This is the third installment in our series on the 2015-17 budget process, and the second concerning revenue projections in the Five-Year Fiscal Forecast. The mayor’s budget is scheduled to be released on Thursday, so we’re covering this to provide some context for the budget decisions to be made over the next two months. As we did in the last post, we summarize the Forecast’s discussion of revenue sources, limitations on those sources and projections for revenue.
It isn’t unusual at citizen budget discussions to hear a proposal that wealthier Oaklanders pay taxes at a higher rate. Although this concept is attractive to many – possibly most – people, the suggestion highlights one of many limitations on the City’s ability to levy taxes. Among those limitations: a California city can’t impose an income tax, or any other tax based on the income or wealth of the people who pay it. Moreover, Proposition 13 limits ad valorem property taxes. The baseline is 1% of assessed value of property. Beyond that, the City can impose an ad valorem property tax to cover obligations incurred before 1978 (as Oakland does to provide an income stream to partly fund its long-closed Police and Fire Retirement System), plus an assessment for certain bond measures authorized by two thirds of the voters. The assessed value starts at the sales price of the property, and cannot grow by more than 2% as long as the same owner holds the property.
And much of the baseline property tax for Oakland properties doesn’t go to the City of Oakland. Although not discussed in the Five Year Financial Forecast, our research has shown that only 26% of the Proposition 13 baseline property tax on Oaklanders goes to the City. Oaklanders’ property tax bills contain a large number of parcel taxes and other special assessments, some supporting police, fire, libraries and other typical city services. Not all of these are city assessments. Nearly all require a 2/3 vote, and they cannot be based on income levels. (more…)