Closing out a year marked by high inflation and economic uncertainty, San Mateo County voters went to the polls in November and passed 13 out of 14 revenue measures on the ballot. Among them were four school district bonds that will have property owners writing bigger checks at tax time. Voters in Daly City’s Bayshore Elementary School District added eight years to the life of a $96 parcel tax. Brisbane and Pacifica residents upped their sales tax rates by a half-cent. And voters in Brisbane weren’t through; they joined their compatriots in Millbrae and Belmont in approving tax hikes on temporary lodging, including hotels.
Dial back to 2016, when the county board of supervisors asked voters to “extend” a 10-year sales tax increase that had been in effect only four years. The margin for the second go-around—70.37%—was even higher than the first time, when the half-cent tax passed by 65.4%.
Does that mean county voters are pushovers for taxes? Not exactly. When the supervisors last summer considered adding a parcel tax to the November ballot to address drought, wildfire and sea level rise, they pulled back after receiving unfavorable poll numbers.
So when is enough “enough?” It depends on whom you ask—and what it’s for.
“I’m clueless as to why they are voting for these things,” says Mark W.A. Hinkle, 71, president of the Silicon Valley Taxpayers Association and a longtime Libertarian Party member. He is especially down on school bonds, given current test scores and declining enrollment in certain districts. “They want good-quality education but they’re not getting it … I think a lot of them do vote for these things thinking they will get better.”
Others see value. As co-chair for the Redwood City School District’s successful bond campaign, financial adviser Jessica Meunier rang lots of doorbells and was gratified by its passage in November. “Education is a big passion for me,” the mother of two young girls explains. “… I want to invest in our schools, our education, our teachers. So whether I do it by donating to the schools or by taxes, I’m probably going to do it.”
The Local Share
At least conceptually, many people say taxes are too high. For Californians, the grass can look pretty green in nearby states such as Nevada and Washington, where there’s no state income tax. Not as noticeably, though, local taxes and fees—from school bonds to sales taxes—nibble at the family budget, too. The upshot: the Golden State came in No. 8 in the Tax Foundation’s most recent national State-Local Tax Burdens Rankings.
That was in 2019, when California’s effective tax rate was 11.5%. It was actually higher—13.3%—in 1977. That was the year before voters passed Proposition 13, which dramatically lowered property taxes and enshrined rates in the state constitution.
Follow-up measures have modified or clarified Prop. 13, which initially required a two-thirds vote to increase local special taxes. In 2000, voters passed Proposition 39, which lowered the threshold to 55% for school bonds. School districts can use bond funds to finance buildings or other capital projects, and property owners’ obligation to repay the borrowed funds shows up on their tax bills until the bonds are paid off. Bond money can’t be used for salaries or other operating expenses.
Not surprisingly, Prop. 39 made it much easier for school bonds to cross the finish line. Since 2001, more than 80% of school measures that qualify for 55% have passed, according to consultant Michael Coleman, who has spent decades tracking and reporting on taxes in California. Statewide, 209 out of 303 tax and bond measures passed last November; 100 of those were for school bonds and 71 were approved. (The tallies can be found on Coleman’s website, CaliforniaCityFinance.com.)
Adding to the momentum, schools and local governments are expected to provide services that weren’t even on the radar screen decades ago; for government, addressing homelessness, human trafficking, sea level rise, and diversity, equity and inclusion initiatives to name a few. Schools have had added costs for the Covid pandemic and safety in the last couple of years.
The money for all that has to come from somewhere, be it taxes on property, hotel stays or corporate payrolls. But people these days seem more sanguine than in the past about ponying up. Much of the willingness seems to follow traditional political lines; San Mateo County—where Republican registration sits at an anemic 14%—has become one of the bluest counties in a reliably blue state whose voters often favor spending.
“I think we’re fortunate to live in an area where the local residents are willing to invest in the local government and the work that we do,” says county Board of Supervisors President Dave Pine. “And I think it makes a big difference in the quality of life in our community. But we couldn’t deliver many of the services that we all value if it weren’t for taxes.”
Odds of Passage
Some are easier to pass than others.
