blight/etc.

    It might also make sense to reduce or remove it entirely for city employees to encourage more of them to be part of the community. It is certainly a benefit I could get behind quicker than COLA’s in excess of inflation.

  5. suki o'kane

    Just got back from the Cultural Affairs Commission meeting to see if they had a sense of the usefulness / viability of the hotel tax increase. The Chamber of Commerce killed this initiative a couple years ago, and looks like they might be poised to do the same unless it’s expanded to restore the % that used to fund the Oakland Visitors and Convention Bureau. Plus it would be a 2/3 vote needed during a special election in a time of economic collapse with the contentious OO repeal on it – a tall order for the arts community not so practiced at voter mobilization.

    So, the Commission. It was Open Forum, probably the worst venue for communication with an official body, but I had to try. I highlighted two areas of the reso that could use some language revisions: 1) specifically articulate what part of Cultural Arts receives the funds to support of programs and festivals (the latter being line-item eliminated in the Fall). Without something specific, there might be some grabbing as the cultural funding waters get chummed with new dollars and

    2) include Cultural Arts in the general fund threshold language that currently, yes, de facto earmarks general fund revenues to the Museum, Chabot and Zoo at 09-10 levels or

    3) throw that triggering section out. If we’re going to go to the trouble of taxing our visitors then let us simply tax them and invite them to attend the programs their tax is subsidizing. While we’re at it, eliminate the Citizen Advisory Committee proposed to oversee it. Plenty of mechanism and oversight to manage the funds within the current sitch: Life Enrichment, Cultural Affairs Commission, Funding Advisory Committee, etc.

    It’s a great start on identifying new resources for the arts (or perhaps what will ultimately be resources for Art and Soul and Black Cowboy Parade), and we need to do more.

  6. len raphael

    the transfer tax is flat out confiscatory compared to rest of california including SF. city has no costs involved in real estate transfer. it’s strictly county recorder’s office function, unless there’s some billing back to the city. if you want to encourage upgrading oaklands buildings, you make it equal to say SF’s or SJ’s rate.

    extending it to entity ownership changes. are they bringing into into synch with the rules for prop 13 or making a whole new set of rules?

  7. V Smoothe Post author

    Max -

    If you read the documents linked above, you’ll see that the current transfer tax ordinance was adopted in 1974. So as much as I agree that the Council often doesn’t vet things properly, this issue particular has nothing to do with the current officerholders.

    das88 -

    I haven’t done any kind of grand survey, so I couldn’t say how Oakland’s transfer tax compares to other cities nationwide. But at 1.5%, it is certainly quite far from the highest. The City of Philadelphia imposes a 3% real estate transfer tax.

  8. das88

    I realized I was writing too hasty — I haven’t done a survey of real estate transfer taxes either. I was going off of something Sanjiv Honda said during an open-forum (yeah I know …).

    Anyhoo, I think I was mis-paraphrasing him. After I submitted, I started remembering it more as him saying along the lines that Oakland and Berkeley were second and third highest in the state. I might still be getting it wrong.

    Ok, let me ask my friend Google. There is this document from 2004
    http://www.ci.sf.ca.us/site/uploadedfiles/controller/budget_information/RealPropertyTransferTax_Feb2004.pdf

    10 Largest California Cities Sorted by Rate
    Oakland 1.500%
    San Francisco* 0.643%
    Los Angeles 0.450%
    San Jose 0.330%
    Sacramento 0.055%
    San Diego 0.055%
    Long Beach 0.055%
    Fresno 0.055%
    Santa Ana 0.055%
    Anaheim 0.055%

    The SF number is a little misleading since they are both city & county, I think this table is splititng their total between the two — SF county is also listed at 0.643% whereas other counties are much lower.

    Alameda County Jurisdictions Sorted by Rate
    Berkeley 1.500%
    Oakland 1.500%
    Piedmont 1.300%
    Albany 0.850%
    San Leandro 0.600%
    Alameda 0.540%
    Hayward 0.450%
    All Other 0.055%

  9. V Smoothe Post author

    Without doing any further research, I can say those numbers definitely aren’t accurate today. For example, Alameda’s transfer tax is 1.2%, not .54%. Albany’s is 1.15%, not .85%. Not having witnessed the specific meeting you’re referring to, I couldn’t say whether Sanjiv’s comments there were accurate or not, but I do find that he’s wrong probably at least 50% of the time.

