Vol. XV, No. 8
March 1, 2002

Tax increase likely as a result of MARCH 5 election

With the statewide election only four days away, California voters will decide a number of measures that will be affecting their pocketbooks and those of their children for years to come. In addition, they will be deciding whom they want to administer their tax system – whether they want tax officials who are trying to keep revenues as high as possible or ones who are more taxpayer friendly. The state controller is the most important tax official in the state, serving as chair of the Franchise Tax Board and a member of the State Board of Equalization. In recent surveys of tax professionals by CFO magazine, California state tax officials have been ranked among the most aggressive in the country, resulting in a taxpayer-unfriendly rating for California’s tax administration (See Caltaxletter of September 18, 2000 for the CFO report. Also, see Caltaxletter of June 22, 2001 for the Committee on State Taxation’s scorecard ranking California among the lowest states for fairness in the handling of tax appeals.)

Observers believe that annual tax increases amounting to hundreds of millions of dollars are a likely outcome of the elections. There are more than $6.7 billion of local school bonds on the ballot, as well as nearly $1 billion of city bond measures. Approvals of local bonds, unlike state bonds, automatically increase property taxes. With almost all school bonds subject to the new 55 percent voter approval requirement of Proposition 39 of 2000, virtually all of the 75 school bond elections – unprecedented in both number and value – are expected to succeed.

In addition, there are scores of local tax measures, such as proposals to increase parcel taxes, sales taxes, etc, on the ballot. Many of these require two-third voters approval.

Even so, some of these measures will also likely pass. (For more details on March 5 election bond and tax measures, see Caltaxletter of February 15 and 22.)

There are also a few tax reduction measures on the ballot, most notable utility tax reduction initiatives in Stockton and Santa Cruz County. The debate between the proponents and opponents of the Santa Cruz measure capsulizes a common theme in tax reduction elections.

County officials say a tax decrease would be devastating in the long run, forcing cuts in the sheriff’s office and elsewhere. According to the Santa Cruz Sentinel, county Auditor-Controller Gary Knutson said the county could temporarily make up for the lost revenue with reserves for two years. But after that, the county would have no option but to cut services.

Proponents call these predictions “scare tactics.” They say when a revenue reduction is proposed, opponents always talk about a reduction in services. But when additional spending is proposed, using an equivalent amount of revenue, there is never talk of cuts in existing services. Repeal proponents point to last year’s salary hikes as evidence of this point. The supervisors approved a three-year package that included a 12-percent raise for all county employees. Supervisors also gave themselves a salary increase of $63,000 to $91,000 by 2004. The Sentinel reported that Ed Mazenko, a leading proponent of repeal, said the county is contradicting itself by saying tax repeal would take away services to the poor while simultaneously approving “obscene” pay raises with this very money. He added the county will have “sucked” an additional $6 million from taxpayers after the last phase of the three-year salary plan is implemented.

Controller Race Update: Steve Westly was the top vote-getter at the California Democratic Party Convention in Los Angeles, getting 52.8 percent to 45.6 percent for Johan Klehs, a member of the State Board of Equalization. However, the Democratic Party requires a 60 percent vote for a formal endorsement. A Field Poll, published February 28, shows Mr. Westly leading Mr. Klehs by 31 percent to 15 percent for the Democratic nomination. On the Republican side, state Senator Tom McClintock led BOE Member Dean Andal, 26 percent to 15 percent. Nancy Beecham had 6 percent and W. Snow Hume had 4 percent.

Coveted Tax Board Posts. “Coveted” is the word in the Los Angeles Times (March 1) headline describing State Board of Equalization seats on the March 5 ballot. The informative article by Nancy Vogel notes how the board’s $131,250-a-year positions are political plums for termed-out legislators like Bill Leonard and Carole Migden, who want to succeed termed-out BOE members Dean Andal and Johan Klehs, who are striving for their parties’ nominations to run for state controller to succeed termed-out Kathleen Connell.

Sixteen people are running in the four BOE districts, including incumbents Claude Parrish (a Republican) in District Three (most of Southern California), and John Chiang (a Democrat) in District Four (most of Los Angeles County).

