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Santa Barbara Politics, Media & Culture

Tuesday, March 06, 2007

Housing Series: Prop 13 Reform

We need to break this subject up a bit as there has been so much discussion.....so, PROP 13 Reform. One of our readers says he pays $11,200 versus his neighbor with a similar house who pays $2,500 in property taxes...is it good public policy to provide incentives for people to stay in one house for many years or should all property taxes be based on more current appraisals? If so, who is going to do all that work? and better yet, who is paying for it?

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56 Comments:

Anonymous Anonymous said...

I think if you are willing to pay $800,000 for a cheaply built, 1100 square foot tract home, built in 1958, you deserve to pay high property taxes. You have set the value on that home by being willing to purchase it. Tough! If you don't like it, move out of town or rent. They guy next door also struggled and scraped to buy his house 20 years ago. At that time his neighbor was probably paying $400 a year because he bought his home in 1972 or earlier.

Prop 13 assumed correctly that as properties changed ownership and values went up, overall tax revenues would go up. In general, that concept has worked very well. Of course nobody could predict how skewed the CA real estate market would get, but that is part of the risk in living in a free market economy. Buyers know going in how much the taxes will be. It isn't a secret and if you are willing to pay the inflated price for a home, then you have to accept the inflated taxes. They go hand in hand. Why whine about it after the fact?

3/06/2007 4:57 AM  
Anonymous donaldo de Santa Barbara said...

......don't cry for me

This disparity is only one example of just a single disparity in our economy. I know it's difficult to figure out who has the worst life in our world but the property owner own can afford a million dollar price tag does get stuck with a hefty property tax bill.

On the bright side for the poor poor homeowner the property tax is deductable on federal tax return and subsequently on state tax return and depending the "reported income" along with home interest and taxes on the first and second home will probably result in a very low if not negative tax bill.

Also on the bright side for the poor poor homeowner is that as time goes on and we don't figure out that what we are all complaining about the same thing. The disparities and corruptions in our style of government and economy (reflective of ourselves I might add) will result in the home owner now paying 11,200 a year, will in twenty years be paying proportionally less than the newby neighbor.

....don't cry for me Carrrifoooornia..........

3/06/2007 5:51 AM  
Anonymous Anonymous said...

Prop 13 is a bummer for everyone when you first buy your house.

Prop 13 is a life saver after you have owned it for a while.

Point is, that for all of us who did save and buy at one time, it was really hard those first few years. There were no vacations and lots of peanut butter sandwiches and old cars. And now, 30 years later it finally looks like it was a very good choice.

And that is the way it always has been and will always be. So save your money, live frugally and make the best investment you will ever make.

And you can get into the Santa Barbara housing market cheaper right now than in years. Take advantage of this and find a way to do it.

Montecito Journal has an entire edition about how to buy into Montecito, which you can apply the same principles to other more affordable locations.

Rather than quit your jobs and sit around waiting for a handout, take your considerable personal skills and plot out a life plan that lets you find what you want.

And it may not include a beach house with killer views, but it may provide a nice Westside condo.

If your only plan is to whine and cry unfair, this is not a plan. But maybe it will hold you until Daddy dies and you get your inheritance.

Other people are working for their dreams, not demanding them. And their dreams adjust to their means. This may not be a concept you are willing to accept ....yet.

Read the Montecito Journal - some excellent tips in general. Just take off the Montecito gloss.

Hispanics here, many recent immigrants are moving into housing in Santa Barbara - just read the last names of recent real estate sales.

Get to know some of them and see how they did it. Because they are doing it. While too many of you are just sitting around whining. Not pretty.

You have a lot to learn from recent immigrants who still have a work ethic, know how to prioritize and find what needs to be done.

3/06/2007 7:13 AM  
Anonymous Anonymous said...

Prop 13 does not need reform.

It serves its intended purpose. It stablizes property tax increase rates.

And it protects everyone's main investment: their personal home.

3/06/2007 7:14 AM  
Anonymous William Sact said...

Prop 13 protects those that want to make their house a home for the long term and promotes continuity of ownership which, in turn, promotes community.

Rising property taxes are a cost of doing business if you decide that your path to wealth involves real estate speculation and churning properties.

I especially like the idea that prop 13 penalizes newcomers. And, the arguement that younger buyers will use more services (schools) justify higher taxes compared to the blue haired neighbors.

3/06/2007 7:15 AM  
Anonymous wineguy said...

Ah, yes, Prop 13. IMHO the biggest bill of goods ever sold to the people.

Contrary to what was posted earlier in a comment to the "Where You Park It" post, heirs do not inherit the Prop 13 assessment (with the sole exception of surviving spouse). This means that sooner or later every privately-owned piece of property will be re-assessed at market values. This is because sooner or later we all die.

But what about corporate-owned properties? Corporations never die, and as long as they hold onto their property it is never reassessed. Think about that one. Who really benefited from Prop 13? Not you and me -- corporate property owners.

There also was another effect of Prop 13. In the pre-13 days, property taxes primarily supported schools and infrastructure. There was some connection between the taxes you paid and the value of your property. That is, it was understood that a property in a well-kept neighborhood with good schools was a place that kept its value. The owner could see that the taxes paid helped keep up the neighborhood.

Now, however, the schools look to the state for ADA money, and the primary source of revenue for the cities is Sales Tax. It is hard for the average homeowner to see exactly where the Property Tax money goes, because it is funneled into various "general funds" at the State and County level.

Lastly, as is suggested in the post, the Prop 13 system is basically unfair, in that neighbors with similarly valued properties pay wildly different taxes.

Will any of this ever change? Conventional wisdom has it that Prop 13 is the "third rail" of California politics, and anyone who touches it will die. Which does seem to be the case at this time.

3/06/2007 8:05 AM  
Anonymous Anonymous said...

As for Prop 13, I voted against it at the time, convinced that it would transfer power from the local to the state. Also, discrepancy between neighbors seemed unfair, although clearly, over time, the pre-1976 owners would die off.

