Torrance's Measure A: A Bad Idea

By Stephen Kroes

The California Taxpayers' Association is certainly aware of schools' facilities needs and has not opposed local school bonds. However, in support of good tax policy and efficient government, we question use of California tax laws that would result in unfair taxes, unnecessarily high bond costs, and guaranteed annual tax increases.

Thus Cal-Tax went on record to oppose Measure A, the Torrance Unified School District's June 3 election bond measure. It was defeated. These were our reasons for opposition:

Unfair taxes: Measure A sought to exploit an obscure portion of state law to allow unfair taxes to be levied on property owners. Almost all school bonds in California are general obligation bonds, which are funded with a property tax rate increase that is based on the value of property. The "Mello-Roos District" tax proposed in Measure A was not a general obligation bond and was not based on the value of property. It was basically a flat amount per parcel.

This would mean that a mansion would pay the same tax as a tiny one-bedroom house. The only exceptions to this flat rate were to be extremely high rates charged to business taxpayers, including small businesses, such as little mom-and-pop shops. They would pay five times as much as homeowners, and they had no vote on the measure. Larger businesses would have paid 10 times more per acre than the homeowners' rate. This proposed tax would not only be unfair; it would be regressive.

High bond costs: Bonds funded with Mello-Roos taxes must pay higher interest costs than typical general obligation bonds. This is primarily because general obligation bonds carry the "full faith and credit" of the government agency, which is the strongest possible promise that the bonds will be repaid. Mello-Roos bonds do not carry the same pledge of credit. Another reason these bonds cost more is that Mello-Roos taxes are not considered by financial investors to be as secure as value-based property tax rates.

Guaranteed tax increases: Measure A included a clause that increased the tax rate by 2 percent per year. Even if a taxpayer's home depreciates or if its value stagnates (which has been the case for many years now in California), this property tax would increase each year.

Cal-Tax's position on Measure A is not a statement that all parcel taxes for schools are bad. If levied as a flat amount per parcel on all property, parcel taxes can be legitimate funding sources for schools.

Indeed, state law requires that school parcel taxes be applied "uniformly to all taxpayers." To sidestep that requirement, Torrance school officials exploited a loophole and used a tax that is really meant for newly developing communities. This kind of fiscal opportunism causes local governments to lose credibility with voters.

On June 3, voters around the state continued a trend of at least two-thirds support for most local school bond measures (25 of 37 general obligation school bond measures were successful statewide, according to a School Services of California, Inc., survey).

The Torrance measure, the only one to use the Mello-Roos tax approach, was rejected. This $80.5 million bond measure received 57.9 percent of the vote, far below the necessary 66.67 percent. That was the worst showing for a local school bond measure in Los Angeles County, where voters approved general obligation bonds in five of seven districts.

The lesson here: Measure A proposed bad tax policy, generating organized opposition. It failed at the polls.