This will be short note, I’m afraid. I’m up to my eyeballs in writing projects, so I have to make this quick. The Albany Unified School District (AUSD) has put a parcel tax on the March 2020 ballot as Measure B. After having given it some thought, and after doing some background research, I’ve decided to vote against Measure B. Here’s why:
Measure B replaces the existing Measure LL which will sunset (terminate) in July of 2021. If Measure B simply asked to continue at the same inflation-adjusted level as Measure LL, I would have no trouble endorsing it. However, according my current property tax bill, we now pay $318 annually for Measure LL, while Measure B will start at $448 annually, and increase of 41 percent.
If Measure B guaranteed that the new money would be held in a restricted fund to deal with pension costs, I would vote yes. But it doesn’t. There needs to be some justification for an increase of this amount, and I’m not seeing it. For comparison, note that in the 2018 elections, the City of Albany asked to voters to extend our half-percent sales tax (Measure L) and our parks and open space funding (Measure M), but at the existing rates.
I’ll be the first to admit that when I was on the school board from 2002-06 we used the same sort of heart-warming photos of cute Albany kids in our campaign literature. But times have changed. Local governments are facing a serious pension-funding crisis, one that will play for a decade or longer (here and here and here). AUSD’s literature would be more honest if it featured age 60+ folks like me holding up signs that say “SAVE OUR PENSION SYSTEM.”
In Albany we have some folk wisdom that needs a critical second look. Do we have great public schools? Depends on your benchmarks. Compared to our surrounding schools districts–Berkeley and West Contra Costa, we do have high-performing schools. But compared to schools nationally, Albany schools are solid mid-pack peformers, as this interesting graphic from the NY Times shows. Albany is sometimes compared to another small local city, Piedmont. Oddly enough, the wealthy Piedmont school district tends to underperform when measured against its peers.
And are Albany teachers underpaid? Again, it depends on the comparison. The Albany teacher’s step-and-column table is here. Similar pay schedules for nearby districts are here for Berkeley (scroll down to Appendix 12), Piedmont and West Contra Costa schools. The steps (rows) indicate years of service, while the columns indicate the amount of education.
Albany teachers are paid at least as well as teachers in nearby districts. However, compared to other public organizations, Albany teachers are paid fairly well. For example, I retired as a UC Berkeley science writer and editor after 20 years of working at UC. My pay was roughly the same as a Column 3 Albany teacher with 14 years of experience.
For more comparisons, the City of Albany’s salary schedule is here. The Sacramento Bee maintains a database of public sector employee compensation (here) but it is annoying to use. This database is easier to use, and it is looks accurate (including for my data), but it is put together by a conservative political organization in Nevada.
There are a few caveats that I should mention. First, as a UC employee, I continued to pay into the social security system, so when I retired, I got my UC pension and I am eligible for social security benefits. There is an employer match in social security, so my pay + benefits are higher because of that. When a teacher joins the STRS pension system, they stop paying into the Social Security system. This creates some unusual incentives.
For teachers who enrolled in STRS in 2012 or earlier, their pension payment is based on their highest one year of pay. This leads to the what called spiking, or pay scales with a big bump in the final year. Albany’s step-and-column is a good example. After remaining relatively flat for several years, in the final year, the annual pay jumps by almost $5,000. For teachers hired after 2012, the pension benefit is based on the highest three years of salary, which is the typical practice for public sector organizations like UC and city governments.
More generally, the STRS pension system creates incentives for a steep system of steps, meaning starting teachers get paid less, while senior teachers get paid more. If teachers also paid into the social security system and got full benefits from both (as I do), the incentives for spiking and steeper steps would be reduced. This would benefit starting teachers, who get paid considerably less than senior teachers.
Now, a note on our property tax bills. I just crunched the numbers for 2019-20 (we paid the 1st installment already, and have the 2nd installment due in April). On the left hand side of our bill, the ad valorum portion, the county gets one percent of our assessed value (less the $7,000 homeowner exemption). For me that’s 56.31 percent of my total tax bill. The county gets a bit of parcel tax revenue, but it’s pretty small. From both ad valorum and parcel taxes, the school district gets 20.98 percent of my property taxes. That amount would rise to 22.17 percent if Measure B passes. The city gets 16.56 percent.
Finally, it’s is important to note that California school districts get significant funding from the state in the form of average daily attendance (ADA) money. For AUSD, that amounts to a little more than $9,000 annually per student. If AUSD is turning to Albany residents for extra funding at the top of the business cycle when state budget has a healthy surplus, what is going to happen when the next recession inevitably occurs as our public pension obligations are increasing?
When I was on the school board, the district was run Dr. William Wong, whose management goals were shaped by running poor rural school districts in Southern California. Wong ran a tight ship financially. From my conversations with various Bay Area educators, AUSD since then has developed a reputation for (how to put this politely) getting looser with its financial management. But then if you have a group of sort-hearted, naïve citizens willing to bail you out with parcel taxes, why bother to run a tight ship?
If Albany residents are going to be the funders of last resort for our local government agencies, we need to start thinking seriously about how we will address our long-term funding needs. I don’t think Measure B does that. Albany residents will have plenty of opportunities to tax themselves in the coming decade. For now we might want to hold off.
WARNING: THIS POST IS LONG AND DETAILED. BUT IF YOU STICK WITH IT, I THINK YOU WILL FIND IT WAS WORTH YOUR TIME.
San Francisco State Senator Scott Wiener, along with our own State Senator Nancy Skinner (in the news recently), have resubmitted their zoning bill SB 50, which was converted to a two-year bill at end of the last legislative session. The final version of the bill is not yet available, but the flaws in previous incarnations of this bill no doubt will remain.
The rhetoric from the bill’s supporters has been sloppy enough that I think it’s time to frame the issues the bill raises in the rigorous analytic framework of neoclassical economics. SB 50’s emphasis on housing supply recalls the supply-side economics of the Reagan administration. But neither supply-side economics nor SB 50 are based on mainstream economics. In what follows, I’ll lay out the groundwork my analysis, which will be familiar to any undergraduate economics major. I know because in the early 1990s, I taught economics at UC Berkeley as an graduate student instructor and as an acting instructor.
Here’s my first question, which is one that could have been drawn from a quiz early in an intro econ course: In a market with a standard downward sloping demand curve and upward sloping supply curve, in order to lower equilibrium price and raise equilibrium quantity, is it sufficient to shift the supply curve outward? If not, what other conditions must be assumed?
Figure 1 describes, in a standard intro econ graph, the question posed. In a housing market, assume a fixed demand curve (D), and an outward shift in supply from S1 to S2. The price of housing falls from P1 to P2, while the quantity of housing supplied rises from Q1 to Q2.
This is a result that proponents of SB 50 like to assume. But the result rests upon a very strong, and very unrealistic assumption–that the demand curve for housing is fixed. In the Bay Area, the demand for housing has shifted outward at a dramatic rate, driven by the growth of large monopolistic tech firms like Apple, Google and Facebook, and by the billions of dollars of venture capital being funneled to tech startups here. This growth requires more tech workers, more office buildings and ultimately more housing.
The choice of the expression “housing crisis” was a deliberate, misleading attempt on the part of SB 50 supporters and other pro-growth advocates to shape the debate. The state’s Office of Housing and Community Development (HCD) instead uses the term “housing shortage.” Statewide, the shortage is the result of both a physical shortage of housing and an income mismatch that HCD estimates requires the construction of 1.5 million units of affordable housing for the poorest of California’s residents.
If simple poverty is the major problem for the whole state of California, in the Bay Area the problem is mostly due to relative poverty–the influx of a highly paid cohort of tech workers crowding out lower-income residents. This is not a housing crisis–there was no hurricane or outbreak of mutant termites that destroyed thousands of apartments. What we have is a venture-capital driven influx of tech workers. It would be more accurate to call this a “housing demand shock.”
Here’s how we could graph a housing demand shock. For simplicity, in Figure 2 above, the supply curve of housing is held constant, while the housing demand shock shifts the demand curve from D1 to D2. While the assumption that the supply curve is constant is too simple, it is very realistic to assume that the demand for housing in California, and especially in the Bay Area, has been shifting outward. In this example, like the example in Figure 1, the equilibrium quantity of housing supplied rises from Q1 to Q2. However, unlike in Figure 1, the equilibrium price rises from P1 to P2.
The outward shifts in supply and demand both cause quantities to rise, while these outward shifts have contradictory affects on prices. To explore this more fully, let’s combine shifts in demand and supply together in one graph.
In this example, demand and supply curves both shift outward. Equilibrium quantities rise as before, and prices rise somewhat. The price response is moderated by the relatively small outward shift of the supply curve.
When both supply and demand curves are shifting out, it is the relative size of the shifts that matter. By now the reader can probably see that if the S2 supply curve continued to shift out far enough, with its intersection point moving down the D2 demand curve, the new price would be lower, not higher. The reader is encouraged to draw diagrams of their own, not only shifting the positions of the curves, but also drawing them steeper (more price-inelastic) or flatter (more price-elastic).
Three general points should be made here: 1) It is unreasonable to assume that housing supply can shift rapidly enough to accommodate a housing demand shock driven by volatile capital flows. This is especially true because builders of new affordable housing shared in very little of this largess. 2) It is generally faster to build office buildings than new communities. With respect to communities, office buildings require far less services like police and fire departments, schools, parks and libraries and utilities. 3) When they ignore the demand issues, SB 50 proponents violate one of the fundamental concepts of economics–that in a market, prices and quantities are set by the interaction of supply and demand, and not by supply conditions alone.
At least in San Francisco, SB 50 isn’t the only game in town. An initiative that explicitly links housing demand and supply will be on the ballot in March 2020. Sponsored by the community development organization Todco, Measure E will cap office construction unless the city meets its affordable housing goals (Links here and here).
While capping office construction to allow new housing to catch up is an idea worth supporting, restoring the jobs/housing balance could still take years–and without something like the Todco proposal it may never happen at all, since SB 50 makes no attempt to control housing demand.