Coleman notes that if taxes are extended or revised without an increase—as in San Mateo County when voters added 20 years to 2012’s Measure A—most pass. Hotel and business license taxes succeed more often than utility taxes, which are among the hardest to enact.
Nonetheless, Coleman says there was “some dampening” in the November election, probably because of concerns about the economy. California’s overall passage rate of 69% was noticeably lower than in the last few election cycles (topping at 83% in 2016.).
More to the point, tax hikes aren’t even being placed on the ballot in some of the redder and more rural parts of the state. The lion’s share of the tax measures, Coleman says, are in the coastal and urban areas, such as the Bay Area and Los Angeles.
But taxes do add up. To the state’s 7.25% sales tax baseline, many jurisdictions tack on their own increments. Total sales tax rates exceed 10% in parts of Los Angeles County, and most San Mateo County cities are in the “high 9s.” Caltrain, which had been out in the cold among public transit agencies without a tax source of its own, finally got a one-eighth-cent levy in a three-county vote in November 2020. (The single losing tax measure in last November’s election was a parcel tax in South San Francisco for childcare.)
Redwood City’s Measure RR in 2018—called the “Redwood City Essential Services Protection Measure”—added a half cent (okayed by a 67.6% margin). Late last year, the city issued a request for proposals to analyze potential new revenue sources—among them parcel taxes and the creation of a new tax or special district—and update current sources of funds. If voter approval is required, the goal would be to get the recommendations to the city council by this November, with the June 2024 election in mind.
Hotel taxes offer a popular way to raise local revenues, because most often they’re paid by out-of-towners. Half Moon Bay’s hotel tax (called “TOT” for transient occupancy tax) reached 15% in July. In most of the county, it’s 12% to 14%.
On the other hand, bonds and parcel taxes literally hit property owners where they live.
This year, the owner of a house in the South San Francisco Unified School District valued at $1.5 million will see a property tax increase of about $900, as a result of $436 million in just-approved bonds. The additional cost for a homeowner in the Sequoia Union High School District with that value will be around $210 to begin repaying $591.5 million in new bonds. It’s $360 more for property owners in the Redwood City School District, where $298 million in bonds were also approved in November. For those who happen to live in both Redwood City districts, that’s an extra $570 per year.
Missing in Action
To oversimplify, Republicans typically are associated with a desire for lower taxes. With today’s lopsided Democratic margin in San Mateo County, it’s not as easy as it once was for voters to hear the opposite side of a tax proposal. There no longer seems even to be a local tax-fighting association. Years ago, the county to the north was absorbed into Hinkle’s Silicon Valley group. When Hinkle, a Morgan Hill resident, can’t locate someone to write the “anti” argument for a voter pamphlet somewhere, he often does it himself, at the risk of being called a carpetbagger.
Coleman, the tax expert, laments the loss of local newspapers. He says in many communities, the only thing voters can go on is the ballot pamphlet they get in the mail. “And,” he adds, “you just hope that they’re reading that. But I think many people aren’t.”
In the last two years, civil grand juries in Alameda and Santa Clara counties have also criticized the way ballot questions are phrased. Limited to 75 words, the question is supposed to be neutral and transparent. But many are considered to suffer from “proponents’ bias” because well-meaning people with a vested interest in the outcome may use “feel-good,” misleading or irrelevant language rather than just presenting the facts.
“It’s an offense against the system that you’re printing stuff to be on the ballot that’s basically a list of arguments,” says Richard Michael, a Southern California resident who maintains a website (bigbadbonds.com) about school bonds statewide.
He continues, “Everybody involved in this knows that the ballot label is the most important thing you can do because it’s the only thing that a voter will actually see when they vote. They might not hear any news. They might not see any mailers or hear any radio ads or whatever else they do, they might not even read the voter guide, which is mailed separately.”
Some critics say the odds are stacked in favor of school districts and government agencies, which can employ tools at taxpayer expense that leave the opposition outgunned—using pollsters to see what voters will support and how to frame it, sending out “informational” mailers, and then working with campaign consultants to craft arguments that hype the benefits and cloud the costs and/or duration of the tax.