But no one imagined the boom in SB real estate. What's unfair now are all the add-ons, the preferences for veterans, for instance, and family members, and much more that we (but not I) have voted for over the years, expanding the original Prop. 13.

About 9 years ago, after years as a tenant, I managed to buy a small house in a working class area of SB. My very working class neighbors have been here forever, sent many children through the local schools, and all are protected under 13, paying around $7-800/year property taxes. With the annual creep, my taxes are $3,600 - and I have no children. Their visiting children drive new SUVs; I an older small car. Almost all my neighbors — and I, too — have an illegal back yard rental unit, providing (relatively) low income housing.

Where's the fairness? Think about it. Who defines "fairness"?

I do think it is to society's benefit to pay for education but do also think that property taxes are unfair. A truly graduated income tax, biting heavily at the upper end, is a much fairer solution - and a very low, based on evaluation, property tax.

Until then, if Prop 13 should come up for a vote, I this time would vote against removing it.

If it were to go be substantially changed or abolished, without income tax reform, most lower income neighborhoods in Santa Barbara would be destroyed as few of the older timers in this city could afford to pay those taxes. After the initial fall in real estate values, prices would skyrocket as all the people just longing to be here would come.

Supply and demand - huge demand, small supply ... unless, of course, we (or you, because I would have left) build, build, build to meet that demand. And that, of course, is what has been done to the south of here....

3/06/2007 8:13 AM  
Blogger Honor Adams said...

What Prop 13 did was reign in the lawmakers and make them abide by a budget. What a novel idea! As far as Prop 13 being "unfair", I don't think so. It protects all property owners, from the past, present and future- from reckless politician spending.

You may gripe about your taxes now, but 5-10 years down the road, you'll be glad you aren't paying the going rate.

3/06/2007 8:55 AM  
Anonymous Anonymous said...

You dropped a very important point: the tax assessment that leads to the $2,500/year tax bill can be inherited. So 50 years from now, the grandchildren who inherit that home will still be paying $2,500, while the neighbor will pay $300,000/year.

Prop. 13 sets up a landed tax-evading heriditary aristocracy. How the heck did we vote for that?

3/06/2007 8:58 AM  
Anonymous syvjeff said...

Over the past 5 years in Santa Barbara I've heard a few pretty much say that those holding on to their homes with Prop 13 tax rates are people who are just greedy and getting a huge break compared to the rest of the world.

Well I hate to break it to those who are into the greedy finger pointing game that Prop 13 is what is keeping this state somewhat glued down. I'd rather allow a settled long term household stay in this area compared to someone who is in the buy, flip and step up game.

What makes a community? The residents who stay, care and nurture it. I have older friends who are retired basically say if they weren't Prop 13'd they would have to move because they couldn't make it based on the fact that housing inflation outpaces overall cost of living. These people are the glue that hold our community together.

I personally believe that if Prop 13 gets pulled in an area like Santa Barbara County, people like me who rent would really not be able to afford to stay and rents would go sky high. It's bad enough that my rent just went up because of a local school bond passing to upgrade a school with declining enrollment.

3/06/2007 9:03 AM  
Anonymous Michael Gorder said...

I'm doing something about Prop 13's disparities; I'm taking the state (Ventura County Assessor, actually) back to court, all the way to the U.S. Supreme Court if necessary. I moved to CA from AZ a little over 3 years ago and found I'm paying 5 or 6 times what some of my long-time resident neighbors are paying.

The mechanism that creates the problem (and the only element of Prop 13 that I'm challenging) is the reset of tax assessment to market value each time a property changes hands. I've thought about this a lot, and over a long time, before going ahead with the legal challenge, and I could go on and on about why I'm doing this, but to boil it down:

1) I see this system as a threat to my career (and that of anyone who has a need to move, such as a growing family accommodating their housing needs), as I fully expect I'll relocate once or twice more.

2) I'd rather see a legislative or referendum solution, but since Prop 13 is a state constitutional amendment, I think it's impossible except as a court challenge.

3) The disparities have been expected and predictable since the beginning, and the effect is to create an ever-increasing benefit to long-term classes of property owners at the expense of newcomers or others with exigent need to relocate. Other states (Florida and Arizona, for example) have or are talking about enacting similar tax laws. This creates a significant impediment to migration, and is the basis of my case (Federal right to travel principle).

4) The typical justification for the status quo, that people who've owned their homes a long time shouldn't get kicked out because they can't pay their taxes, can be solved by other, more targeted means that address that particular problem. CA already allows retirees to accrue tax liens if they can't pay their assessments!

5) An straightforward alternative to Prop 13 would be to control the rate of statewide property tax revenue growth rather than just individual assessments.

6) Tom McClintock once wrote to me (after I told him what I was up to) that Prop 13 "keeps taxes low for everyone". Let me give the lie to this notion. Suppose instead we had an alternate system with equalized assessment which controlled state revenue growth, and assessments grew at ~5% rather than 2% as they do now.
(I didn't just pull 5% out of the hat. This is what Berkeley econ prof and Nobel laureate George Akerlof suggests is the appropriate number.) It turns out that under Prop 13 I'll be paying higher taxes FOR THE NEXT FORTY YEARS than I would with the equalized system. This is more or less true of anyone who's bought property in the last five years in the high-demand areas of the state.

7) My attorney, Larry Dushkes of Thousand Oaks, and I are looking for help moving the case forward.
If you're interested, you can contact me through my website, stop13.org.

--Michael Gorder
Westlake Village

3/06/2007 10:01 AM  
Anonymous Anonymous said...

You want to see a travesty with Prop 13? Go to http://www.zillow.com and type in the address of 1939 Laguna Street in SB.

Now, digging a little deeper, it appears the owners of this 1-acre property paid a mere $1,988 in property taxes for 2006. I simply am amazed.

I have no axe to grind against the owners of said property, it's just a prime example of what's wrong with Prop. 13 in its current form.

3/06/2007 11:04 AM  
Blogger Bill Carson said...