An intriguing possibility to speed up that process is suggested by Figure 4. What if we could increase housing supply and simultaneously decrease housing demand by converting offices to apartments? In such a scenario, small office buildings could be completely retrofitted and converted to apartments, while whole floors of taller office buildings could be converted.
The advantages to this plan are many. Since building any new housing is very expensive, money would be saved by utilizing existing buildings. Downtown office workers could walk to work (or perhaps just take an elevator), and their presence in the neighborhood in the evenings would create a lively after-work social scene with new bars, restaurants and shops. If some of the new apartment units were affordable, inclusionary and affordable housing programs could be tapped for revenue to subsidize the retrofitting.
Of course, this would mean that some tech businesses would leave the city, a trend that is already beginning. But is this so bad? By moving to cities with lower housing costs, tech workers could afford houses instead of apartments, and move into neighborhoods with good schools and other amenities. And they might not have to move far. Oakland, Concord and Walnut Creek, Sacramento, Las Vegas, Phoenix and Austin all are possibilities. It makes sense to move jobs to where housing is more available.
In the story told in Figure 4, as offices start to close and workers move to other cities, the demand curve shift inward from D1 to D2. Housing quantities and prices both fall temporarily. But as the former office spaces are converted to housing, and the supply curve shifts from S1 to S2, housing prices continue to fall while musicians, artists, people of color, students, new immigrants and commuters are drawn back to the city. This is a story of the degentrification of San Francisco.
CONSTRAINED OPTIMIZATION AND THE LIMITS OF UPZONING
If SB 50’s advocates fail in part because they do not grasp the interaction of supply and demand, there remains a deeper failure. Upzoning will not effectively increase housing supply, at least not for many decades, if at all. Zoning is a constraint, although a complicated one. But in the current housing market in the Bay Area, zoning is mostly a non-binding constraint. That is why changing zoning laws will not be effective in the short run. By definition a “crisis” is something happening here and now and requires effective solutions in the short run. Zoning changes are not that solution.
To discuss this, I want to introduce the topic of constrained optimization in a form that is familiar–the model of consumer behavior in standard neoclassical economics.
Figure 5 presents a typical graph that could be found in many intro econ textbooks. A consumer is faced with choosing how many mangoes and avocados to purchase. The goal is to maximize utility subject to a budget constraint. To keep things simple, let’s just assume the consumer budgets six dollars per week on fruit, and they only like to eat mangoes and avocados. Mangos cost $1 each and avocados cost $2 each. If they spend their entire fruit budget of $6 per week, the consumer could buy six mangoes or three avocados, or some combination of the two. Their purchase decision will lie along the blue budget constraint line.
The graph also features a series of indifference curves which display the consumer’s preferences between mangoes and avocados. Along each curve, the consumer is equally satisfied with the options available. As we move to indifference curves further up and to the right, the consumer’s satisfaction, or utility, goes up. That’s another way of stating that more is better, a basic the assumption in these models. The consumer maximizes their utility by reaching the highest indifference curve possible without violating their budget constraint. In this example, our consumer will choose to buy two avocados and two mangoes.
Now let’s assume that due to the popularity of avocado toast, the local grocery where our consumer buys fruit limits customers to one avocado per day, or seven per week. We represent this new constraint on the graph as a dashed vertical blue line at the number seven on the horizontal avocado axis. Now the figure contains two constraints, one binding, one non-binding.
In this example, the budget constraint is the binding constraint, and the store’s limit is non-binding. But if our consumer was shopping for a family, their budget for fruit might be far larger and their budget constraint could lie much farther to the right. If, for example, our family shopper had a fruit budget of $60 per week and wanted to purchase 20 mangoes and 20 avocados, their choices would be constrained by the grocery store’s limits. In that case, the budget constraint would be non-binding, and the store’s limit would be binding.
Here is another example in a different context: Assume you are a very fast center fielder playing for a major league baseball team. The center field wall is short and you a facing a team with lots of power hitters. For you the outfield wall will be a constraint if the opposing team’s hitters are whacking balls into the grandstands. On the other hand, if you are playing a team that focuses on line drives and high batting averages, the outfield wall may not be a constraint because balls aren’t being hit that far.
The important point to remember is that removing non-binding constraints does not change the equilibrium outcome. Whether or not a constraint is binding or non-binding depends on the situation. In large, complex, multi-dimensional models, it is often not obvious which constraints are binding, and computer algorithms are used to determine the optimum outcome. In the real world, building housing is subject to many constraints. In the current Bay Area context, zoning rules are typically not the binding constraints for two reasons. First, there are many other constraints that are binding. Second, zoning rules don’t work quite in way that many SB 50 supporters seem think they do.
In an excellent letter date June 14, 2019 (here), the City Council of Rohnert Park sent to various legislators a list of the many constraints on building new housing. Excerpts from the letter appear in italics below:
There is a flood of proposed legislation in California intended to address housing that are a result of a misdiagnosis of the root causes of the housing shortage. The bills seem to assume that a lack of approvals is unduly constraining housing construction. In reality, it is a complex problem with many contributing factors to the housing shortage including:
• An economic expansion including significant regional construction demand in Silicon Valley and San Francisco for office buildings and campuses
• A lack of specialty trade construction subcontractors
• A lack of construction workers
• Immigration uncertainty and hostility from federal government
• Cost, long delays, and uncertainty associated with the California Environmental Quality Act lawsuits
• Tariffs and trade uncertainty driving up materials costs
• A building boom to replace homes lost due to wildfires
• Lack of available sites due to land use protections such as urban growth boundaries, community separators, etc.
• High costs associated with mitigating water, sewer, transportation, and environmental impacts including endangered species (e.g. California tiger salamander, various vernal pool wild flowers)
• State regulatory requirements such as low-impact-development storm water requirements
• Loss of redevelopment which was the greatest affordable housing producer in the history of California
• Federal tax reform which lowered the value of affordable housing tax credits leading to a widened funding gap for affordable housing projects
• Increased local government capital project spending from new gas taxes, regional tolls and other revenue improvements
• Whole-house-vacation-rentals taking housing stock off the market
• Lender reticence to extend credit to construction projects post 2008 melt-down
• Lack of affordable housing gap funding.
Rather than address those issues within its control, some state legislators are seeking to impose “by-right” development projects on local governments, elimination of fees, removing parking, overriding local plans, and limiting public input.
As the letter describes, there are many binding constraints that prevent housing from being built, constraints which SB 50 does little or nothing to address. But even if all these constraints could be removed, there is still another problem. Upzoning–allowing multifamily and other large housing developments in neighborhoods in which they were previously restricted–requires homeowners to do nothing.
Let me give an example from my own neighborhood. I live in an R-1 neighborhood where only single-family homes can be built. My 1,100 sq. ft. house was built in the 1920s. If my neighborhood was upzoned to R-2 zoning (which allows for multifamily housing), what would I be required to do? Nothing. Upzoning removes a constraint–if my neighborhood became R-2, I could sell my house to someone who plans to build a duplex. But I’m not really interested in doing that. I think I’d rather sell to a family who wants to live in the perfectly adequate house that is already here, and until then I might add some plumbing to my backyard studio to convert it a legal accessory dwelling unit (ADU), which I would probably continue to use as an occasional guest house.
For me, R-1 zoning is a non-binding constraint. As in the examples above, if you remove a non-binding constraint, it doesn’t change the outcome. Some people seem to think that zoning is like eminent domain, where the state can condemn your house, force you to sell, and then demolish it to make room for a freeway (or an apartment building). That’s not how zoning works. Upzoning allows someone to build something bigger on my property, but it can’t require me to let them do it, or to sell to them. I still maintain my property rights.
Even if I wanted a duplex where my little house exists now, there is another problem. I might not be able to find a developer who would want to build it. The project very likely wouldn’t be profitable. Let’s just say because I live in a town with good schools within walking distance, with a charming walkable commercial district nearby, I could sell my house to a young family for $1 million. As an alternative, I could sell it to a developer who wanted to build a duplex.
First the developer would have to pay $1 million for the property. Then they would have to demolish the old house and build two new units. That’s expensive. Then they would have to find a buyer for the project. The problem is that privacy, space and aesthetics are all what economists call normal goods–as your income rises, you demand more of them. If you tear down a charming 1920s bungalow and replace it with a boxy duplex, you are destroying the very characteristics that made the property valuable in the first place.
Given how valuable single-family homes are in the Bay Area, and how expensive it is to build for all the reasons listed above, upzoning R-1 neighborhoods like mine might lead to very little building in the short run. In the long run it might lead to more, but as John Maynard Keynes famously said, “In the long run we are all dead.” If we really want to solve our “housing crisis,” solutions that take several decades are inadequate to the task.
However, the combination of upzoning and gentrifying low-income neighborhoods, typically occupied by families of color, could be profitable under SB 50. That’s why low-income community organizations tend to be among the most vociferous opponents of SB 50. Various versions of the bill in the past have attempted to mollify these critics, but the neighborhood groups are right to be extremely skeptical. They have been hesitant to abandon their positions on the bill (and possibly their positions in their old neighborhoods).
For a good example how and where such problems could emerge, consider Minneapolis. Advocates for upzoning consider the city a model. Minneapolis recently banned single-family zoning in favor of allowing residential triplexes “by right,” which means the city has very limited ability to block the projects. In an article that is both fascinating and disturbing, a Minneapolis planning commissioner, architect and resident of low-income North Minneapolis, dissects this policy (here).
To summarize, the arguments for SB 50 fail for two reasons. First, expanding supply will not bring down prices unless demand is constrained. Second, although zoning is a type of constraint, in the current situation, it is not a binding constraint. However, several other constraints are binding. Upzoning R-1 residential neighborhoods does not require a homeowner to move or prevent them from selling their house to a new owner who might live in it for decades.
If SB 50 is ineffective in bringing about its stated goals, what then is the real purpose of the proposed legislation? The real purpose of SB 50 is to destroy local control and small-homeowner property rights. Real democracy exists at the local level. But for corporate real estate developers and their sycophants (see here and here), local democracy is a nuisance. If democracy, at least on paper, must exist, they would prefer its decision-makers to be housed a compact space, like a state capital building, where they become easier targets for lobbyists and campaign-funding checks.
