Property Taxpayers in Center of School Bond Debate

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Property taxpayers are in the eye of a brewing storm whipped up by the contrasting efforts to pass a statewide school construction bond initiative and the Brown Administration’s insistence that future school construction bonds be funded locally. Depending on which way this wind blows, local residential and business property taxpayers could be hit with a higher property tax burden.

There is also the danger than business properties, including small businesses, could be singled out for even higher taxes if local bonds rely on parcel taxes for repayment.

A $9 billion state school bond already has qualified for the ballot. Builders, building trades, business organizations, school districts and a bi-partisan array of elected officials support it. State school bonds are paid off by the General Fund and this is why the governor’s office objects. In his concern to protect the General Fund, Governor Brown wants local school districts to raise local taxes to pay for school construction bonds.

While Brown’s fiscal stewardship guarding the General Fund is admirable, forcing school construction bonds on local districts would add a burden to property taxpayers and exasperate California’s housing crisis. Moreover, it could expose businesses to higher local parcel taxes if an effort to create tiered parcel tax rates is revived.

There appears to be little disagreement of the need for school construction funds. Money from the last statewide school bond has run out. The governor believes local school districts should raise revenue for school construction and remodeling. That approach puts the tax burden on local property taxpayers whose property is collateral for the bonds, parcel taxpayers who pay a flat fee on each parcel of property, and building fees for new home construction.

Given that each of these payment methods add to the cost of housing in a state that constantly is looking for answers to an affordable housing crisis, the approach seems counter productive to say the least.

In addition, increased property taxes can be quite a burden on property owners on fixed incomes.

Relying on state funds authorized by a statewide bond is not new. Four statewide bonds were passed over an eight-year period between 1998 and 2006 but there has not been a statewide school bond passed since then.

Understandably, the governor is concerned with rising state debt. But it is important to consider that his plan moves any new school bond debt obligation onto local property taxpayers.

For businesses, especially small businesses, the cloud of increased taxes could become darker if an effort to revise a tiered parcel tax targeting businesses becomes reality.

Charging business properties higher parcel taxes than residential property was beginning to blossom around the state earlier in the decade. However, in an Appellate Court decision in Borikas v. Alameda Unified School District, the court ruled against that approach. In 2013, a legislative attempt was made to undo this court decision and open the door for businesses to pay higher parcel taxes. While this effort failed, an attempt to revive such a plan is possible if local districts become the focus of school construction bonds.

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