It began, as
many good stories do, with a conversation over a beer.
During a
recent trip to Pittsburgh, a friend, who a short time before had returned to
the Steel City after a number of years in the North Bay, offered to give me a
tour of his hometown. (This was the same
evening that included a visit to a downtown plaza that I likened to
a scene from “The Lord of the Rings.”)
The friend
began the evening with a walk about Sewickley, a village near his current
home. He thought that I would find the village
charming, an expectation in which he was largely correct. Tidy streets, interesting storefronts, even a
few well-swept alleys for less mainstream businesses. It was a quite comfortable place. (All of the photos are of Sewickley.)
Of course, I
could still make the criticisms that I would make of most suburban villages in
the U.S. The rail line that had allowed
Sewickley to begin life as a summer retreat from the coal and steel fumes of
Pittsburgh was long gone, replaced by a reliance on private autos. Most of the downtown stores were single story,
so there were few opportunities for walkable downtown living. And, with a couple of apartment house
exceptions, large lot single-family homes seemed to jarringly abut the
downtown. Middle housing was a largely missing
element.
But Sewickley
was still a charming, if imperfect place.
(To tie it back to the North Bay, I’d say it’s like Healdsburg without
the recent growth spurt or Sonoma without the weekend throngs of tourists. Looking at the entire Bay Area, Orinda seems
a reasonable comparison.)
Our initial amble
complete, my friend steered us to a small restaurant a short block from the main
street. We sat at the bar, ordered
beverages, and began to chat with the owner and bartender about Sewickley.
The
conversation eventually turned to property taxes. The barkeep told a story of friends who had
recently moved from Sewickley because of the tax burden. As he told the story, the family had retired
the mortgage on a home assessed at $800,000, but were still facing a monthly
property tax bill of $1,300. With
college expenses for their children nearing, they decided that they couldn’t
afford to stay in town, so sold the house and relocated outside of the city
limits.
As my friend
and I walked back to his car, it dawned on me that the facts added up to an
interesting data point. Long-time
readers know that I have a theory about California’s 1978 Proposition 13. I’ve argued that the “tax revolt”, although
generally described as a campaign against government waste, was more accurately
a rejection of the costs of maintaining the sprawling land-use pattern that we
had adopted.
I’ve argued
that, had Howard Jarvis been less judgmental, this
reality could have been obvious and we could have begun remediation. Instead, we capped property taxes, continued
sprawling, and moved onward to a world of potholes and failing waterlines, with
no municipal funds to address the problems.
So the bar
chat gave me a data point to see what it costs to run a small city where there was
no arbitrary cap on property taxes, where the only cost constraint was what the
citizens were willing to tax themselves annually, as expressed through their
elected representatives.
Luckily, the
numbers were easy to calculate while walking.
$1,300 per month times 12 months equals $15,600 per year. For an $800,000 assessment, that would be a
tax rate of 1.95 percent, a startling difference from the 1 percent cap under
Proposition 13.
I could stop
here, having made what many might find a sound point. But I trust that the more discerning readers would
have been capable of poking several holes in my simple analysis.
I’m not
going to try to plug every hole. After
all, this is a blog post, not a master’s thesis. But I can plug a few.
Who
trusts a barkeep?: To be a
successful bartender requires a number of skills, but storytelling veracity isn’t
one of them. A story may have already have
already been enhanced before it reaches the barkeep’s ears and then edging the
facts up even further makes for better bar conversation, which leads to better
tips.
Luckily, Sewickley
property tax rates can be confirmed on-line.
(Rather than the percentages usually noted in California, Pennsylvania
uses millage, or tenths of cents per dollars of assessed value. But millage can be converted to a percentage
by moving a decimal point.)
The most
recently updated Sewickley tax rates are 4.73 mills for
Allegheny County (2015), 6.5 mills for the Borough of Sewickley (2015), and 17.1548
mills for the Quaker Valley School District (2014). Adding these gives 28.3848 mills, or 2.8348
percent. Unexpectedly, the story told by
the bartender actually understated the tax rate.
Don’t
property values also matter?: Vendors and public employees don’t get
paid in millage rates; they get paid in dollars, which are millage rates times
assessed value. So home values matter
just as much as millage.
To avoid the
bias of a single realty firm which might focus on a particular segment of the
market, I checked the Zillow
webpage for Sewickley.
The median home value for Sewickley seems to be about $250,000, which is
perhaps half of the North Bay median value of close to $500,000. (It seems the barkeep’s friends, with their
$800,000 home, were in the upper echelon of the Sewickley’s demographics.)
So the
combined Sewickley tax rate, which is applied to homes of half the value, would
be equivalent to a tax rate of perhaps 1.4 percent on the more expensive North
Bay homes, closer to the 1 percent cap in Propostion 13, but still a significant
difference.
Does
a cap rate equal an average rate?: That’s the last hole to patch. Proposition calls for a 1 percent cap on the
total property bills, except for a few incremental taxes that are allowed to
exceed the cap, but it also sets a maximum rate at which taxes can increase
year to year. With the rapid run-ups in
California real estate values, many homes are taxed well below the 1 percent
cap.
(The
variance from the cap is specifically true of businesses, where a business that
owns a building can be sold without triggering a Proposition 13 adjustment
because the building continues to be owned by the business. If the political will is ever built to change
Proposition 13, the drafting error in how businesses are treated is likely where
the revisions would begin.)
In addition
to businesses, it’s likely that any home that has been held since 2003 or
before is taxed below the 1 percent cap.
I don’t know of any analysis that computes the average California
property tax rate, but I’ll guess something around 0.8 percent.
And that’s
where I’ll call a halt. I haven’t fully
rectified all the apples versus oranges possibilities, but I’ve moved in that direction. A place that continues to fund the actual
municipal costs required for a tidy, well-maintained community needs the California
equivalent of a 1.4 percent tax rate, while California taxes itself at about
0.8 percent. If you want to measure that
depth of the pothole in front of your house, that’s one good measuring stick.
And where
does urbanism fit into this story? Very
simply, a walkable urban community is less expensive to service per dollar of
assessed value. An urban community
wouldn’t solve the property tax shortfall, but it’d be a step in the right
direction.
It’s fun to
see where a casual conversation over a beer can lead.
I have one
more insight to share from my evening tour of Pittsburgh. It’s about how some neighborhoods age
differently from others. I’ll share in
my next post.
As always,
your questions or comments will be appreciated.
Please comment below or email me.
And thanks for reading. - Dave Alden (davealden53@comcast.net)
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