On the other hand, under local democracy, there are too many decision makers, and too many homeowners, to be bought off easily. Influencing local government officials is like herding cats, and homeowners are a group of independent and opinionated Jeffersonian free holders (at least after the mortgage is paid off). Local governance is messy. Some corporate real estate interests would prefer to do away with local governance and small homeowners altogether, and, judging from the legislation they support, require the little people to live in large, drab apartment blocks like those in the old East Berlin, or to house tech workers in Shenzhen-style worker barracks–quick to build, no design review required. SB 50, along with related bills like Skinner’s SB 330, take a giant step in that direction.
NEGATIVE EXTERNALITIES AND ANTITRUST
Since legislation like SB 50 and SB 330 are not the solution, it’s a good idea to step back and ask how we got into this mess. If we don’t understand how we got here, if we don’t understand the nature of the malady, we will keep on prescribing for ourselves the wrong remedies.
First, a note about rural California. In many respects, the problem there is not that the rich are getting richer, but that the poor are getting poorer (here and here). Although it is true that lack of affordable housing can exacerbate rural poverty, the opposite is also true–lack of effective demand due to poverty can reduce the amount of new housing. Poverty is both a cause and effect of the rural housing shortage.
Economic relationships in which cause and effect flow in both direction are difficult to disentangle. But in the real world, they are common. In his classic essay, “Politics and the English Language,” George Orwell stated this succinctly:
“But an effect can become a cause, reinforcing the original cause and producing the same effect in an intensified form, and so on indefinitely. A man may take to drink because he feels himself to be a failure, and then fail all the more completely because he drinks.”
In California, the combination of rural poverty and lack of housing are nothing new. Does anyone believe that in 1962, when Dolores Huerta and Cezar Chavez began organizing the United Farm Workers, those farm workers were better housed than they are today?
Here in urban coastal California, things have changed. As I mentioned earlier, the rise of demand for housing has been driven by the growth of large monopolistic tech firms like Apple, Google and Facebook, and by the billions of dollars of venture capital being funneled to tech startups here. The clustering of firms based on emerging technologies has been happening at least since the industrial revolution, and analyzing this new round of tech clustering is keeping economic geographers busy.
One of the new aspects of tech clustering in the United States is that it’s happening during an era of weak antitrust enforcement. Especially given the privacy issues engulfing Google and Facebook, is there any economic efficiency argument for Google Maps and Gmail to be run by the same company? How about Facebook and WhatsApp? The gigantism of tech firms is now drawing the attention of Congress.
New York University finance professor Thomas Philippon is the best known current thinker exploring the failures of U.S. antitrust policy. As he notes in an Atlantic magazine article, “In 1999, the United States had free and competitive markets in many industries that, in Europe, were dominated by oligopolies.Today the opposite is true.” A New York Times article about Philippon’s work on corporate concentration states, “Philippon’s biggest contribution is to explain that it isn’t some natural result of globalization and technological innovation. If it were, the trends would be similar around the world. But they’re not. What explains the difference? Politics.”
Facebook, Google, Apple and other tech firm are not immutable forces of nature. Our rules, or rather the lack of enforcement of them, have led to their growth. Bay Area citizens have every right to use the rule of law to restrain the behavior of, and the problems created by, these behemoths of the Bay.
Many of the problem big tech creates are what economists call negative externalities.The negative externality most often in the news today results from the burning of fossil fuels. The price of burning coal, oil and gas does not include the social and environmental damage caused by increasing levels of carbon dioxide in the Earth’s atmosphere, or their contribution to climate change. One partial solution would be to charge a carbon tax to increase the cost of burning fossil fuels and internalize those costs in the higher price.
Writing in the Jan. 18, 2018, edition of the New York Times, columnist E. Tammy Kim tied the logic of taxing negative externalities to the tech housing demand shock:
“A half-century ago, it seemed inconceivable that factories, smelters or power plants should have to account for the toxins they released into the air. But we have since accepted the idea that businesses should pay the public for the negative externalities they cause. Today, corporations must answer for increased rents and evictions, and for worsening traffic jams. Like air and water pollution, these costs are shared by all of us.”
“At the economic end of the equation, the costs of excessive tech concentration are creating serious negative externalities. These range from spiraling home prices and traffic gridlock in the superstar hubs to a problematic “sorting” of workers, with college-educated workers clustering in the star cities, leaving other metro areas to make do with thinner talent reservoirs.”
The Bookings report stresses subsidies to develop new regional growth centers. Their goal is to:
“Assemble a major package of federal innovation inputs and supports for innovation-sector scale-up in metropolitan areas distant from existing tech hubs. Central to this package will be a direct R&D funding surge worth up to $700 million a year in each metro area for 10 years. Beyond that will be significant inputs such as workforce development funding, tax and regulatory benefits, business financing, economic inclusion, urban placemaking, and federal land and infrastructure supports.“
The New York Times’s Kim endorses not the “corporate takeover of housing policy” (as the advocates of SB 50 suggest), but taxation of negative externalities in existing tech centers:
What is needed in Seattle — as well as San Francisco; Austin, Tex.; New York City; Boulder, Colo.; and other urban areas where the rapid influx of high-paid tech workers has made housing unaffordable for nearly everyone else — isn’t a corporate takeover of housing policy but, rather, a per-employee “head tax” that would fund real investments in affordable housing, which should be a public good.
These two policies are complimentary. In addition to taxing tech’s negative externalities to subsidize affordable housing, the tax revenue could fund the development of new regional growth centers–although if state taxing and funding mechanisms were used, the new regional grow centers would have to be in California.
In this blog post I have attempted to explain how the advocates for SB 50 do not understand the basics of supply and demand. These advocates misunderstand or ignore the many constraints to building housing, and they do not have a clear understanding of zoning or the unintended consequences of upzoning. In their arguments they fail to recognize the broader economic context that includes antitrust and negative externalities.
SB 50 cannot fulfill its stated mission of reducing housing costs in the short run. However, if enacted, the bill could be effective in its intended, long run mission–removing local control of land use and encouraging the corporate takeover of housing policy.
NOTE: Jan. 14, 2019: I made changes to two paragraphs, at the suggestion of a reader. Typos continue to be corrected as I find them. Jan 15: I added link to Nancy Skinner news story in first paragraph.
Imagine that Amazon notified you that starting right now, every week they would send you merchandise and bill your credit card for it–even though you had not ordered any of the items and you didn’t want them. In reality, Amazon can’t get away with doing that because it’s illegal. But the same rules don’t apply in the wacky world of special districts.
Special districts–water districts and other small government agencies–can “annex” your city and charge your property tax bill for the services, even though your city didn’t request them. As a resident, you don’t get to vote. Your city council members don’t get to vote. Whether or not a city can be billed for such unwanted services is up to a special organization called a LAFCo, a local agency formation commission. Alameda’s LAFCo is here.
Alameda County has a special district for mosquito control, the Alameda Country Mosquito Abatement District (MAD). However, the county also provides mosquito control through its broader vector control program. For many years Albany has relied on the country vector control program. It has been one-stop-shopping for us, and the city has been happy with the services provided. We have no interest in being part of an additional mosquito control program, especially one that we’ll pay for with new parcel taxes (although the taxes are only $4.24 annually–at least for now).
In order to prevent annexation, the city has to fight back by requesting something called a protest hearing. I know this must sound bizarre, but special district rules are arcane. And in order to fight against this unwanted annexation of our city, I’m asking for your help. Here’s the official word from the city about how you can file your protest. You should be receiving a postcard with the same information, but just in case, here it is again:
NOTICE OF PROTEST HEARING
PROPOSED ANNEXATION OF THE CITY OF ALBANY BY THE MOSQUITO ABATEMENT DISTRICT
The Alameda County Mosquito Abatement District has applied to annex the City of Albany to become part of the Mosquito Abatement District (MAD). If this application is approved, Albany property owners will have to pay a new fee for services from MAD. The Albany City Council has submitted a letter opposed to this annexation.
Albany has for many years received mosquito abatement services, from Alameda County Vector Control, and these services are included in our overall package of services from Alameda County.
The MAD seeks to take control of Albany’s mosquito abatement by ‘annexing’ Albany and obligating Albany property owners with an additional fee.
The Local Agency Formation Commission (LAFCo) is the agency responsible for administering the protest hearing. LAFCo will hold a public hearing regarding the proposed annexation. The protest hearing will be held Wednesday, January 8, 2020
from 6:00 p.m. to 8:00 p.m at the Alameda County Administration Building Board of Supervisors Chambers, 5th floor, 1221 Oak Street, Oakland.
We encourage you to please consider filing a protest.
How to File a Protest: To be considered valid, a protest must be written and filed by either a landowner or a registered voter, within the area included within the reorganization. Protests may either be mailed to the Alameda LAFCo at 1221 Oak Street, Room 555, Oakland, CA 94612 or delivered to the LAFCo Executive Officer at the protest hearing. Each protest must be signed and dated, must state whether it is made by a landowner or a registered voter, and must include the name and address of the protester and a street or parcel number identifying the location of the land. A registered voter’s protest must show the name and address appearing on the affidavit of registration. Disclosures related to expenditures made for political purposes related to the subject change of organization must comply with the Political Reform Act (California Government Code Section 81000 et. seq.). Only written protests that are received prior to the end of the hearing on January 8, 2020 will be accepted as timely.
For additional information, please contact Alameda LAFCO Executive Officer Rachel Jones at (510) 271-5142 or
Yes, you understand correctly. In order to protest as a citizen, you have to write a letter with specific information and either mail it or bring it to the meeting. It makes you suspect these rules haven’t been updated since before the internet was invented. At least you are not required to travel to the meeting in a horse and buggy.For more on special district lunacy, see this episode of John Oliver’s HBO comedy show.
Please consider writing a letter and sending it early enough that it gets to the Alameda County Administration Building before January 8. It doesn’t have to be perfect, it just has to be done. In your letter, you might want to stress that the issue is not the mosquito district’s competency–it’s their redundancy. Our little city doesn’t have the resources to pay twice for the same services. Although mailing a letter or bringing one with you to the meeting is a pain, it might be one of the most cost-effective letters you ever write.