  10. das88

    What’s interesting, then, is that those cities probably raised their transfer taxes during the height of the real estate frenzy which doesn’t seem like very good fiscal planning.

    Even with the updated numbers making other cities more inline, though, I would say that they are also too high rather than Oakland & Berkeley are not too unusual.

  11. Marleen Sacks

    A new parcel tax? Are you kidding? After the Measure Y fiasco, they should be ashamed to even consider such a concept. Even though the money is supposed to be for landscaping and lighting, I wouldn’t be at all surprised if it ends up getting used for junkets to D.C. and lunches at Bay Wolf. Such expenditures apparently appear to be justified under what the City refers to as the “backfill” theory, and whatever other cockeyed theories are out there to justify turning special tax funds into slush funds.

  12. Max Allstadt

    Regarding the issue of our highest paid municipal workers. We have figures on that. Thanks for the PDF. Do we have any figures on productivity? Anecdotally, it’s pathetic. Here’s a question for your readers: when you walk or drive by a city job site or a Cal-Trans job site, or a PG & E job site, what percent of the people you see are doing anything productive? What about on a private job site? I see productivity and effectiveness on the 2nd floor of 250 Ogawa, but I never see it at city job sites.

    If there were some kind of productivity metric that we could look to, we could demand that the city employees’ unions maintain and improve a standard, or get no raises, or even get cuts.

    I also wonder what the retirement age is for city workers. We should probably raise it significantly. The fact that your 65 doesn’t mean you can’t work any more, nor does it mean you shouldn’t work any more. I’ve worked for a contractor over the last two years, and he’s in his mid 70s. If he can carry sacks of concrete at his age, certainly some municipal workers can do the same.

    V- I know this is a tangent from the matter of taxes, but at some point I’d love to see if you can dig up a way of evaluating just how ineffective our public employees are, regardless of their pay. I’d pay them if they worked as hard as my boss does. I just know they don’t work that hard. Still, rather than whittle down their pay, I’d rather find a way of racheting up their productivity and competence.

  13. len raphael

    Sanjiv H. is correct. Much of CA including most urban areas have rates ranging from 1.10 per thou of sale price to 8/thou. Oakland’s rate is 16.10/thou.

    SF uniquely has graduate transfer tax, which seems much more equitable than Oakland and Berkeley. For under 250k to 1Mill sale price the SF rate is 6.80/thou. ie. on a 500k sale the tax wb 500×6.80=$3,400 in SF, but $8,050 for the privilege if Oakland or Berkeley.

    Normally, the buyer and the seller split the transfer tax. But the net effect is to inflate the cost of buying real estate in Oakland and to feed the transfer tax addiction of our City govt. Talk about unstable source of revenue.

    Transfer tax by city for all of Calif. from the “League of California Cities” site. (odd, their site doesn’t end in .org)
    http://www.californiacityfinance.com/PropTransfTaxRates.pdf

    rate per 1,000 of real estate sale price:
    City of Alamada 13.10
    Berkeley 16.10
    Emeryville 1.10
    Orinda 1.10 as is most of CCosta except Richmond, our sister city for bad schools and high crime. It’s rate is 8.10.

    -len raphael
    temescal

  14. Ralph

    Good to see council efforts to repeal Measure OO. Prior to the Public Safety Hearing; I met a woman, who wants me to help her unseat Quan. Then she indicated she supported Measure OO, and I told her point blank there is no way on God’s green earth that I could possibly support anyone who thought that was a good Measure.

    And as much as I am annoyed that Council did not actively campaign against this Measure, I am guessing they were hoping it would fly under the radar and people would not go down ballot. Any other year this may have worked.

    It will be a cold day in he** before I vote to raise my taxes. Do right by me with the money you have and then come back to me for more. And you can demonstrate you are doing well by arresting the drug dealers on the 1400 blk of Broadway. Police make a uniformed response, which scatters the dealers, but we need undercovers and arrest.