Drawing the Line
“There’s really a bright line,” Supervisor Pine responds. “Taxpayers’ money can’t be used to advocate for a tax measure. But their money can be used to explore the viability of a measure and I think those are different.” More often than not, he says, polling keeps tax measures from going on the ballot. “You have to have a high degree of confidence that the electorate will support the tax. It’s expensive to go to the ballot and fail. It also positions you poorly having forced you maybe to go out a second time.”
Chris Robell, a retired corporate chief financial officer, wrote the ballot arguments against both of the Redwood City school measures on the November ballot, which he opposed because of the long-term cost of bond financing and the way he believed the measures were being presented. He posted about them on social media and produced a video explaining his opposition.
“Bonds are such an expensive way of doing financing,” Robell says, noting they’re similar to a home mortgage, which costs many times the sales price by the time the loan is paid off. Combined, he argues, the two districts’ estimate for the cost of $890 million in bonds is actually $1.7 billion, including principal and interest. He adds that soaring interest rates could create even more expense.
Robell figured there had to be a good reason to go into debt. But when he asked why the school districts needed the money, he started hearing alarm bells.
“There’s a long list of projects and the projects are very general,” he says. “Then they say they’re going to consult with the community and figure out what we’re going to spend it on. They also make sure in their marketing materials to highlight things that have the highest voter excitement”—items such as deteriorating roofs and lack of air conditioning. He says he’d rather see additional funds go to hiring and retaining teachers than into infrastructure.
The “yes” citizen campaign committees for the two school measures raised sizable war chests for mailers and other campaign staples. “I’m just one person,” Robell says. “I don’t have $250,000 (for a campaign). It’s not a fair fight.”
Today’s vs. Tomorrow’s Dollars
Richard Ginn, who is president of the Sequoia district board and also a CFO, says there is a time value in being able to invest bond money today that is repaid in future dollars. (A basic financial principle holds that money in hand today is worth more than the prospect of money tomorrow, because today’s money can be used now and because the future contains uncertainty such as inflation, which could reduce the money’s value and effectively make it cheaper to pay back loans.)
With that in mind, Ginn says “we have aging buildings” that need upgrades every 10 to 15 years in a continuing process. “If the government is going to provide services and public facilities, you have to pay for it.”
Ginn says he’s among many people who moved to San Mateo County because of the quality of its schools, and that also translates into higher property values. He believes that in approving Measure W last November, voters understood that the funds would be used only for capital projects. The board will have to prioritize, Ginn says, but having air conditioning for classrooms will be high on the list. “We have had several days [last year] that were not conducive to learning.”
Meunier, the co-chair of the “Yes on S” committee supporting the Redwood City School District bond measure, was thrilled when it passed since it will help pay for costly, multi-year projects she believes are definitely needed. Voters in 2015 approved $193 million in bonds under another initiative called Measure T, but Measure S supporters said it covered only about a third of the need. Many of the district’s schools, Meunier says, are still “way behind.”
She adds, “If you don’t have the right technology, building safety and back-end stuff, you will not have the best teachers, happiness for the kids, teaching for the kids and the right environment.”
Furthermore, Meunier says, new and unexpected costs add to the schools’ financial burden. She recognizes that people who don’t have schoolkids or are retired may not share her passion about education. “The word ‘tax’ has a negative connotation,” says Meunier, “but what it’s actually funding is something I know that I want to do.”
Reporting to the Taxpayer
With the lowered threshold for passage, school districts with Prop. 39 bonds are required to have audits and independent citizen oversight committees looking at how the money is spent. There are now more than 500 of them in the state, according to the California Association of Bond Oversight Committees, which was formed in 2019. The organization says the reality sometimes falls short of the promise; some committees never meet or members haven’t been appointed. The group has proposed legislation to give the watchdogs more bite.
Annual reports by the Redwood City School District’s Measure T Oversight Committee are available online and detail where the money has helped modernize and upgrade schools throughout the district. The wide-ranging list includes new kitchen equipment, lunch tables and umbrellas, as well as fire alarm system upgrades, security cameras, safety locks and fencing, new fire escape ramps and emergency “wayfinding” signs.