Addendum: January 23, 2020. At the Alameda LAFCO meeting on Jan. 8, 2020 the board voted to force Albany to join the Mosquito Abatement District. It took me a few phone calls and emails to discover what the process was. It turns out, assuming we have about 10,000 registered voters or property owners, one-quarter of them would have either had to send a letter or attend the meeting in person. That’s 2,500 people. Less than 2,500 people and the annexation happens. Between 2,500 and 5,000 people, a vote is held. If more than 5,000 people show or send letters, the annexation would have been cancelled. LAFCO received a total of ninety one written protests–8 registered voters, 83 property owners. Many thanks to those of you who protested. This whole process is bizarre. It reminds me of something out of a movie I saw recently, the black comedy “The Death of Stalin.” The only bright note is that any increases in fees will be subject to a 2/3 majority vote of the whole county.
Here in California we are bombarded with news about our “housing crisis.” State politicians have used the housing crisis as justification for removing local control of zoning and handing carrots to developers. We are told that the Bay Area is the “epicenter” of the housing crisis.
Politicians and pundits who use this overblown language should review some of the reports available from state agencies and business sources. Those reports paint a far more nuanced picture.
The reports show:
1) San Francisco is not the epicenter of the affordable housing shortage. The opposite is true.
2) The state does not have a housing crisis. It does have a severe shortage of affordable housing for our lowest-income residents. This is due a combination of a physical housing shortage and simple poverty. There is not a shortage of market-rate housing.
3) 2018 population estimates show that population growth has slowed dramatically statewide, but the decline varies from county to county. Factors including fires, expensive housing, and the search at the urban boundaries for cheaper housing. Housing projections need to take these new figures into account.
4) Hundreds of thousands housing units have been proposed in California—more than enough to meet growth in housing demand statewide since 2010. While some projects are working their way through local government approval processes, most of them have been approved. For most of these projects, the construction phase is the bottleneck, not local government.
5) Growth is not an act of God. The jobs/housing ratio in the Bay Area is out of balance. The trend toward the “Manhattanization” of San Francisco has been fought sporadically for decades, and is now back on the agenda. There needs to be a serious, competent, open and democratic planning process for growth, both at the regional and state level.
This analysis is based on the following four widely available reports. However, the data has been combined to tease out some conclusions that are not well understood:
San Francisco is not the epicenter of the housing crisis
Under the standard definition, any household that spends more than 30 percent of its gross income on rent is considered rent-burdened. The chart below displays the percentage of low-income households that are rent-burdened in California. The chart is taken from the LAO report, but the graph has been truncated to save space. The original chart on page 7 of the report lists several more highly cost-burdened California counties.
Source: LAO report, p. 7.
Note that the least burdened county is San Francisco (which is both a city and a county). Low-income San Francisco residents on average have a rent burden that is lower than any other California county, and lower than the rest of the United States. This is probably due to a combination of low-income residents hunkered down in rent-controlled apartments, while highly paid techies are paying market rates.
According to the report, “The figure demonstrates that low-income households experience similar levels of rent burden across communities—suggesting that insufficient income creates housing affordability challenges even in low-cost communities that have a sufficient supply of housing. Because of this, construction of affordable housing has a key role in helping low-income households afford housing.”
The HCD report takes a slightly different approach, but the results are much the same. In the chart below, counties are ranked by the average percentage of income spent on housing and transportation. As in the LAO chart above, this version of the chart has been truncated to save space. Several more highly rent-burdened counties can be found in the original chart on page 34 of the HCD report.
Source: HCD report, p. 34.
The report shows that not only does San Francisco have a low rent burden, it also has a low transportation cost burden due to access to mass transit and jobs that are close to housing. Together these two charts show that despite the myths, San Francisco is not the epicenter of the state’s housing crisis.
California has a
severe shortage of affordable housing
Statewide there is a shortage of 1.5 million housing units for very low- and extremely low-income residents. These income categories are defined based on household income with respect the local area median income (AMI). The county is usually the area used in the definition. Extremely low income is defined as less than 30 percent of AMI, while very low income is 30 to 50 percent of AMI.
An example will help make this clear. Let’s assume an AMI for a particular county is $100 thousand annually for a family of four. Then an extremely low income household makes $30 thousand annually or less, a very low income household makes $30 to $50 thousand annually, a low income household makes $50 to $80 thousand annually, a moderate income household makes $80 to $120 thousand annually, and an above moderate household makes more than $120 thousand annually.
A household at the upper boundary of the moderate income category must spend on rent at least 30 percent of annual income, or $3,000 per month, before it is considered rent-stressed. On the other hand, a household at the upper boundary of the extremely low income category must spend on rent more than $750 per month to be considered rent-stressed. In reality, the AMI for Alameda and Contra Costa counties is slightly higher than these figures. This is due in part to high tech salaries in the Bay Area. In at least nine tech companies, the median salary is more than $200 thousand annually.
The chart below compares incomes and housing availability statewide:
Source: HCD report, p. 30.
There is a lot going on in this graph, so it is useful to work through it carefully. On the left is the bar that shows renter households by comparison to AMI. On the right the bar displays rental units that are affordable for renters in the various income categories.
As the legend on the right shows, in every group except the above moderate group, some households must pay more for housing than they can afford. For example, note the upper boundaries of the light blue bars. For low-income groups and below, there is a shortage of 960 thousand units statewide—the difference between the top of the light blue bars on the left and right. For moderate income households (green bars) and below, there is still a smaller shortage of 61 thousand rental units statewide.
The gap of 1.5 million housing units is shown by the blue arrow. Note that for low, moderate and above-moderate income households, the bars on the right (light blue, green and yellow) are thicker on the right than on the left—within those groups, there is enough housing. If there was enough affordable housing for very low and extremely low income households, all income categories would have sufficient housing (these numbers are for the state as a whole and figures can vary by region).
Taking a broader view, this chart details the mismatch between renter incomes and rental housing supply. One solution is to expand the bottom of the right hand bar—increase the amount of affordable housing. An alternative would be to shrink the bottom of the left hand bar—increase incomes to push renters into higher income categories. As the LAO report stated, the real culprit here is poverty (see here, here and here). But in either case, California doesn’t need to subsidize more market-rate housing. It needs to concentrate on housing for its lowest-income residents.
population growth has slowed dramatically
Housing estimates have to account for population growth. In recent years, this issue has grown more complicated. Population growth has slowed tremendously in the last few years and is falling well behind projections, but in very uneven ways.
Source: DOF E-5 Population and Housing Estimates.
The table above is derived from the population estimates of the California Department of Finance demographic unit. It shows the figures for the state, selected large counties and all nine Bay-Area counties. Population for the state and various counties is shown for the years 2010, 2018 and 2019 (in blue on the left). On the right (in green) we see the total percent change from 2010-19, the annual average for the nine-year period, and the annual percent change for 2018-19.
Let’s start with the far right hand column. Last year’s statewide population growth figure of 0.47 percent is the lowest figure ever recorded. The state population growth rate is about half what had been forecast in long-range estimates. Only two counties, Riverside and Sacramento, had population growth rates of greater than one percent. Also note that three counties with negative growth last year all suffered from devastating fires.
In addition to the three counties with fires, four counties had slower growth than the statewide average—Marin County and the three Silicon Valley counties of Santa Clara, San Francisco and San Mateo. In Silicon Valley, the lack of population growth is partly due to people leaving because they can no longer afford to live there.
Next, it is useful to compare the last two columns. In the state as a whole and in every county except one, last year’s growth rate is below the 9-year average. Population growth has slowed down. The only exception is Sacramento County. The region has become a popular destination for people exiting the Bay Area to look for cheaper housing. Estimates of future housing needs must be adjusted for these slower population growth trends.
Proposed housing is
sufficient to meet statewide growth since 2010
A comparison of population growth data, along with proposed housing projects, tells another interesting and complex story. The table below is derived from the Dept. of Finance population figures combined with estimates from the Construction Industry Research Board (CIRM) report of housing projects in the pipeline.
When reviewing these numbers, it’s important to keep in mind two things. First 2010 is the base year for the DOF population reports. California’s housing shortage existed even then. Renter’s income began to lag behind rising rents at least a decade before 2010 (HCD report, p. 29, fig. 1.23). Second, the number of proposed housing projects exceeds population growth in some Silicon Valley counties. If built, this new housing would help restore the jobs/housing balance in those counties, reducing the need for commuting.
Sources: DOF E-5 Population and Housing Estimates and CIRB report.
In the left hand column are the number of persons in 2019 living in households. Note that these numbers are slightly lower than the previous population statistics because they exclude people living in dormitories, assisted living centers, prisons and other group settings. The figures in the green section show the number of housing units in 2019, and how many housing units we would need to keep up with population growth from 2010-19. In the state as a whole, and in every county in the table, there is a shortage—since 2010, housing growth has not kept up with population growth.
The first column in the blue area shows the size of the shortfall, and compared it to the number of housing units that are in the approval and construction pipeline. In some cases, there is more than enough housing in the pipeline to meet population growth, and in some cases it is the opposite. In Los Angeles and Sacramento counties far more housing has been planned than is needed to meet population growth since 2010. The East Bay counties of Contra Costa and Alameda are a little behind. Interestingly, the Silicon Valley counties of Santa Clara, San Mateo and San Francisco all have far more housing in the pipeline that they need to accommodate population growth.
Statewide, there are 801,300 housing units in the pipeline. Of that number, according to the CIRM report, 451,000 are either under construction or are awaiting developers to pull the permits and begin work. In other words, cities have done their jobs and have signed off on 451,000 new housing units statewide—more than enough to meet population growth since 2010. The bottleneck for those units is the construction industry, not local governments. The HCD report states California needs to build 180,000 housing units annually. The number of units the in construction backlog (downstream of local governments) is 2.5 years of needed housing production. In the business press, the problems with the construction industry are well known. For more on the construction industry, see these two articles in the San Francisco Business Times (here and here).