Just took a look at my last property tax bill. Did you know that nearly two-thirds of the property tax revenue goes to the School Disticts. Two-thirds!!! What the heck do they do with all that money?!

Maybe the problem isn't so much how the government collects the tax dollars, but how they are spent.

3/06/2007 11:23 AM  
Anonymous Anonymous said...

Children do inherit the Prop 13 tax base, as well as qualified grandchildren and a number of other qualified persons. Please read the law and do not represent it here in this discussion.

3/06/2007 12:24 PM  
Anonymous sa1 said...

I guess I'm a little lost on this argument of fairness. In all cases, a person who relocates to a new dwelling has two choices. Buy or rent. The merits of your choice are dictated by market rates. The long time owner of a property with a "low" property tax may be able to offer his home for rent at an attractive rate over the monthly cost of buying that same property. The seller of said competing property then has the option to lower his asking price so the monthly carry cost is more in line with prevailing rental rates. It's these individual decisions multiplied by millions of times that cause a reversion to the mean. This is why the dramatic drop in mortgage rates caused an inflationary spiral in the asking price of individual homes. The monthly cost of borrowing $200,000 @ 10% in '89 was ~$2000. At 5%, you could borrow $400,000 for ~$2000 allowing you to offer twice as much for the same house for the same monthly cost. The owners of the house didn't cause the high price, the new buyers did. Prop 13 merely set the tax rate at 1.1 % of the sales price. So the desparity in tax assesment was caused by the very buyer that caused the imbalance. Why try to penalize the owner down the street who had nothing to do with this decision?

3/06/2007 12:51 PM  
Anonymous sa1 said...

"Children do inherit the Prop 13 tax base, as well as qualified grandchildren and a number of other qualified persons. Please read the law and do not represent it here in this discussion."

So what's your point? If the children don't live in the house, maybe they'll offer it for rent a a low cost to the guy that's helping the homeless in this town. Or maybe they'll put it up for sale and the new owner will then pay the "fair" tax rate.

As I grow older in life, I have a better understanding of the Commandment "Thou shalt not covet thy neighbors goods"

3/06/2007 1:05 PM  
Anonymous Anonymous said...

Wineguy, you are simply wrong. Children and grandchildren inherit the Proposition 13 tax assessment.

I know.

I inherited my mother's.

This is simply wrong and stupid. But that is the whole purpose of Prop. 13, just to vent irrational anger at the government.

I'd change it the following way: as long as the original owner or spouse keeps the house, use the current formula for the property value assessment.

But upon any transfer of the property, make the old owner responsible for back taxes if the sale price (or fresh assessment) is different than the property value assessment.

Just use smooth appreciation from first sale to transfer to work it.

That would keep old people in their houses just like the current system, and keep predictability to the property tax while an owner/occupant lives there. You'd only be liable for the property value increase when you have the cash after the sale of the property. And we would have no need for new assessors.

But it would even out the ridiculous unfairness of the current Prop. 13. The most obnoxious portion of that unfairness is that children and grandchildren inherit property tax assessments.

3/06/2007 1:40 PM  
Anonymous Anonymous said...

We all know this is a retirement community, here's a passage from wiki that seems to speak directly to our current housing problems:

Similarly, Proposition 13 greatly benefited homeowners whose homes have appreciated in value since it was passed, particularly those (such as the elderly) whose incomes have not risen as fast as property values. In cities with many older residents, this has led to a severe shortage of affordable housing, since new developments must often be far above the state's median home price in order to provide enough tax revenue to pay for the services they require.

3/06/2007 1:43 PM  
Anonymous wineguy said...

Thanks for the corrections, as I was apparently wrong about the inheritance matter. However that does not change the fact that corporations are the major beneficiaries of Prop 13.

3/06/2007 1:47 PM  
Anonymous JA said...

Sara,

Before Prop-13 was passed by the voters in 1978, the property tax rate in CA was 2.6% and as high as 3% in certain cases.

Imagine that? Take the assessed value of the average south coast home today and multiply it by 2.6% and that is what we could all be paying were it not for the efforts of Howard Jarvis.

However, there is still a need to provide additional relief to many California families who are getting slammed by out of proportion property taxes. I say out of proportion because they really aren't in proportion to the current level of service recieved from local governments.

What we could do is increase the homeowners exemption which hasn't been changed since 1974. It has remained at $7,000. This is significant when you consider the fact that $7,000 in 1974 was worth a third of the value of your average home in California. Today, $7,000, particularly in an area where the median price for a single family home is $1.2 million, is nothing.

3/06/2007 2:56 PM  
Anonymous anonymous santabarbarian said...

Wineguy- thanks for you post regarding corporations and prop 13. I was not aware of that.

3/06/2007 5:36 PM  
Anonymous harping said...

Anon. 8:58 a.m. wrote "$2,500/year tax bill can be inherited. So 50 years from now, the grandchildren who inherit that home will still be paying $2,500"--not so, it goes up 2.9% per year for every homeowner(& if property values drop you can request a reassessment). The rate is compounded, so rest assured the grandkids will be paying plenty more than $2,500/yr fifty years from now!

3/06/2007 6:28 PM  
Anonymous Anonymous said...

Time to install a parcel tax - a certain percentage goes to the city/county at every sale.

Public services are primary reasons the quality of life brings higher sales prices for homes. The owner should not make all the profit from these public services that increased their home equity.

They should pay up part of their profits. Other cities have parcel taxes. It would help cure some of the imbalances here and fund municipal services.

I say, bring on more city staff to sit around and call on their sick leave and medical benefits while they do nothing but complain they are overworked.

3/06/2007 7:41 PM  
Blogger Sara De la Guerra said...

JA -- not a bad idea. Kind of like the flat tax that surprisingly Jerry Brown and many Republicans have been for. That sounds like the fairest way to do it...

3/06/2007 8:00 PM  
Anonymous Michael Gorder said...

