The Metropolitan Forum Project Reviving Citizen Civic Engagement

Bill Targets Tax Policy That Adds to Urban Sprawl

June 02, 2003

Los Angeles Times

George Skelton, Los Angeles Times

May 29, 2003

SACRAMENTO--As legislators teeter timidly alongside a nightmarish budget gap, they may be getting into a mood to correct an
unintended consequence of Proposition 13.

No, they are not going to raise property taxes, at least in this bill.

And, really, there is no direct link between the budget gap and Prop. 13, the revolutionary property tax-cutting initiative that passed 25
years ago June 6.

But there is a realization among legislators and Gov. Gray Davis that major tax restructuring this year's good-government
buzzword is needed to stabilize and balance future revenues and spending to avoid habitually falling into chasms of red ink.

Not just the state, but local governments will have to be part of any such restructuring.

One proposal is only a piece of the restructuring, but it's significant and would affect virtually every California community.

There have been many unintended consequences of Prop. 13. They include tax inequities involving adjacent houses of equal value,
homeowners paying an increasingly larger share of the tax burden compared with commercial property owners, suffocating control
by Sacramento over local government financing

These shortcomings ultimately should be addressed. But they're not in this bill.

This bill simply corrects a flaw that made local governments mainly cities less reliant on the property tax and addicted to the
sales tax, leading to more housing sprawl, longer commutes and fouler air. A lot of big-box stores and auto malls sales tax
producers were built where urban housing or light manufacturing should have been developed.

Prop. 13 did this by stripping local governments of control over the property tax. It gave the state authority to distribute these revenues
between local entities. For cities particularly, the property tax became unreliable.

Then in a budget crunch a decade ago, Sacramento hammered local governments by heisting $4 billion of their property taxes and
shifting it to schools. That allowed the state to keep an equal amount it had been sending schools.

Budget-balancing by strong-arm.

The new bill (AB 1221) would help balance the local revenue mix. Initially, local governments would swap a half-cent of their sales
tax worth $2.4 billion for an equal amount of property tax. In the future, locals would keep the additional property taxes they
generated. The goal is to encourage development of urban housing and light manufacturing, which pay property taxes.

It's a bipartisan effort, sponsored by two influential lawmakers: Assemblyman Darrell Steinberg (D-Sacramento), chairman of the
Appropriations Committee, and Assemblyman John Campbell (R-Irvine), vice chairman of the Budget Committee.

Campbell says business owners gripe to him about housing sprawl and long drives that wear down workers: "They say, 'People
commute from Riverside to Orange County. Guess what? The employee's tired. The family isn't happy. And they don't stay with me
long.' "

Steinberg asserts: "It's the first time since Prop. 13 that there has been an effort to change the underlying structure of how local
government is financed We need to not just talk about and study structural reform, we need to take action."

Steinberg is a former Sacramento city councilman who acknowledges ignoring proposed housing projects and chasing big-boxes to
capture sales taxes.

Often, giant retailers negotiate for sales tax kickbacks millions worth as an inducement for plopping down in a city.

"Big-boxes are shameless," says Orange County Supervisor Chris Norby, a former Fullerton mayor and loud advocate of the bill.
"It's sales tax piracy under the guise of economic development."

"[Retailers] should make those decisions based on business factors, not on who they can shake down for the most money."

The measure whipped out of Steinberg's committee Wednesday. The Assembly is expected to pass it by June 6, the deadline this
year for a house to approve its own bills. The biggest test will be in the Senate.

So far, the League of California Cities opposes the bill. Many cities like the sales tax arrangement. And none trust the state. "There
hasn't been a very good working relationship," notes Dwight Stenbakken, the league's lobbyist.

To answer their fears, the bill's authors plan to sponsor a constitutional amendment that would protect local governments from future
state tax muggings.

That will gain the support of the California State Assn. of Counties. Its lobbyist, Steven C. Szalay, also points out that the property tax
outperforms the sales taxes in tough times.

Other supporters include the California Chamber of Commerce, California Retailers Assn. and state Labor Federation.

It's a simple bill propelled by a simple concept: bipartisan cooperation. A liberal and a conservative actually working together, a
model of legislating that's rare in this era of petty politics.

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