The need for
democratic growth planning
Building more housing and increasing housing density in the Bay Area are often justified because they will reduce rents. But if adding density will reduce rents, why does Manhattan, the most densely populated place in the United States, still have high rents? That is the question that the Bay Area’s pro-growth advocates have yet to answer. The relationship between increasing urban population density and lower rents is not straightforward.
The housing crisis has been talked about almost exclusively in terms of supply. Sooner or later, anyone who has taken an economics course will began to wonder about the demand side of the housing market, or put another way, the job/housing balance. Growth is not an act of God. Do we accept growth at any cost? Do we want to turn the San Francisco into Manhattan and the rest of the Bay Area into Brooklyn, Bronx and Queens? Who gets to decide?
To help clarify these issues, the chart above demonstrates a stylized version of San Francisco’s office and housing markets. On the vertical axis are office units. On the horizontal axis are housing units. We define these such that one more office unit requires one more unit of housing for balance. Each office unit provides space for one more person to work, and each housing unit provides space for one more person to live. The thick grey line is the balanced-growth expansion path. Along this line rents will stay reasonable. The points on the upper right indicate places where there are more office units than housing units, and rents are high. To the lower left, there is a surplus of housing units, and rents are low.
Let’s start on the lower left, at point (0,0). Assume some time in the halcyon past San Francisco had job/housing balance. But with a sudden burst of commercial development, 4,000 office units were developed, but only 1,500 housing units. We find ourselves at point A. Rents have risen, low-income residents are being displaced, artists are moving away, etc.
From here there are two possible courses of action. The first would be to get back on the balanced growth path quickly. Commercial growth could be discouraged and held to 1,000 new office units. Meanwhile to preserve housing possibilities for current residents, 3,500 affordable units would be produced. Balanced growth and reasonable rents would be reestablished at point B with a new total of 5,000 office units and 5,000 housing units.
Another alternative would to add 3,500 more market rate units while adding 6,000 more office units. The end result would be 10,000 office units and 5,000 housing units. This is point C. Note that at point C there are double the number of office units with respect to point B. This is the road to Manhattan. Point C has moves us even further away from the balanced growth line than point A. Yet getting to point C requires building just as many housing units as getting to point B.
For developers, point C is advantageous. First, because of the influx of well-paid tech workers, new housing can be market rate. Second, with the job/housing ratio even more out of balance, rents will continue to rise, allowing developers and their allies to continue to decry NIMBYism, impact fees, high construction costs, etc. The reality is that as long as the tech boom continues, developers can maintain the housing “crisis” simply by expanding office construction faster than housing construction can keep up.
But balanced grow per se is not the complete answer. Even if we can stay on the balanced grow path, there remains a question—how much balanced growth do we want? In the short term even balanced growth puts stresses on the kind of infrastructure local governments provide. Think of it this way: When you buy a house, you don’t stop there. You have to turn your house into a home. You furnish it inside with carpets, furniture, beds, kitchenware and eating utensils.
When a developer builds a new neighborhood, all those houses have to be furnished on the outside to turn that collection of houses into a community—infrastructure like water and electricity, sewer systems, police and fire services, park, libraries and schools. Building communities is expensive and takes more time than building offices.
In the long run, too much growth, even balanced growth, leads to crowding. Californians don’t just live to work. They want to get outdoors and enjoy weekends and vacations. Many people already feel that the Bay Area is too crowded (here and here). In addition, even balanced growth can start bumping into environmental constraints—sea level rise, droughts, fire, earthquakes. None of these are made easier to mitigate by more growth and more population.
To focus exclusively on California’s “housing crisis” obscures as much as it illuminates. The issues are far broader, and require a more informed and democratic discussion of how much California should grow, and how it needs to change to adapt to its future. Those are the issues our legislators and all Californians should be discussing.
It’s time once again for me to post the amounts spent by candidates for Albany city council and school board positions. I typically do this after every election. This information is public record and can be found on the Albany city clerk’s website here. The candidates are required to complete their post-election reporting by the end of January, and the city posts the information in February. The spending numbers below were taken from each candidate’s Form 460, page 3, line 11.
There were three candidates who ran for two city council positions, Preston Jordan, Peggy McQuaid and Rochelle Nason. McQuaid and Nason were both incumbents, and both won re-election. McQuaid and Nason both agreed to the voluntary campaign spending limit of $6,000. This limit does not include the $980 required by the state for the 250-word ballot statement. Jordan did not agree to adhere to the limit. Their vote tallies (high to low) and spending are listed below.
McQuaid $3,183 votes: 4,716
Nason $6,915.27 votes: 4,245
Jordan $35,379.60 votes: 4,009
For comparison, here are the spending amounts and vote totals for the three candidates who won election in 2016:
Nick Pilch $16,076.48 votes: 5,386
Pete Maass $7,185.47 votes: 5,328
Michael Barnes $1,990.69 votes: 3,589
My spending in 2016 was low because I created my own simple campaign literature in Photoshop and InDesign and I used my surplus yard signs from the 2012 election. In addition, my strategy was to spend as little as possible and still come in third, which is what I accomplished. That seems like the rational approach to me.
I will point out that the two big spenders in 2016 and 2018, Nick Pilch and Preston Jordan, are the co-founders of the advocacy organization Albany Strollers and Rollers. I think we set the voluntary campaign limit in the right place. Pilch and Jordan, who spent much more than $6,000, didn’t seem to get much bang for the buck from their additional spending.
Here are the amounts spent for the Albany Unified School District elections:
Sara Hinkley $4,635.38 votes: 4,922
Clementina Duron $(NA) votes: 4,575
Brian Doss $(NA) votes: 3,092
Charlie Blanchard $(NA) votes: 2,940
Ross Stapleton-Gray $(NA) votes 2,438
All of the school board candidates except Hinkley spent less than $2,000, so they were not required to file a Form 460. The Albany Teacher’s Association filed a Form 460 to report its campaign expenditures on behalf of the following candidates:
The East Bay Times wrote a poorly reasoned op-ed about Albany, disguised as an endorsement piece about the city council race. Fortunately it didn’t find its way into the Friday, Nov. 2, issue of the Albany Journal. I’ve printed the full text of the op-ed below, indented and in italics, annotated with my responses. For the sake of brevity, I’ll refer to the authors of this piece as EBT. Published version is here.
Albany needs to get a grip on its taxes and its financial planning.
Well, no. Actually, we already have a grip. Let me just start by saying that as a former state budget analyst (back in the 1980s), and a recently retired UC Berkeley science editor, I have high standards for writing. In my opinion, the authors of this op-ed substitute ideological arrogance for thoughtfulness and rigor. I’ll explain below as we go:
On taxes, voters should elect research geologist Preston Jordan. He was a driving force behind the city’s sidewalk tax, approved by voters in 2016. But he also is firm that such add-on taxes should sunset, giving voters a periodic opportunity to decide whether they merit renewal.
No. This sounds like EBT just read Preston Jordan’s campaign literature are took it at face value. Jordan was not the driving force. The driving force was just about everyone in Albany who was sick of tripping over cracked sidewalks. Jordan was helpful in the end with technical details of how the tax should be applied to parcels of various sizes. And the group he help found, Strollers and Rollers, did fund and distribute campaign literature. While the council was grateful for the efforts of Jordan—and many other residents—some sort of solution for cracked sidewalks was to be passed one way or the other.
EBT also misunderstands the sunset issue. Repairing sidewalks is the homeowner’s responsibility under state law. The Albany sidewalk tax was conceived of from the start as a one-time project that would run for several years to allow the city to repair all of its cracked sidewalks. Homeowners currently remain legally responsible for the sidewalks in front of their houses, and will continue to be responsible once the program ends. More here and here.
For financial planning, voters should re-elect Rochelle Nason, who is a strong advocate for implementation of long-range city budgeting. Three people are seeking two seats on the council in the Nov. 6 election. The choice is not easy. All three, including incumbent Peggy McQuaid, are smart, thoughtful candidates.
I agree about the smart, thoughtful candidates. However, one candidate stands out, and she is Peggy McQuaid, the only candidate EBT failed to endorse. I have been involved in public life in Albany since 2002, when I first served on Albany’s school board. EBT’s failure to endorse McQuaid is more a reflection of the newspaper’s poor judgement and lack of knowledge of the city than it is of McQuaid’s outstanding service and reputation in Albany. Her endorsements are stellar, from virtually all of Albany’s living former mayors to most of the current East Bay mayors. I wonder if EBT even bothered to read those endorsements. For my endorsements, go here.
The city is also asking voters to make the city sales tax permanent. As we’ve said previously, voters should reject Measure L. When combined with the state and county portions of the sales tax, Albany has one of the highest rates in the state. And the city is seeking approval for a $69 parcel tax for park and open space maintenance. Measure M would replace a temporary tax with one that is permanent, which is why voters should reject it.
This is misleading, and deliberately so. The urbanized coastal counties of California are vastly different than the rural and wilderness counties. The coastal counties generally have higher county tax rates. Albany has a high combined tax rate because Alameda County has a high tax rate. If Albany was in Plumas County, it would have a low tax rate. Comparing rural and urban counties is comparing apples to oranges.
I’ve included the recent sales tax rates for California (source here). I’ve put the information into two spreadsheets. You can have the data sorted either by countyor by tax rate, take your pick. The highest sales tax rates in California are actually in Los Angeles County—many cities have rates over 10 percent. If Measure L passes, Albany will continue to have a 9.75 percent sales tax rate, which is the same as our neighbor to the north, El Cerrito, and the same rate as four other Alameda Counties cities—Hayward, Newark, Union City and San Leandro. Albany’s tax rates are comparable with many of our neighboring cities.
Measure L is a good deal for Albany voters. For every $1,000 a resident pays in taxable purchases (not including food, which isn’t taxed), Measure L will cost only five dollars. Measure L can be revoked in the future if the either the city council or a citizen’s initiative place it on the ballot. We could have added a sunset provision to Measure L, but the city’s polling of Albany voters indicated that a sunset provision wasn’t important to them. Elections are expensive for cities, and unnecessary elections are a waste of time and money.