Harping 6:28pm: Prop 13 increase limit is 2.0 percent per year. In 50 years, that factors to an increase of 2.69x, so an assessment today of $2500 will be exactly $6725 in half a century. Projecting inflation (which averaged ~4% over the last half century), the relative cost in curret dollars would be ~0.38x.

Assuming we're talking about an $800k property today and comparing with statewide home prices appreciatng at ~9% per year since the early 1970s (this from CA Realtors' Association and other sources), a new buyer of a similarly valued and appreciating home half a century from now will be paying close to 100x higher taxes than his heir neighbor. For all practical purposes, the heir will be paying zero....

While this certainly is based on some speculation about where property values are going, the reality is there are similarly valued properties around which have assessment disparities of well over 100x--today.

Taxes (broadly) buy good government, and current market value is an excellent measure of how much a property owner needs good government (i.e., police, fire, courts, etc.). Turning the tax system into a pension system for the already-wealthy is neither wise nor just.

3/06/2007 8:21 PM  
Anonymous sa1 said...

"Public services are primary reasons the quality of life brings higher sales prices for homes. The owner should not make all the profit from these public services that increased their home equity."

How does this take into account that fact the long term residents have been paying prop tax all along to build and support the infrastructure you so highly value today? i.e. the schools were built with their money not the new owner's who just start paying tax now yet have full use of the infrastructure. Still haven't heard how flattening the property tax in SB will make housing more affordable? If everyone in Cali had their property reasessed, where would the money go? What would people suggest the new found wealth be spent on? What infrastructure are we missing out on here in SB?

3/06/2007 8:33 PM  
Anonymous sa1 said...

and another thing Mr. Gorder., how do you explain the fact that property tax in Dallas is not fixed, yet there is very little to no appreciation in real estate there? Should we also get rid of the in state subsidy for residents of cali and force every attendee to pay the actual cost at the University of California? How are we long term residents well served by you if you're just here long enough to put your kids through Univ., pay four or five years in prop tax than leave due to "employement necessities"? Gov't has been proven to be a very poor guardian of the public's money.

As I've said before, it sounds like sour grapes to me. Cali has built it's economy to be like the 7th largest in the world, 60% of the population own their own homes, we pay 28% of the federal income tax, we tolerate a virtual open border with our southern brothers, have one of the most generous support system for the needy, and you think you have a better idea???

If it aint broke, don't fix it. And don't forget, prop 13 protects those small business owners who employ a whole lot of people especially in this town.

3/06/2007 9:01 PM  
Anonymous Anonymous said...

Sa1, still haven't heard why passing Prop. 13 assessments to kids and grandkids makes any sense at all. That defect alone is a good reason to trash Prop. 13.

I've tried to give a serious alternative... leave the system as it is, but when a home sells, if it sells at above the assessed value, make the seller liable for back taxes, which they can easily pay out of the proceeds of the sale. Also, stop the ridiculous inheritance of Prop. 13 assessments.

If we did that we could lower the tax rate from 1% to something less, like 0.8%.

3/06/2007 10:16 PM  
Anonymous Michael Gorder said...

sa1 833 & 901: I don't deny that part of my rationale for pursuing this is that I can. It's not clear that a CA resident moving in-state has standing to make a right to travel case, but I do.

The notion that long-term residents have paid their dues fails on two counts, I think. First, it unjustifiably burdens in-state migrants; second, the Federal case law on right to travel takes a dim and increasingly strident view opposed to tax or benefit structures that favor broad classes of long-term residents over newcomers. The social rationale for this is simple: we all pay our "dues" to each other somewhere (elsewhere in CA, elsewhere in the U.S.), and it's illegal to stand in the way of people who want or need to move.

The reason property in CA appreciates as it has is complex, but basically it's because people want to be here. I myself went to school here, moved away, and then came back. I expect to stay in the state, but I may move elsewhere. In any case, I want to work to make sure that no one--certainly myself included--faces economic discrimination regarding where they choose to live. On the whole, I think California would benefit from a reasonable adjustment to its property tax system that evens the playing field.

I'll also admit that what I'm doing may expose the state to a catastrophic liability risk. If I succeed in knocking out the reassess-at-sale provision, it will open the door to a flood of refund claims. Doing the math brings bankruptcy to mind....

Perhaps this reason alone (i.e., that such a risk could even exist) is sufficient cause to take a serious look at reform.

3/06/2007 10:16 PM  
Anonymous Anonymous said...

The reason property appreciates exorbinantly in California is simple... existing homeowners stifle the free market. They are little different than old communist economic planners in Moscow and Beijing... the only difference is their political goal.

After stifling the free market, homeowners then make all sorts of arguments that it is the free market that drives up the cost of housing... supply and demand, and since existing homeowners heavily suppress the creation of supply, the price goes up.

Then there is all the ignorant nonsense from existing homeowners that new housing ruins their quality of life, or that our environment cannot sustain more housing.

Quality of life is a function of infrastructure. Crowded places can be fantastic, if they are well planned. But homeowners do everything to stop the planning of infrastructure that would make higher density livable.

Environmentally, the South Coast from Rincon to Gaviota, can only support 5,000 folks or so, simply because of the scarce local water supply. We've already trashed the environment with Cachuma and the Central Valley Water Project to subsidize (financially and environmentally) the existing homeowners. If existing homeowners really cared about environmental sustainability, they would raze their home and remediate their land to open space. I don't think they should do so, but I do think existing homeowners are hypocrits for trying to use environmental arguments.

3/07/2007 6:32 AM  
Anonymous sa1 said...

10:16pm- Excuse me Mr. Quixote, may I call you Don?
Can you give us an example of a fully adjudicated federal case you refer to (Federal case law on right to travel takes a dim and increasingly strident view...)

Could we not make the same argument that federal income tax discriminates against those states where wages are inflated to account for local cost of living. The average wage of 44K/yr buys a lot more in Texas than it does in Cali. yet we both pay off the same tax table. Do you have a mortgage? The feds give a healthy subsidy to mortgagees. This is not available to renters or those who own their homes outright, is this fair? Is it fair to those of us without children to not get the various tax deductions both state and federal and pay for their schooling? Your idea of fairness seems self serving and one sided.

