Quan's Budget Option C Gets An F

At last week’s Council meeting, Quan introduced three alternative budget proposals. http://www.abetteroakland.com/three-budgets-for-oakland/2011-04-29. The one she was pushing for was, of course, Plan C, the one that called for yet another parcel tax. For anybody tempted to actually download and read the budget proposal, save yourself the trouble. It is garbage. First of all, the majority of the documentation is just filler. I mean, does the Council really need to know the history of Oakland going back to the Stone Age? You think I’m joking, but it’s in there. Looking at this budget proposal, you’d really think our politicians hadn’t evolved much since cave man days.

Notably, the proposals fail to contain any meaningful information about what is necessary to balance the budget, the procedures necessary to implement the various cuts and revenue generators, the relevant timelines for all of this, and how likely or feasible these things are to happen between now and July 1. For example, Quan proposes straight cuts to various departments. How are the departments supposed to cut their budgets, when they’ve already been severely cut? Layoffs aren’t conducted at the department level. Neither are pay cuts. All of these things require action at the top, not the department level.

Completely lacking from the proposals is any discussion of what is really necessary to balancing the budget - long term, structural changes to public employee compensation, including pensions. Short-term fixes, like furlough days, obviously don’t address any long-term problems. And, they result in lost services to the residents. We need better services (or at least the same services) for less money, and the only way we can do that, long term, is with compensation cuts. And compensation cuts generally require negotiations with the unions, and negotiations with the unions take a long time. Shouldn’t the proposals include a detailed discussion of what proposals for cuts have been made to the unions, where we are in those discussions, and how likely those discussions are to be resolved by July 1? Yes, but there is none. In fact, the unions are complaining that they’ve never even heard of Quan’s proposals!

As for the parcel tax, the proposals should include a detailed discussion of the timing of tax collection. Because it just won’t work, no matter what happens. Even if the Council were to approve a parcel tax to go on a special election ballot, that couldn’t happen for at least another three months, by law, which puts us into mid-August. That means there is no way that the tax could be included on the November tax bills. Which means that the City would have to borrow around $11 million to get us to next November. What is that going to cost? And then homeowners would be saddled with a double tax bill in 2012. You’ll get a taste of what that feels like this coming November, when you see a double tax bill for Measure Y, thanks to BB passing last November. Shouldn’t there be a discussion about all of this in the proposals? Yes, but it’s not there either.

Now, the unions are already whining about how everybody has to pitch in to help the City out, and it’s not fair to just stick them with cuts, and how the taxpayers need to help carry the load by paying more in taxes. Just for kicks, I decided to figure out how much extra we are already paying, compared to our neighboring cities. Thanks to Proposition 13, the base tax rate is not allowed to exceed 1% of the assessed value of the home. Of course, it can and does typically exceed that based on how much debt the municipality takes on, but usually not by a huge amount. Except in Oakland, where the base rate is a whopping 1.4086%. Here’s the breakdown, from highest to lowest, and how those differences can increase your actual annual property tax on a $500,000 home:

Oakland - 1.4086% Actual tax: $7043
Albany - 1.3975% Actual tax: $6985
Berkeley - 1.2555% Actual tax: $6277
Piedmont - 1.1931% Actual tax: $5965
Alameda - 1.1376% Actual tax: $5688
San Leandro 1.1223% Actual tax: $5611
Hayward - 1.0892% Actual tax: $5446

So, for the same house, Oaklanders would essentially be paying around $1500 extra annually in taxes, compared to neighboring cities, on a modest home. For more expensive homes, the disparity is obviously much greater.

Now, this does not take into account the special assessments that public entities can tack on as well, like my beloved Measure Y, or the new tax being proposed. Oakland does not come in first place for the special assessments. Here’s another chart showing that information:

Oakland - 1.4086% + $752 Actual tax: $7795 (including Measure Y)
Albany - 1.3975% + $1726 Actual tax: $8711
Berkeley - 1.2555% + $1663 Actual tax: $7940
Piedmont - 1.1931% + $3090 Actual tax: $9055
Alameda - 1.1376% + $1072 Actual tax: $6760
San Leandro 1.1223% + $525 Actual tax: $6136
Hayward - 1.0892% + $653 Actual tax: $6099

So, it is true that Berkeley, Piedmont and Albany would have higher total property taxes (on a $500,000 home) compared to Oakland. But keep in mind, you’re not going to find many homes in those cities in those price ranges. In Piedmont, practically none. And the high special taxes are due almost entirely to the assessments for the schools, which are significantly better than Oakland schools. Piedmont residents pay over $2000 a year just in special taxes to support their schools. And it shows.

(By the way, Long Beach, to which Oakland is frequently compared, has a tax rate of 1.114851%. To compare other Los Angeles County cities, check out this fabulous L.A. Times chart. http://www.latimes.com/news/local/bell/la-me-city-property-tax-table,0,5895218.htmlstory

None of them even come close to Oakland's tax rates, except...Bell!)

So, to summarize, this new parcel tax would not be able to be collected until November, 2012, sinking us deeper into debt. Oakland’s excessive debt is already costing homeowners at least an extra $1500 a year in taxes already. The new parcel tax makes no promises about better services, like increased police staffing levels. In fact, the City is pretty much admitting that even with the new tax, the level of services is going to go down even more. By the time the budget needs to be passed, on July 1, no election will have been held, so adopting Proposal C would basically rely on hope and prayers. Employee unions have made no meaningful concessions as of yet, and we have received no progress report on where things are at in that department.

Plan C gets an F.