Albany also loves its parks and some of them could use a little TLC. With climate change bringing more extreme weather, taking care of our parks will require resources. Measure M, like other parcel taxes, will require a super-majority vote. I’m not sure we’ll clear that hurdle, but I’ll do my part by voting for Measure M, and I hope enough of my fellow citizens do, too. For more see this flyer.
Albany property owners currently pay eight separate city parcel taxes totaling $449 for things such as libraries, sidewalks, road paving and street lighting. Plus, for every $100,000 of assessed value, homeowners pay $82 a year to help cover the cost of public employee pensions and city bond obligations. That’s $363 annually for the owner of an average single-family house.
May I please provide a dose of reality? The number of small parcel taxes on California property tax bills is due to Proposition 13’s stringent requirements for seeking additional tax revenues, which include super-majority votes and annual reports. This is not just the case in Albany, it’s true all over the state. I have written extensively in my city council blog about our property taxes, see here and here (once there, you will have to scroll down):
I just happened to get my new property tax bill in the mail today (although it was already available online). Here is a simple percentage breakdown of where my property tax dollars will go in FY2018-19:
58 percent: Alameda County
23 percent: Albany Unified School District
15 percent: City of Albany
4 percent: Other local agencies
It’s important to remember that not all of the city’s spending is discretionary. Like other East Bay cities, Albany is under consent decree with the Environmental Protection Agency to repair its aging sewer lines. We are legally required to spend this money. With respect to other local government agencies, the City of Albany simply isn’t creating a property tax burden.
Also note that the Albany Unified School District gets a much larger share of property tax revenues than the city. This is due to the state’s abysmal under-funding of K-12 education. In Albany we care about our schools, and are willing to help fund them ourselves.
And when property owners sell their homes, the city charges an exorbitant transfer tax of $1,150 for every $100,000 of value, again one of the highest in the state.
Again, this is deliberately misleading. Charter cities, as distinguished from general law cities, have written charters that allow them to set their own transfer tax rates when property is sold. According to the information EBT cites (here), there are eight charter cities in Alameda County. Of the eight, two charge lower transfer taxes than Albany, while five charge higher rates.
That “exorbitant” tax rate is actually only 1.15 percent. I think Albany homeowners get what they pay for in the sense that good schools, well maintained parks and pleasant shopping districts keep property values high. I’m pretty sure the value added to Albany homes compensates for higher taxes.
Meanwhile, city general fund expenditures are forecast to rise 41 percent from fiscal year 2015 to fiscal year 2020. It’s unclear where this ends because the city lacks a long-range budget.
It’s time for city leaders to stop trying to permanently lock residents into more taxes and better plan Albany’s financial future. Jordan and Nason provide the best hope for doing that.
Is there a citation for those forecasts? It’s hard to comment when I don’t know where the numbers come from or how credible they are. As for the rest of the paragraph, it’s more the same sloppy rhetoric. Albany’s current ballot measures do not try to “lock residents into more taxes.” Measures L and M are not new taxes, they are continuations of existing taxes. We are asking the voters to renew existing taxes. Isn’t that precisely what this op-ed piece has been suggesting?
All the current council members and city staff are keeping close watch on the potential problems with public pension funding. There won’t be any real differences between the candidates that get elected in this regard, since they will all be working together on the issue.
Unfortunately, this op-ed has been an exercise in ideology over informed debate. In that regard, it’s absolutely presidential. I do think what we have here is a bit of a culture war. I often ride my bike across the hills in Lamorinda and points further east, the cultural home of the East Bay Times. I was out there the other day and saw a political sign for someone named John Cox. “John Cox,” I said to myself, “I wonder who that is?”
Life over the hills is a bit like those German cars so many people drive there—monochromatic. Albany prides itself for being a little more colorful, although not as colorful as Berkeley (thank God). Think of our little town as the Denmark of the East Bay. Higher taxes, good public amenities, civic pride and a high quality of life. We like it this way.
It’s time again for one of my intermittent blog posts. This one is on an important topic — the city council and why it’s in the interest of Albany to keep Peggy McQuaid and Rochelle Nason on the job. Peggy and Rochelle have proven to be dedicated, objective, thoughtful and hardworking. I don’t think the city council can afford to lose either of them.
Peggy is Albany’s #1 public citizen. A lifetime resident of our town, she has contributed more of herself to the city’s well-being than anyone that I know. She has contributed over the years through her participation in many of the city’s advisory boards and other civic organizations. Yet when she was elected, Peggy gave up her memberships in several of these organizations because she felt she need to be fair and objective, and because she needed to be free of all of potential conflicts of interest. Peggy has taken her responsibilities seriously and has been an excellent mayor. But don’t take my word for it. Her endorsements include almost off the living former mayors of Albany, and many of the local mayors from our surrounding communities.
It’s one thing to like and respect some one like Peggy, whom I’ve known for years and who I often agree with. It’s another thing to like and respect someone who you more often disagree with. But that summarizes my feelings about Rochelle Nason, who was not someone I knew when she joined the council, but who has earned my respect over the the last few years. I especially appreciate her legal background, which has particularly come in handy in our closed sessions, when we discuss legally complex issues that require confidentiality under state law. She possesses managerial expertise from having running large organizations. Rochelle also has an impressive list of endorsers.
As council members, we do not have power as an individuals. We only have power as a group. Good city council members tend to be self-effacing team players who, when given the chance to talk about their victories, will instead share the credit with many other people. They use the pronoun “we” more than “I.” Peggy and Rochelle both have this quality, and it’s one that is essential for the smooth functioning of a city council.These qualities do not stand opposed to providing leadership. Real leadership is not about grandstanding — it’s about getting stuff done.
Peggy and Rochelle have another critical ability — the ability to stand back, set their personal feelings aside, and take a dispassionate view of the needs of the city. Too often in the past, city council seats have been treated as sinecures from which to launch favors for friends and to advocate for pet projects. Fortunately, on our current city council this tendency has been minimized. It will stay that way if Peggy and Rochelle are re-elected.
Peggy and Rochelle have both agreed to abide by Albany’s voluntary campaign spending cap of $6,000. That’s far more than I ever spent on a campaign to get elected in Albany, but sadly, far less than some other candidates have spent. In a town of Albany’s size, people power is what should count in running for office, not dollars.
In 2020, the three current male members of the city council, Peter Maass, Nick Pilch and myself, will all be termed-out (we’ll be ineligible to run again because of term limits). That means in two years, we’ll have a council with three brand new members. I’ll be much more comfortable leaving the council then if I know that our two current dedicated, long-serving female council members will be there to help smooth the transition.
Please vote for Peggy and Rochelle for city council.
As many of you may have read, SB 827 didn’t make it out of the April 18 hearing in the Senate Transportation and Housing Committee (T&H). I had a second-row seat, so I’ll give you my perspective below:
As I often have said around Albany City Hall, I’m at the stage in my life when I no longer get much satisfaction from saying, “See, I told you so.” But I have attached (here, as a pdf) my April 16 comments to the committee.
The day of the hearing, while I was wandering around, looking for the room, I stumbled upon Senator Ben Allen (D-Santa Monica), and waited for a break in the conversation to thank him for all his good work last year on the vaccination legislation (with Sen. Richard Pan, D-Sacramento). As it turns out, Allen was on T&H, and he made some of the best criticisms of SB 827.
After a few perfunctory bills that were heard while a quorum slowly assembled, Sen. Wiener stepped up the to the podium to present SB 827. The hearing room is designed with sloping floor, almost like a stadium, and an elevated, semi-circular dais, making it hard to see the faces of all the members when you are seated in front.
Wiener presented the bill, and it appeared to me he was the defensive from the start. When he described the strong points of the bill, he mentioned items that were not in the original bill, but were added as amendments in committee. That was probably a good thing. The original bill defined transit corridors so broadly that almost all of San Francisco, and much of urban coastal California, would have become zoning-free, like Houston.
The majority of the members of the committee (10-D, 3-R) damned the bill (and Wiener) with not faint, but fulsome praise. It was a little condescending. Everyone agreed that Wiener had identified a problem. But the reality is the original bill was sophomoric and the committee had to do a fair amount of Wiener’s homework for him.
Wiener, when he was on the SF city council, had a reputation for rapidly flinging stuff against the wall to see if anything stuck. His fellow committee members on T&H gently let him know that is not how things get done in Sacramento. In the future, they were looking forward to working with him in a more constructive manner.
And as for the tech-backed YIMBYs, I think the message to them was that the state legislature get requests from many powerful groups, and that they could take a number and get in line. As the nouveau richekids on the block, they had an over-inflated opinion of themselves, perhaps due to some easier victories last session. But SB 827 was an overreach. They’ll learn.
The bill’s co-author, Berkeley’s Nancy Skinner, offered a rambling defense of the bill that, as a constituent, I thought was an embarrassment. In the end the bill got only four yes votes, two from the co-authors and two from Republican committee members. Six Democrats voted against, and two Democrats and one Republican were NVR (no votes recorded). I’m not sure how the NVR strategy works, but it’s annoying. More here.
I’m left puzzled by two things. The first is the media’s infatuation with Wiener and this bill, which I thought was obviously a PR stunt from the start. The NY media were especially guilty of this–an echo chamber of cluelessness. I’m reminded of Sol Steinberg’s famous 1976 New Yorker cover (attached here). More than once Wiener’s bill was presented as “bold.” Yet I don’t think anyone in this debate thinks of Houston, which has no zoning, as a bold model for San Francisco.
The second thing I find puzzling is that the co-authors pitched SB 827 as an environmental bill that will reduce California’s carbon footprint. I’m not sure if they were being disingenuous or if they don’t understand that the evidence for that is quite weak. But this is a topic for another day. Just keep in mind that homeless people have very low carbon footprints, yet no one argues homelessness is good for the environment. Housing is an end to itself, not a means to an end.
There were enough audience members who wanted to speak that they were only allowed to say whether they were in favor or opposed. I was one of the later. I’d guess those who were opposed outnumbered those in favor by about two-to-one.
The vote was taken, SB 827 died in committee, and the audience streamed out to the elevators, mostly happy and excited. In the end, the committee made the right decision.