President Nixon instituted wage and price controls, care to share how that worked out?

The average holding time for a house is 7 years. When you move, aren't you readjusted then? Why is it fair to single out a small percentage of people who stay longer?

No where in anyone's argument is the new buyers paying up for housing held responsible for their decision. Monetary inflation does not account for the increase in cost. Blame the wealthier than thou outsiders not the long term residents. In your own backyard, they’re spending huge sums to widen the RR fwy. It wasn’t needed till they flooded Newbury Park, Moorpark and Camarillo with many thousands of new homes for you newcomers

"it's illegal to stand in the way of people who want or need to move." ---You have your choice of any housing based on what you want to pay. You chose WLV. You could have chosen Canoga Park or Simi and would be paying less prop tax than the guy that is pissing you off next door while using the same infrastructure, that'd teach him. (I grew up in your backyard, you know anything about SB?)

I’ll buy into your prop 13 remake as long as it also goes in hand with a flat tax across the board for income adjusted for regional cost of living. Why give anyone a free infrastructure ride, including the low income types. Let's get really freakin' fair about things as long as we're tilting at windmills...I mean, you know, because we can.

By the way, shouldn’t you also have additional savings in the bank from lower housing cost in AZ and used that to offset your new prop tax here?

---------------------------------------------------

"Sa1, still haven't heard why passing Prop. 13 assessments to kids and grandkids makes any sense at all. That defect alone is a good reason to trash Prop. 13."

Makes no less sense than living trusts and the like that protect all sorts of inherited wealth. But perhaps this is one of the small tweaks we can do to make you feel better. Again, still haven't heard how tossing prop 13 would make housing more affordable so much as causing existing residents to subsidize (we love that word here) infrastructure for the newcomer who is also causing an inflationary spiral in housing cost. Those of you non home owners who aren't newcomers have been paying nothing in prop tax so quit popin' off! :-P

-------
6:32am
Sounds like you spent too much time at The Bullfrog in Leidsplain. When you come down off your high, look around and tell me again why it's crucial to you to live here and not Ventura.

3/07/2007 11:51 AM  
Anonymous Michael Gorder said...

"Can you give us an example of a fully adjudicated federal case you refer to ('Federal case law on right to travel takes a dim and increasingly strident view...')"

Here's a few U.S. Supreme Court cases if you want to have a look:

Zobel v. Williams, 457 U.S. 55 (1982)
Hooper v. Bernalillo County Assessor, 472 U.S. 612 (1985)
Saenz v. Row, 526 U.S. 489 (1999)

Ironically, I consider Nordlinger v. Hahn, 505 U.S. 1 (1992), the most recent litigation of Proposition 13, to be quite helpful, even essential to my case, as it clearly establishes that right to travel is an open question (Nordlinger's assertion was denied only for lack of standing) and also makes it quite apparent that the Court had little respect for Prop 13. It also creates a clear path to attack itself and Prop 13 and essentially invites such a case.

I'd say the balance on self-serving and fair tilts toward my position, if for no other reason than the feature of Prop 13 allowing inheritance of advantageous assessments. This provision has the clear signature of a scheme to reward the wealthy for being wealthy.

The debate over how to assess property taxation in CA is essentially a debate among different categories of wealthy people. "Fixing" it will not suddenly open the door to property ownership to new categories of people of modest means, although it may create a brief window as some landlords, hoarders, and investors will bail out.

Unquestionably the spirit of Prop 13 was to constrain taxes, and I'm in favor of that. If the only alternative was to return to market assessments at a fixed (or unconstrained) assessment ratio, I'd agree that the status quo is preferable even to that.

Warren Buffett thought it absurd and immoral that he was paying less tax on his Laguna beach houses than a new owner of a starter home in Chico. Can you in good conscience disagree with him?

3/07/2007 1:48 PM  
Anonymous Michael Gorder said...

Made a typo. That should be "Saenz v. Roe, 526 ...".

3/07/2007 2:12 PM  
Anonymous Anonymous said...

Sa1, whoa, every renter pays property tax, that is, no landlord pays the property tax out of their pocket and passes the savings on to their tenant.

The newcomers aren't causing a spiral in housing costs; if there was a free market in housing costs, there would be no spiral. But homeowners clamp down on supply, which causes the inflationary spiral.

Meanwhile the homewoners are wanton in their distruction of the environment... the horrible suburban layout of this place causes cars to be needed for most transit needs, causing global warming and asthma-causing pollution.

3/07/2007 2:28 PM  
Anonymous Anonymous said...

How immoral was it when particularly the elderly were getting taxed out of their own homes prior to Prop 13?

How do you get around that one when dealing with the lesser of two evils: elderly tossed on the streets out of their family homes versus the young and yuppie having to pay more to get into one?

3/07/2007 2:48 PM  
Anonymous sa1 said...

"Sa1, whoa, every renter pays property tax"

Ok, granted. Glad you were paying attention (obviously more uh... unintentioned sophistry on my part, I'm sure).

However, your rental cost takes into account that prop 13 tax and if your landlord has owned the house or building for a long time, Are you personally willing to accept the rent increase if reassessed to market rates. Would this help or harm the rental affordability issue here in SB?

"The newcomers aren't causing a spiral in housing costs; if there was a free market in housing costs, there would be no spiral.

I disagree, the free market offers a product to the highest bidder. To create the product there must be resources. SB is constrained by natural geography that limits the most essential resource which is open space. The free market allows the owner of open space to offer it to the highest bidder if they choose to. Individual home owners don't make that decision. The city/county has the responsibility to provide ballanced developement in line with the communities goals. This community, for many decades has held the line on growth to prevent the wanton destruction you so rightly decry.

"the horrible suburban layout of this place causes cars to be needed for most transit needs"

Not sure what's so horrible about it, you can't drive 15 miles without leaving town. I'd rather take a horse but they wouldn't let me park him on State street and even he produces some ozone killing methane...ya just can't win sometimes.