  15. len raphael

    R, Impossible to prove, council members, including the two runoff candidates for at large, didn’t do sht to defeat OO because they knew it would probably win and they knew they were too ineffectual to change the outcome. other than a couple of public statements, there was one postcard with bad graphics stating the council’s opposition to OO. Jean Q said something to the effect that she was not allowed to take position on ballot measures.

    even now, they don’t have the cajunes to make the massive cuts in the programs and salaries most of them overfunded over the last decade. so my tendency is not to toss them a life preserver by supporting the repeal of OO when they haven’t made the fundamental permanent financial changes we’ll need even after this crisis.

  16. V Smoothe Post author

    Len, not sure where you heard that, but you must be misinterpreting something Quan said. She, of course, is allowed to take a position on measures on the ballot, and was, in fact, very vocal about her opposition to OO. One could argue that she could have done a better job fighting it, but with her passing out No on OO signs from her booth at like every street festival this summer, there’s no way anyone can accuse her of being unclear about her position.

  17. Max Allstadt

    They could have done a much better job of fighting it. 11 out of 11 major elected officials voted against it.

    Of the five competing candidates for council seats, off the top of my head, I know Sean Sullivan, Pat McCullough and Kerry Hammill were against it. Anybody know about Gilmore or Juarez?

    Kerry Hammill, by the way, also counts as one member of the School Board who was against it. Anybody know about the others?

    There were also a bunch of people who run youth services organizations who voted against it. I know at least one who wasn’t super public about it, but who knows, that might change.

    Seriously one flyer that said “11 out of 11″ on it, and this thing would be toast.

  18. Ralph

    len, that was essentially my point. but let me see if i understand, you rather us be saddled with this monstrosity of a measure rather than have cc repeal it.

    (i think one of the people who actually realized the stupidity of the measure was one of the authors. admittedly it was qualified – he did not think this was the right time to introduce this measure. i think that was shortly before the election. do i understand correctly.)

    max, i am glad you still believe in the decency of man. i wish a campaign of 11 out of 11 say no on OO would have defeated it. some people i talked to kept reiterating the same tired crap – you must vote for the kids. others talked about the people must be heard. what is deeply disturbing is people think afterschool programs for less than 5% of the students are going to fill void for the 90% of OUSD students who are 5 grade levels below where they should be is going to make an appreciable difference.

  19. Max Allstadt

    Ralph, I don’t entirely believe in the decency of man. I believe that simplistic campaigns can be very effective. We need to retaliate against OO advocates with the same simplistic campaigning they used to win. The only difference will be that our underlying logic won’t be flawed, and our message won’t be a big fat lie.

  20. Charles Pine

    In 2006 Quan raised $150,000 to campaign for her Measure N ($148 million in bonds, build a palace library downtown that neighborhood youth will not go to). Maybe she raised one-tenth that to print yard signs against OO.

    Kernighan’s suggestion to consider taxation as a whole rather than topic by topic shows up Quan on the parks parcel tax: she lost twice on increasing the LLAD and she wants to restore her reputation as the one who can pass tax increases.

  21. DontBotherDelores

    David Kakishiba, Greg Hodge, Jumoke Hodge were all for OO. Mrs. Hodge even spoke in favor of it at the Finance meeting. These people broke our school district once and they have no problem doing it to the city either.

  22. Max Allstadt

    So that’s two School Board Members and one School Board Member-Elect (at the time of the vote). Hammill was against OO. Did any of the other members speak against it, or did they all just stay mum?

  23. len raphael

    i received a mailer no on oo shortly before the election which listed, most if not all council members and maybe dellums also. too late to affect absentee voters, and too poorly done to counter that class OO smiling child poster. I’ve kept that yes on OO mailer because it was so well done.

    R, the way things are looking, before we’re out of this economic trough we might well have to slash 20% of the general fund expenditures, not 10%. that’s what 200Mill?
    Heck, a council and mayor that played around w Y and and LLAD, various interfund balances, should be able to trot Russo out to get a cya letter to define half of the general fund spending as child related.