With this blog post I’m asking you take a stand on an important issue in Albany. Here is the contact information for our State Senator Nancy Skinner. I’m asking you to read the following, and if you agree with me, contact Sen. Skinner to let her know that a bill she co-authored, SB 827, is unnecessary and should be abandoned.
The bill is a clumsy attempt to micro-manage local government zoning decisions in a way that will not (at least in Albany) address the problem of housing shortages. And probably not anywhere else. But it will cause many other problems.
I see SB 827 as part of a growing trend to scapegoat elected local government officials and brand them as obstructionists. I strongly suspect that with the success of right-wing, pro-business groups in Washington, DC, and with the takeover of many state governments by the same interests, the focus of these groups is now turning to demonizing local governments, which are becoming the last bastions of community-based democratic control.
I have spent too many weeks writing a draft about a bill from last session, SB 649, which was also supported by Sen. Skinner (but opposed by our Assembly Member Tony Thurmond). This bill was a giveaway to Verizon and AT&T and other cell phone providers. The bill would have stripped local governments of the ability to regulate to location of mini-cell phone transmitters in neighborhoods.
Bills like this are the brainchild of ALEC, a right-wing organization that provides model conservative legislation at the state level. Fortunately, Governor Brown, who learned something about the value of local governance while the mayor of Oakland, vetoed SB 649. I’ll reexamine SB 649, and its relationship with net neutrality, in a later post.
Now my concern turns to SB 827, which remains threat to local governance generally and to Albany specifically. As an introduction, here is the op/ed piece I wrote on SB 827 for the East Bay Times. It appeared in the Albany Journal on Friday, March 16 (the editorial text is in italics):
Opinion: Albany has lessons for bill that will encourage ugly, thoughtless growth
The year 2017 was when California’s Legislature began to take the state’s housing crisis seriously. A package of 15 bills, written by a variety of state senators and Assembly members, was signed by the governor.
To implement these bills, new administrative codes will have to be written, money will have to be allocated to state agencies and new staff will have to be hired and trained. Meanwhile, legislators are already crafting new housing bills.
In the middle of this flurry of activity, Senate Bill 827 has landed with a thud. It is such a troublesome piece of legislation that it has local government officials (like me) scratching our heads. The bill was sponsored by San Francisco’s state Sen. Scott Weiner and Assembly member Phil Ting, along with East Bay state Sen. Nancy Skinner. It is unclear who actually wrote the bill, but it was clearly someone who lacks experience.
The bill is based on the notion that zoning restrictions should be removed along public transit corridors, allowing apartment buildings up to 85 feet tall to be built by developers, with almost no review by planning departments. This will apply statewide. If a developer wants to build a drab big-box apartment building that fills an entire lot, local planners will have no control over how it looks, except for making recommendations on paint and trim.
The authors of SB 827 made some rookie mistakes. For example, the bill ties maximum building heights on transit corridors to curb-to-curb widths, which can vary as sidewalks are replaced, triggering zoning changes. A deeper problem is that the definition of a transit corridor hinges on bus schedules. A change in bus schedules can also trigger changes in zoning, making the transit agency a city’s de facto zoning agency.
Even worse, the bill’s definitions of transit corridors are so broad that with minor exceptions, the whole city of San Francisco becomes a zoning-free transit corridor. If SB 827 passes as written, most of Albany will be defined as a transit corridor, and our current zoning maps will become irrelevant. Large parts of our city would be upzoned to allow for bulky buildings of up to 85 feet tall — even in neighborhoods zoned for single-family homes.
The bill is also notable for what it leaves out. The bill makes no effort to encourage affordable housing. If anything, it will discourage developers from creating affordable apartments. Nor does the bill do anything to reform the state’s absurdly bureaucratic and abused CEQA review process
SB 827 is a mess — and an unnecessary one. Like other cities and counties in the state, Berkeley and San Francisco already have the authority to change their zoning laws. If the bill’s sponsors can’t create local political coalitions, elect their allies to city councils and have them vote to change zoning, why should the state get involved? Our senators’ effort to allow Sacramento to override local zoning authority is a sign of the weakness of their ideas, not their strength.
Our little city of Albany has some lessons to share about this controversy. Back in the 1970s, Albany’s city council allowed the development of small, boxy, unattractive apartment buildings with inadequate parking. The neighbors began to complain about both how these structures looked and how street parking was being affected. In 1978, a group of Albany residents took matters into their own hands and passed a local voter initiative, Measure D. The measure required two off-street parking places for new residential development, and prevented zoning changes in residential neighborhoods.
Today, Albany’s residents are concerned about high rents and housing shortages, and the city is trying to do its part to help. Over the years, Measure D has turned out to be a big headache. In 2016 the Albany City Council proposed an amendment to Measure D that removed the parking restrictions. Its success gave a green light to our homeowners to develop “in-law” accessory dwelling units.
Albany’s city council and our residents both favor thoughtful growth that makes our city more lively, attractive and walkable. But there is another kind of growth. For lack of better term, let’s call it thoughtless growth. Albany experimented with thoughtless growth in the 1970s. The result was resentment, lack of trust and backlash. Decades later, we are still living with the political consequences. (The unattractive apartment buildings are still here, too.)
SB 827 will encourage ugly, thoughtless growth. State Sens. Wiener and Skinner would do themselves and their communities a favor by keeping in mind what happened right here in Albany in the 1970s. We don’t want to be forced to repeat the past.
Michael Barnes is a member of the Albany City Council. He is expressing his personal opinions and not speaking on behalf of the Albany City Council.
Here is another take on the original bill from the SF Examiner. Here is the take by the League of California Cities.
By the time my op-ed appeared in print, the original version of the bill had passed through its first committee hearing and had been amended. A good review of the changes can be found here as a big pdf. Scroll down to the second-to-last page for a one-page summary. Here is the League of California Cities’s letter to Sen. Wiener opposing the revised bill.
Basically, one of the rookie errors I mentioned, basing street width on curb-to-curb measurements, was changed to measurements based on property line boundaries. And in the revised bill some local planning elements will be allowed, including daylight planes and setbacks from the streets. In addition, the bill now specifies floor-area ratios. These changes will prevent buildings from becoming too bulky and occupying whole lots.
However, minimum building heights of up to 85 feet will are not changed. The bill still eliminates most of Albany’s current zoning. And the new version doesn’t allow for any subjective design review. As long as buildings conform to some basic objective standards, they are allowed to be ugly. The suggestions of local planning and zoning commissions on how to make the building more attractive can be ignored.
Below is an image of how zoning in Albany would change under SB 827. You can click to enlarge the image. The blue circles show areas within a half-mile radius of major transit stops, including both our local BART stations (North Berkeley and El Cerrito Plaza) and the intersection of two main bus routes where Solano and San Pablo Avenues meet. The green areas show the regions within a quarter mile of bus routes the run at 15-minute intervals or more often during peak times. Here and here are two sources of maps with the zoning overlays.
Most of Albany would be upzoned to allow buildings with a height of 85 feet in the green areas, and up to 55 feet in the blue areas. The two areas of Albany not affected would be the area NE of Memorial Park and the area near St. Mary’s High School.
To provide a sense of scale here is a photo of one of the taller apartment buildings in Albany, at about 40 feet tall. This is about half the height of new buildings that would be allowed in the green areas in the map above under SB 827.
SEVERAL OTHER PROBLEMS
There remain several other problems with the bill. First of all, it doesn’t make sense to base zoning on bus routes and bus stops. Buses move, buildings don’t. It makes more sense to take buses to the buildings than vice versa. Sen. Wiener has argued that bus routes in San Francisco should be considered fixed, but that is not what I heard from AC Transit planners at a recent meeting I attended in Richmond. They spoke at length about how bus routes often need to be adjusted. Under SB 827 when bus routes and bus stops are adjusted, zoning automatically follows, and that can create serious problems.
Alternatively, if we could just convince AC Transit not to run buses through Albany too often, that would instantly solve many of the problems that SB 827 would create. The bill’s transit-orientated zoning requirements apply only to bus routes that run at 15-minute intervals (or more often) during peak times. The bill unintentionally creates perverse incentives to slow down transit growth because of the zoning problems that would result.
Secondly, circles and squares don’t mix. Cities are laid out in grids. SB 827’s zoning rules around BART and bus stops are based on circles. That means curving zoning boundaries will cut city blocks into oddly shaped pieces. For buildings cut in half by these circular zoning boundaries, precise calculations with have to be used to determine which set of zoning rules apply. From a practical standpoint, this will be a big problem for planners—the zoning equivalent of trying to put square pegs in round holes.
Thirdly, this one-size-fits-all, cookie-cutter zoning doesn’t work given the variety of cities throughout the state. Albany exists on a different scale than Los Angeles. Albany packs 18,500 people into about one square mile of developed space. Our city’s population density (and ethnic composition) is remarkably similar to San Francisco’s, which packs 871,000 people into 47 square miles of developed space. The City of Los Angeles alone, not including its metropolitan area, holds 3.976 million people in 469 square miles at a density of 8,480 people per square mile. That Albany and Los Angeles should be subjected to the same top-down zoning rules doesn’t make sense.
Apart from all the problems above, there is a fatal flaw in SB 827—when it comes to building more housing, zoning is seldom the main problem. The important thing to remember is that cities don’t build housing, developers do. Here is a short list of constraints that get in the way:
1) Lack of property for sale.
2) Lack of interest among trustworthy developers.
3) Lack of capital.
4) Lack of a skilled workforce.
5) Burdensome regulations (including state-mandated ones like CEQA).
Unless all of these constraints are removed, new housing doesn’t happen. In a built-out city like Albany, 1) is the main problem. Further north, even before the fires in the Santa Rosa area, 3) and 4) were the problems. In other parts of the state, it’s other combinations.
Under existing law, cities are already required to zone for densities at levels necessary to meet their entire state-mandated Regional Housing Needs Allocation (RHNA). This does not mean cities have to build housing themselves, only that local zoning cannot be an impediment.
In other words, under current law, zoning is not allowed to be a binding constraint. If zoning isn’t a binding constraint, then what good does it to do to relax this constraint? Why is it rational to assume that relaxing zoning requirements statewide will lead to a building boom, if they are not the main problem in the first place?
