Property Taxes: Why Some Get More Than Others

I had a discussion with firefighters from the East County Fire Protection District over the weekend regarding the coming budget. The discussion primarily involved Prop 13 and its method for allocating the property taxes; specifically why Oakley only gets .06 cents and Brentwood .07 cents while the rest of the county receives anywhere between .12 cents and .17 cents to pay for fire services. Ultimately everyone wanted to know how to we change it.

Proposition 13 was passed on the first Tuesday in June of 1978, three weeks before the end of the fiscal year. Section 1 of Proposition 13 required the property tax to be “apportioned according to law.” With direction from counsel lawmakers were advised that the phrase “according to law” gave the Legislature the responsibility for allocating the property tax. With less than three weeks to put together a plan the legislature passed Senate Bill 154.

SB 154 allocated the property taxes collected at the 1 percent rate to counties, cities, special districts, redevelopment agencies, and schools. Under SB 154, a local government’s share of the property tax was based on the share of the property tax going to that local government before Proposition 13. The share of the 1 percent property tax rate received by individual local governments varies significantly throughout the state. This allocation system became the foundation of the property tax distribution mechanism subsequently enacted in AB 8 in 1979. Under this system the state controls the allocation of property tax revenues, while local governments are responsible for service delivery.

There have been two significant changes to AB 8 since 1979. There first concerned cities that had very low or no property taxes prior to passage of Proposition 13. The Legislature acted to gradually increase the share of property taxes going to these cities. The second was the property tax shifts of 1992-93 and 1993-94. In response to severe budget deficits, the state shifted $3.6 billion in property taxes from counties, cities, and special districts to schools. The shift was called the Education Revenue Augmentation Fund. Unfortunately, allocation of the property tax is a zero-sum game, for every jurisdiction that gets a larger share, others have to lose an equal amount.

The AB 8 system reduces government accountability. Local governments have no authority to modify the tax allocation formulas in response to modern needs and preferences. So, although there may be obvious reasons to change the allocation at local levels due to changing priorities the state is the only one with the power to shift revenues between taxing jurisdictions.

If you want to know more read: Demystifying the California Property Tax Apportionment System

About Kevin

Mayor - City of Oakley, Manager of Mainframe Operations and Optimization – USS-POSCO INDUSTRIES, Co-Founder and Board Member - Friends of Oakley A Community Foundation, Commissioner - Contra Costa Transportation Authority, Board Member - Tri Delta Transit, Transplan, San Joaquin Joint Powers Authority and RD 2137, Advisory Board – Opportunity Junction
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