3/07/2007 6:01 PM  
Anonymous Anonymous said...

It's just another tax cut for the rich. I wish it would go away.

3/07/2007 6:06 PM  
Anonymous Anonymous said...

2:48pm, granted, that is why I have proposed a specific remedy that back taxes would only be charged at the time a house is sold, and only then if the house sells for above its assessed value. Use smooth appreciation from the original purchase price to the sale price to compute the back taxes; and it would be the elderly's heirs who would pay the taxes, not the elderly themselves.

Sa1... you know, there will be no such increase in rents, because right now landlords with rentals and low Prop. 13 taxes don't offer lower rents than do landlords with high assessments (those who recently bought). Rents are determined by market forces. There was no reduction in rentals when Prop. 13 was passed by the way, in spite of promises by landlords that there would be. I remember that very very well. I don't pay rent, BTW, I own.

What dreary, worn out arguments about constraints of natural geography in SB. Balderdash, there is more buildable space here than in Manhattan. The livability of densly populated areas is totally determined by the quality of the infrastructure, and that is my main point: existing homeowners are irrationally and ignorantly against anything (like fixing Prop. 13) that would help build great infrastructure.

Whenever any free-marketeer wants to develop a tract, the homeowners piss and moan, drive their hummers to the County meetings, and complain about pollution and traffic. They have their children don butterfly suits of the butterflies that used to inhabit the areas where the homeowners' own homes sit on. They claim sewage and water infrastructure is insufficient, but never note that the sewage and water service they get is horribly destructive of the environment. Homeowners in Santa Barbara are two-faced hypocrites.

The high prices of houses in Santa Barbara is a direct result of homeowners manipulation of the marketplace, and their ignorance of how great infrastructure could make a densely populated area terrific to live in.

3/07/2007 6:43 PM  
Anonymous sa1 said...

Mr. Gorder, Let me first say I do admire your intellect and contributions here. Could you do me a favor? As one who regularly has to wade through 100’s of pages of arcane rhetoric for a simple contract for services, could you ask your colleagues to give us simple, reasonable men a break sometimes? Don’t use a whole paragraph when a simple plain speak sentence will do.

Thanks for the incentive to actually lookup and digest an actual Supreme Court ruling (beats Soduku for mind exercise any day)…Now, Here come da Judge:

Nobel has to do with residency and distribution of natural resource revenue by the state of Alaska based on residence time in state. This is about a disbursement of state funds to residents not a tax assessment against all property owners, residents or not.

Hooper has to do with a small specific group Veterans and their access to a prop tax deduction based on when they arrived in state. The state lost as it was not a legitimate state purpose to grant this deduction rather than a reward for service and thus under equal protection, deserving of all vets currently in the state regardless of when they arrived. It’s about the deduction and not the original tax.

Saenz starts out: ”California, which has the sixth highest welfare benefit levels in the country” has to do, once again to a distribution of state funds based on time in residence, not a property tax assessment. Further:” (d) Since the right to travel embraces a citizen’s right to be treated equally in her new State of residence, a discriminatory classification is itself a penalty”. You are being treated equally. Long term residents and newcomers are equally treated when assessed on a new property purchase.

To Quote the US Supreme Court’s majority decision finding for Cali’s right to Prop 13 (Nordlinger):

“First, the State has a legitimate interest in local neighborhood preservation, continuity, and stability. The State therefore legitimately can decide to structure its tax system to discourage rapid turnover in ownership of homes and businesses, for example, in order to inhibit displacement of lower income families by the forces of gentrification or of established, "mom and pop" businesses by newer chain operations. By permitting older owners to pay progressively less in taxes than new owners of comparable property, the Article XIIIA assessment scheme rationally furthers this interest.

Second, the State legitimately can conclude that a new owner at the time of acquiring his property does not have the same reliance interest warranting protection against higher taxes as does an existing owner.”

In Nordlinger Justice Stevens’ dissent is strong and sides with you…but you gotta admit I was making the very same arguments with no foreknowledge of the Supreme Courts decision. C’mon Blogabarbara, who’s your daddy?

Case Closed (BAM!) Next!

3/07/2007 8:53 PM  
Anonymous sa1 said...

6:43 Listen, I'm all for great infrastructure. Your version of high density is rampant through out Cali. Why can't we just have a bastion of low density, semi rural life that isn't totally out in the sticks? From the sounds of it, San Francisco may be more your style. I'm warming up to the anti prop 13 side as I feel trapped/stuck by the financial burden of moving due to cap gains tax and higher prop tax. Maybe if we pass reform it would cause some of the wealthy type to puke up the Reviera and Hope Ranch, Montecito stuff cheap so I could move there finally. I live in one of the least valued neighborhoods so I'd have less to lose then them. After all, I don't deserve to be unworried about the future anyway. Now if I could only find a good paying job in town, I could quit traveling to and living in the third world where they real have something to cry about.

3/07/2007 9:18 PM  
Anonymous Anonymous said...

sa1 853:

You took time to actually review the citations; very good. I'm with you on the legal mumbo jumbo in most rulings, but Saenz is refreshing, is it not? Nevertheless, I have no legal training; I'm a physicist.

Obviously, the Nordlinger case ruled in favor of the status quo. But--Prop 13 has never been challenged by a valid assertion of a fundamental right (which right to travel is) or a protected classification, certainly not at the Federal level. In spite of the sections you're citing, the "rational bases" developed for Nordlinger stand in direct conflict with right to travel, and it's a fundamental right, which in general trumps. I'd also draw the class lines (travelers vs. everyone else) differently than you suggest (traveling new buyers vs. non-traveling new buyers)--a position which is supported by Zobel.

Best you (or I) can say is it's still up in the air. And, it may only be a matter of time before some racial group (Hispanics, maybe) complain they're paying higher taxes than everyone else. Will Prop 13's disparities stand up to such?