The proponents of SB 827 fail to address this issue. The reality is that in different cities and in different regions, different sets of constraints are binding. There is no one-size-fits-all solution. That is why local control remains important.
Sen. Wiener might have to you believe that building new multi-family housing in San Francisco is bogged down in morass of zoning rules. But it’s not. Nor would gentrification be solved by turning San Francisco, one of our country’s most beautiful cities, into a zoning-free laughing stock like Houston, TX. Some portions of Houston are gentrifying quickly, while San Francisco is not.
There is a real problem with bills like SB 827 and the pie-in-the-sky talk coming from some gubernatorial candidates that propose simplistic solutions to complex problems—they create unrealistic expectations that will eventually fail to be met, leading to cynicism and backlash. A good rule of thumb is that solving problems in the public sector takes at least as long as it took to create the problems in the first place. California’s housing crisis has been gaining steam for years, and it may take a generation of hard work to turn it around.
We have our work cut out for us, and SB 827 isn’t the tool we need to get it done. I suspect Sen. Wiener is opportunistic and ambitious enough to realize this and not care, just as as long as he gets the media attention. Meanwhile, other thoughtful legislators, with more thoughtful approaches (here and here) get very little media attention.
That’s why I encourage you to write to Sen. Skinner to encourage her to drop this bill. Again, here is her contact information. And while you’re at it, please contact our Assembly Member Tony Thurmond here. Unlike Sen. Skinner, he voted the right way on SB 649 last session, so I’m hoping he can support our concerns once again.
Now that I am finally retired, it is time to get back to blogging. Since it’s been so long since I last posted, there are six items that I want to mention, more or less in chronological order (from old to new) and in order of brevity (from short to long):
1) Lions Club lawsuit
2) Rent review
3) New social services center
4) Campaign funding for 2016 council races
5) Our new property tax bills
6) Implementation of Albany’s Soda Tax
ALBANY LIONS CLUB LAWSUIT CONCERNING CROSS ON ALBANY HILL
The cross is an issue that the council has been dealing with for about three years now. Due to the lawsuit, the city staff and council members cannot comment on the issue, which is frustrating for both Albany residents and the council. I can tell you that the lawsuit is now in federal district court and there should be a resolution within months, not years. I can also share with you public information about the schedule. The latest information is that the initial case management conference is set for Dec. 14, 2017, before Judge William Alsup.
The city issued a request for proposals (RFP) to help the city formulate a rent review ordinance, but the response was disappointing. City staff have been in contact with organizations that could meet the requirements of the RFP, and it will be issued again with more efforts to notify potential applicants. There is a good review of Bay Area rent review efforts on page 1 here, written by Barry Miller, who coincidentally was the planning consultant for our general plan update.
NEW SOCIAL SERVICES CENTER
The Albany Community Resource Center opened its doors for the first time this past Friday, September 8, and will now be open every Wednesday and Friday from 10am-1pm.There was an open house on Friday, September 29, part of Albany Local Week. I attended the opening and was impressed by how much work the staff have put into creating the center, and by the generosity of the Albany United Methodist Church for providing the space. Information on the Community Resource Center can be found on the city website here.
CAMPAIGN FUNDING FOR 2016 CITY COUNCIL RACES
In California the campaign spending of council candidates is public information, and it is available on the city’s website here. Candidates must file the state’s Fair Political Practices Commission (FPPC) form 460 to report contributions and expenditures if they form a campaign committee or if they plan to receive or spend $2,000 or more.
In the November 2016 Albany city council race, three candidates filed form 460s. Here are the contribution and expenditure amounts for each (page 3, lines 5 and 11):
Nick Pilch: Contributions $19,958.00; Expenditures $16,076.48
Peter Maass: Contributions $7,185.47; Expenditures $7,185.47
Erik Giesen-Fields: Contributions $3,985.85; Expenditures $5,013.04
Note that some contributions came from the candidates themselves. For example, all but a few thousand dollars of Pilch’s expenditures were funded by him.
The remaining two candidates, Amber Whitson and me, filed FPPC form 470s because we didn’t anticipate receiving or spending $2,000 or more. We were not required to file documents detailing our contributions or expenses. I have no information about Whitson’s spending. However, I did keep close track of my own campaign finances, and here are the figures:
Michael Barnes: Contributions: $1,079.84; Expenditures $1,990.69
Basically, I recouped my costs for literature and postage. I did not recoup the cost of my official ballot statement, which for all candidates is $978. I find it annoying that the state charges candidates so much, since the expense discourages democratic participation. For my campaign, my strategy was simple–spend as little money as possible and still come in third in the vote count, which is what I accomplished.
In the fall of 2018, two council members, Peggy McQuaid and Rochelle Nason, will be up for re-election. In 2020, Pilch, Maass and I all well be termed out, so three new board members will be elected then. I am hoping Giesen-Fields runs again. He was a good candidate and I think he would be a good council member.
NEW PROPERTY TAX BILLS
Homeowners in Albany have just received their new property tax bills. I have written a previous post (you have to scroll down a bit) about how to read your property tax bill. I’ll put up my new bill and compare it last year’s (see below). You can click on the images to enlarge them, and click the back arrow to return to the text. Note that 2016-17 is tinted blue, while 2017-18 (the bill we just got in the mail) is tinted pink:
On the left hand side of your bill are the ad valorum taxes, which are based on a percentage of your assessed value (less $7K if you occupy the property as your home). My new bill is based on my adjusted assessed value of $591,506. Your bill will have different amounts, but the percentages will be the same. I’ll express these percentages as the taxable amount per $100K of assessed valve, just to make comparisons easier.
The AV (ad valorum) percentages changed very little from last fiscal year (July 1, 2016 to June 30, 2017) with one exception. The tax rate for the Albany Unified School District rose, as expected, from $200 to $250 per $100K of AV (highlighted). So this year you will pay $50 per $100K AV more than last fiscal year to AUSD. Overall, however, the increase in the tax for all AV items rose only $41.60 per $100K AV. This means that the other smaller AV items tended to fall slightly.
Keep in mind that the annual increase in your AV property tax is the combination of two factors. The first is the change in the percentages discussed above. The second is the annual increase in your assessed value, which is capped at two percent under proposition 13. This year my assessed value rose the full two percent, and yours probably did, too. That means the AV proportion of my property tax bill rose 5.2 percent, for a total of $402, which is a combination of the two-percent increase in AV (from the lower right section of your property tax bill), and the change in the AV percentages (from the left hand column of your bill).
On the right hand side of your property tax bill are the “Fixed Charges and/or Special Assessments.” These are generally referred to as parcel taxes because they are same for each parcel and don’t vary with the assessed value (there are some minor exceptions). There are two new items here (highlighted). The first is the Albany sidewalk tax that was approved by Albany voters on the Nov. 2016 ballot. For me the tax amount is $38.64, but it will vary depending upon your lot size.
The second item is Measure AA, a measure that I consider regressive and regrettable. I blogged about it here. It’s basically a Robin-Hood-in-reverse scam that takes $12 annually from Bay Area property owners, rich and poor alike, many living miles from the Bay. It then funnels most of the money to Silicon Valley to beautify Bay views for some of the wealthiest high-tech corporations in America.
All the other items remain the same. Some are adjusted for inflation, some are not. Overall, the amount of parcel taxes that I pay rose by almost exactly $90, and that figure should be about the same for all Albany homeowners. As I predicted in my previous post, I now am paying more than $10K annually in property taxes for my 1,100 sq. ft. Albany bungalow. Other folks in town are paying far more than that.
ALBANY’S SODA TAX FIZZLES
Albany’s soda tax, passed by the voters in Nov. 2016, is now in place.The tax revenues are beginning to stream in. It’s still a little early to get a sense of how much money the tax will bring in annually over the next several years.
I was the only council member not to support the tax (here and here). I thought it was another one of those feel-good measures that lacked a solid policy foundation and was based on wishful thinking. My recent casual survey of soda prices in Albany confirms this. I encourage you to take your own surveys as you shop for food to see what you discover.
One goal of the soda tax was to raise prices of sugar-sweetened beverages (SSBs) like sodas and canned teas. Excluded from the tax were juices (although they often “naturally” contain more sugar than soda) and sweetened dairy products like chocolate milk (our state’s powerful diary lobby made sure those items weren’t taxed). The idea is that the tax would be applied to SSBs at the wholesale level, and retailers would would then faithfully pass along the cost increase by raising only the price of SSBs.
But here in Albany, that’s not what happened. I checked prices at Safeway, Target, Bevmo, Sprouts, CVS and Seven-Eleven. Sugar-sweetened sodas and diet sodas have the same price. Then I cruised down the length of Solano Ave., stopping to check soda prices at restaurants that are popular with teenagers. Sugar-sweetened sodas and diet sodas have the same price.
One exception was the new Safeway Market at the top of Solano in Berkeley, where the old Andronicos was located. That Safeway store did have special stickers to distinguish between the two types of soda. For example, a 12-pack of regular Coke was $1.44 more expensive than a 12-pack of Diet Coke. (A 12-pack contains 144 oz. of soda, so with the SSB tax of one cent per ounce, the tax totals $1.44.) However, Safeway often has club-member or two-for-one discounts, and those sale prices are the same for regular and diet sodas.
The Albany City Council never had the authority to tell retailers what prices they could charge. And today, it’s difficult to know which other goods have been marked up to cover the wholesale cost of the soda tax. But I think it’s fair to say that the council has effectively imposed a tax on food, which was not the intent of the soda tax.
During the next several weeks, the council will be discussing how to spend the soda tax revenue. It should be an interesting discussion, since the amount of revenue raised, unlike in our much more populous neighbor to the south, won’t be enough to start any major new programs. Because the SSB initiative was written to require a simple majority vote, and not a two-thirds supermajority, the SSB tax revenue cannot be earmarked and must be put in the city’s general fund. Perhaps the council can use it to enhance some existing programs.
ENOUGH FOR NOW
There are a few more items I’d like to cover, but this is enough for now. I’ll to blog again soon.