The Sequoia high school district’s 2015 bond ($265 million for Measure A) financed a prodigious list of big projects, among them new classroom wings at Carlmont, Woodside and Menlo-Atherton high schools, renovation of the music building and the athletic practice field at Sequoia, a new gym at East Palo Academy and the new TIDE Academy.
San Mateo County maintains comprehensive online information on the 2016 Measure K sales tax, including annual reports, lists of specific expenditures and accountability criteria. One of the chief reasons county supervisors placed Measure K on the ballot was because of calls at the time for more affordable housing. Polling indicated that a bond for housing wouldn’t pass but a 10- or 20-year extension of Measure A would win handily. It did—and the former Measure A became Measure K. In December, the county announced the award of $54 million in housing grants that included more than $23 million in Measure K funds.
As its proponents promised, there is a citizen oversight committee. It meets twice a year. Its main role is to review the annual audit from the county controller’s office, but the committee has no power to recommend to the board of supervisors how funds should be spent.
Funding A New Agency
Meanwhile, the San Mateo County Flood & Sea Level Rise Resiliency District has a tax problem. Called OneShoreline for short, the agency was formed three years ago. The county and its cities were expected to contribute to it until it secured an independent source of funds. Some of the money from Measure K was supposed to go toward addressing sea level rise, and Pine says the county has indeed drawn on that source for its own OneShoreline share.
The board of supervisors last spring was looking at putting a parcel tax on the ballot, which had “kind of morphed into a broader climate resiliency tax,” Pine explains. Residents received glossy mailers about a “New Normal” of drought, wildfire and sea level rise, and were asked to comment online. But polling showed a parcel tax wouldn’t pass—illustrating Pine’s contention that polling often keeps tax measures off the ballot.
“Polling reflected what was going on in the world at the time,” he says, “which was inflation and gas prices were at a record high. People were still feeling uneasy about Covid. And it was clear that obtaining two-thirds approval [the margin a parcel tax needs] would be extremely hard to achieve. So we passed on it.”
Where does that leave OneShoreline? Pine says it’s not at imminent risk of going out of business. But long-term, he adds, “the need still exists to figure out how to fund OneShoreline.”
Virginia Chang Kiraly, who serves on the boards of both the Menlo Park Fire Protection District and the San Mateo County Harbor District, heard a similar message when she canvassed door-to-door last spring in her unsuccessful campaign for the board of supervisors. “I didn’t once talk to anyone who was for any taxes and I didn’t even bring up the tax measure,” she says. “And they don’t know how their tax dollars are being spent. I heard this over and over again.”
Chang Kiraly says she’s not anti-tax but that it was the wrong time to be going to the voters for more money when families were struggling to cover basic needs. She also contends OneShoreline should first try to partner with other taxpayer-supported special districts with overlapping missions to “figure out how you can expand on what they’re doing.”
Every harbor district infrastructure project, she adds, takes sea level rise into account. “How do you expand that and not have to reinvent the wheel? So it’s really about how do you become more resourceful with what you’ve got right now instead of working in silos?”
Hinkle remains “baffled” why so many tax measures get approved by the people who will be paying the tab, though some of that may be because of residents who have been priced out of California and aren’t around to vote “no.”
It bears noting that the Peninsula and Silicon Valley have some of the wealthiest ZIP codes in the country. For two-earner families or tech employees receiving stock options, thousands of dollars in taxes for quality public services and good schools may seem money well-spent.
Hinkle owns a swimming pool enclosure business, and his wife is an architect. They built their home in Morgan Hill 29 years ago. The property tax started at $4,000. Despite Prop. 13, their bill today runs more than $10,000. “Last time I looked, I had something like 19 different line items,” Hinkle says, add-ons for special districts, schools and other things. “Every year the property tax goes up $400 or $500.”
He’s lived his whole life in California but says if he and his wife ever quit working, “we can’t afford to stay here because of the property taxes and the cost of living. … You’ve heard the phrase ‘death by a thousand cuts?’ Well, I’ve had 19 cuts, and I’m not sure I can afford more.”