As I've found, most in the legal world think this is settled law because that's the mantra of the powers that be. But not all.

3/07/2007 10:20 PM  
Anonymous Michael Gorder said...

Anon 10:20pm was me. Thought I dropped my name in.

3/07/2007 11:21 PM  
Anonymous sa1 said...

10:20- It is in fact and practice settled law. Whether you can unsettle it is up in the air. I believed they address the right of the state as trumping other rights as long as they met the test of being fairly applied to all and in the states interest. That whole Allegany thing, I think, of inconsistent or random reassessment being an example of unfair assessments. I think they spoke directly to travelers by saying that the prop 13 applied equally to in state and out of state owners thus being non discriminatory to travelers. We've probably become more boring than the DCHP, Satic IP, NAT and wifi guys...Anyway, good luck with all that and don't forget to wear your lead shield for the family jewels, we need more challegers like you. :-)

3/07/2007 11:41 PM  
Anonymous Anonymous said...

Sa1, we agree that the homeowners in this town cry about trivial problems.

If you want semi-rural, there's always Oregon, Idaho, Washington, Far Northern California, Wyoming, Colorado, Arkansas, Missouri, Upstate New York, North Carolina, Nova Scotia, and New Zealand.

Around here taxpayers of years back (not local ones) paid for Cachuma and its distribution network, the airport, and the 101. It was the US and California taxpayer at large who paid for those things.

If the Santa Barbara homeowners want to secede and keep the world out, they should pay back the US and California taxpayer for all those infrastructure improvements. $10 million/homeowner should do it.

3/08/2007 6:59 AM  
Anonymous sa1 said...

6:59am- Our different views of each other's desire have one fundamental difference. We're both static. You want to be static and remake the environment to suit you. I want to be static and keep the enviroment as it is.

Your moving to SF or LA to be in a high density, high infrastructure enviroment takes little energy and resources from the community. Your rebuilding of the community to suit your desire would take great energy and resources. So what seems more practical to you?

I still maintain that by increasing density here, would be to destroy the very reason there is a high demand to live here rather than in SF or LA. If that is your intent...

3/08/2007 10:44 AM  
Anonymous harping said...

Sa1, I think you are right on re: "I still maintain that by increasing density here, would be to destroy the very reason there is a high demand to live here rather than in SF or LA." As much as I try, I don't think I'll ever understand how others can argue against that. If you like density, there are so many other places to live that cost less than SB & that have more job opportunities. San Diego, anyone?

3/08/2007 12:45 PM  
Anonymous Anonymous said...

Sa1 and harping... I don't accept your narrow view that the only measure of a community is density. I don't like density, I like a high quality of life, and I think Santa Barbara could be a whole lot better than LA. SF is totally different than LA, and I don't think lumping them together is appropriate at all... it is a typically narrow-minded comment of those who look at density as the only parameter that governs quality of life.

Santa Barbara would be better if it did not have the sprawl and low density that causes high rates of auto driving.

Santa Barbara would be better if it had great public transit.

Santa Barbara would be better with more people, because people are interesting, and bring culture with them.

I don't subcribe to your narrow-minded, misanthropic, and parochial views. Santa Barbara need not become LA or San Diego to be greater in its own distinct way.

But back to Prop. 13... Prop. 13 enshrined hatred of the government by cynical folks who do things like pass property tax assessments to children and grandchildren. A house divided against itself cannot stand. Some faith in government is necessary, just as strong, invasive scrutiny of government performance is necessary. But Prop. 13 let the burn-down-the-barn, slay the beast conservatives enshrine their hatred of all government.

3/09/2007 5:15 AM  
Anonymous sa1 said...

5:15am-
Ok, I'll bite once again as this is probably the number one issue facing SB today. Housing and density, not Prop 13. You seem to conviently dismiss the fact that prop tax is not the only tax we pay. You don't know me at all so I won't take umbrage at your bigoted attempt at character assassignation. The government handling of public money has a poor record of inefficiency. Nick Welshes article in "The Independent" this week is just one example. It is a foundation of capitalism that the profit motive will find the most efficient utilization of resources. Not always fair, but you have the socialist model to compare against. Those Chinese, Russians and Venezualians have been showing us for years...haven't they? Shining examples of central authority doing the right thing. Lest you point out the various European Social leaning gov'ts, take a look at their unemployment rates and social unrest before you take that leap.

The pass down portion of Prop 13 is one that is tough to defend on the face of it. I think that it is fair to say that the very rich are a small portion (10-20%?) of the Cali population. One corner stone of the civil rights movement was bootstrapping the underclass through various advantages based on race and net worth. Many low income, hispanic families have been in the SB area for generations. Would you deny them the right to stay in place through an inheritence so that you could out bid them for that home, just because it's in downtown SB? How long do you think (a place like)Jimmy's Oriental Gardens would have survived if they had jacked their families rates every year? Prop 13 didn't cause high demand but granted, may contribute to lower supply in the SB area. Maybe some realtor type can tell us what the average ownership time is here. I saw somewhere that it is 7 years. I'm not sure if that's nationally or what but that average may give us a better perspective of the disparity. Just pointing out a few examples doesn't make a fair argument.

Social and economic equality is a two edged sword and we all have to make sacrifices. I for example, couldn't get a job with the LA fire dep't because my skin was the wrong color and didn't qualify for various scholorships and grants because with 4 kids my engineer father (homemaker mother)made a slightly above average wage. That's ok, I stayed focused, attended UCLA and SBCC, showed up for work everyday, saved my money,and finally made my way here. Put my savings down, financed through the credit union and shared my house with more than a dozen different people for ten years, to afford my $2100 mortgage (initially@10 1/4%). I still support affirmative action programs of various kinds even though even today I can't take advantage of literally no gov't subsidys other than prop 13. And now you want to deny me that. I see the advantage of different points of view and our need as a society to even the playing field where possible.

Now, I have first hand knowledge of a wide variety of cultures and can point out wonderful aspects of all of them. I just wonder at the need to incorporate them into my daily experince. I'd love to have a transit situation like NYC, Amsterdam, Paris or London but SB is so far removed from those examples, I think your ideas on this are wildly impractical. Didn't it cost well over $1 Billion just to get 10 miles built in LA? You think SB and Cali gov't would be able to build your vision?
Come back with facts and figures and I might take you a little more seriously.

3/09/2007 9:02 AM  
Anonymous westy said...

Sa1, you are a breath of fresh air.

3/09/2007 9:38 AM  
Anonymous Anonymous said...

Well, Sa1, I've proposed several times a method to not raise property taxes until the time of the sale, where back taxes would be due if the sale price exceeded the assessed value. I don't think that would have impacted Jimmy's at all.

You pick and choose the portions of the free market you want. Since when did heriditary count for so much in America? Why did we get rid of inherited titles? How come Elizabeth Windsor is not our sovereign? Easy, we aspire to be a meritocracy. Prop. 13 flies in the face of merit based advantages.

I cannot understand why $1 billion dollars a mile has anything to do with SB. We could adapt our train tracks (which are empty most of the time) like has happened in the SF Peninsula corridor at a small fraction of that cost.

Funny how you never complain about the government-built water system we have, or the government-built 101, or the government built sewage processing system. Is private enterprise always so great? My health care provider is pretty darned awful, but they are private! They only cost twice as much as Canada's or Spain's, and we Americans are less healthy.

As for today's Poodle, 1/2 the point was that the City of Santa Barbara does quite well at managing their program, unlike the County!

3/09/2007 1:55 PM  
Anonymous Anonymous said...

If it weren't for Prop 13, which I always thought I hated, I wouldn't know anybody in this city anymore except the developers and other people who have made money the thing their life is about.

3/09/2007 5:31 PM  
Anonymous Michael Gorder said...

It would seem that many suppose that there's no alternative to "Prop 13 exactly as it is now" other than "We'd be driven out of our homes". I disagree, and here's a couple more things to think about:

--If you're forced to sell out to to an eminent domain action, Prop 13 also robs you of your beneficial assessment. Now there's something to get mad about.

--If CA really wanted to control housing costs the obvious solution would be to put price controls on housing (and other real property).

But, of course, there's NO way price controls will ever happen. The appearance is that many CA residents (those who like the way things exactly as they are, thank you very much) want their cake, to eat it, and to have someone else pay for it.

Well, I think this is bad public policy, bad manners, bad law, and bad civilization. I think it's time for a change and, as I say, it would seem that the only way anything will get done is by a Supreme Court decision.

3/10/2007 7:32 AM  
Anonymous essayone said...

1:55pm-

I've noticed your comment about back taxes several times. I've offered that pass down maybe one piece of prop 13 we could toss. However, you've pestered me so much about it that I withdraw my offer and my decision stands along with the US Supreme Court (arguably the smartest guys in the room). My comment about Jimmy's was generic to prop 13, not pass down.

"You pick and choose the portions of the free market you want."
That's my prerogative to support my argument. If you want a full discussion of free markets, I'd have to charge you for it at The U of Essay or Homie College (it works on so many levels). No subsidies for tuition allowed.

"Since when did heriditary (sp) count for so much in America?"
Since parents decided to love their children more than their gov't, or you for that matter.

"Why did we get rid of inherited titles?"
What, you never heard of the "King of Rock", the "Sultan of Swing", Prince, The Chancellor of UoC... (I could go on but nobody liked my BB team names either).

"How come Elizabeth Windsor is not our sovereign?"
Because she's a girl and we through off the yoke of Imperialism 230 years ago.

"Prop. 13 flies in the face of merit based advantages."
I might say that one merit based advantage was being smart enough to get here first. If you make me a huge offer for my home, I might take you up on it...when I feel like and not when the gov't forces me too.

The train thing is doable but you'd need a lot of right of way money for feeder lines or buses. Not to mention the eminent domain issue forced on those to refuse to go along. Personally I'd just as soon wait for my autopilot emmission free car, we're so close I can taste it. GPS can locate you within 6 inches (which 6? Don't even go there).

Healthcare? What are you kidding me? We need a whole new thread for that one.

Poodler?, I think he was mocking the City for self congratulatoriness (or however you say that.
Next time bring your fax and figures as I asked before.

3/10/2007 2:16 PM  
Anonymous Sancho Panza said...

Mg, Mg, Mg

"--If you're forced to sell out to to an eminent domain action, Prop 13 also robs you of your beneficial assessment."

At a tidy profit I might add. Though those down the street from you pretty much rejected those offers when 101 widening was proposed around the 405 interchange. Eminent domain issues are something of a third rail I suspect.

"--If CA really wanted to control housing costs the obvious solution would be to put price controls on housing (and other real property)."
Consider attending U of Essay for a lesson on economics. Out o towners pay double by the way. Who said cali's wanted to control housing costs? It's the road to riches I hear.

Indeed, "Let them eat cake"

"Well, I think this is bad public policy, bad manners, bad law, and bad civilization."

Hmmm...Perhaps you should stick to killing quarks and working on Unifying the Grand Theory, you'll probably feel better.

Bring you're "A" game next time, I liked it better.

3/10/2007 2:34 PM  
Anonymous Essay one said...

"Anon" 3/09/2007 1:55 PM-

It would appear, after giggling hysterically, SDLG wisely chose not to post my retort...I'll demur to her wisdom.

3/11/2007 9:48 AM  
Anonymous Anonymous said...

If, as some of the previous commenters claimed, Proposition 13 merely stabilized property assessment increases at some reasonable level, it might make sense. But it does not: It caps assessment rises at a nominal 2% a year, which is typically actually lower than inflation... meaning that in real terms, Proposition 13 legally requires that property assessments be perpetually lowered year after year. Since the lower assessments are heritable, this in effect creates a landed aristocracy, where people who have held their homes for generations will pay basically no property tax.

6/28/2007 9:35 AM  

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