Reapportionment by the Legislature made District One (including San Francisco) even more favorable to a Democrat of liberal persuasion – Ms. Migden. Mr. Leonard, a Republican completing his 24^th year in the Legislature, admits that he asked majority Democrats in the Legislature to draw him a district in which to run, The Times reported. A finger of the vast Second District stretches into San Bernardino County to include his house. The district runs all the way to the Oregon border as it takes in about 8.4 million people, the population of each district.

When the dust clears, or the music stops and the four chairs are filled, there are almost certainly going to be two Republicans and two Democrats occupying them. The state controller sits as the board’s fifth vote.

District One: Ms. Migden, a San Francisco Democrat and powerful chair of the Assembly Appropriations Committee, is unopposed for her party’s nomination, which is tantamount to winning the seat. Two Republicans – Mark Bendick, a corporation tax manager, and Max Woods, an engineer/entrepreneur -- and Libertarian Elizabeth Brierly, a business analyst, also are on the ballot.

District Two: A fellow Republican opposing Mr. Leonard is Ted Costa of Sacramento, an anti-tax crusader who dislikes “political maneuvering” at the BOE, particularly the way districts were redrawn to favor retiring legislators. Democrats on the ballot in this GOP-leaning district are Norman Angelo, a retired board auditor from Bakersfield, and Tom Santos, a Sacramento tax consultant.

District Three: Steve Petruzzo, a veteran board auditor, is challenging Mr. Parrish, who may be one of the board’s most publicly accessible members, priding himself in personally returning phone calls. Emad Bakeer of El Cajon is another Republican on the ballot. The Democrat nominee will be Mary Christian-Heising of La Jolla, a perennial candidate. Libertarian J.R. “Nobody” Graham of San Diego told The Times he “would always vote for the victim, never the tax man.”

District Four: Incumbent Chiang will be the Democratic nominee in this district where registration favors a Democrat. His Republican foe in the general election will be Glen Forsch, who wants to promote a monthly sales tax holiday. Also to be around for the November general election will be Libertarian Kenneth Weissman, who wants to see government and taxes “scaled back tremendously,” The Times reported.

Assessor Races Update:

• Tehama County. Dale Stroud and Mark Columbo are seeking the assessor post being vacated by retiring assessor Robert Brownfield. The race is shaping up as “management” versus “labor.”
  
  Both Red Bluff men work in the assessor’s office. Mr. Stroud is the assistant assessor and has worked in the assessor’s office since 1977. He has the endorsement of Mr. Brownfield, and former Assessor Robert Risberg. “The difference between us is my administrative experience,” Mr. Shroud told the Redding Record-Searchlight.
  
  Mr. Columbo has served in the assessor’s office for about the same period of time, and ran unsuccessfully for assessor in 1990. He says management of the office has been a big problem for many years and has the endorsement of the Tehama County Employees Association Political Action Committee, which gave him $2,500.

• Kern County. In a poll by the Bakersfield Californian, released February 22, assessor candidates Trice Harvey and Jim Fitch were tied with 23 percent of the vote each. Fifty-four percent said they had not yet made up their minds (or are keeping their vote confidential by not telling pollsters who they support). Both candidates expressed confidence they will get the largest share of the undecided vote. Mr. Fitch said his name-recognition and volunteer-grass roots campaign is growing. Mr. Harvey said last-minute advertising and name-recognition will benefit his candidacy. “That’s better for me,” Mr. Harvey told the Californian. “People know who Trice Harvey is and what they’re getting if they vote for me. They don’t know what a Jim Fitch is.”
  
  In terms of demographics, the poll indicated that Mr. Fitch is ahead with well-to-do voters while Mr. Harvey is ahead with voters making less than $75,000.

• San Bernardino. More fireworks erupted in the San Bernardino County assessor’s race this week. An attorney for the Colorado River Indian Land Company, owner of billboards that Assessor Donald Williamson alleges have under-reported values, said an e-mail document and memo he obtained February 25 from the Assessor’s Office prove Linda Foster, Mr. Williamson’s opponent, was the sole target of the assessor’s efforts. Mark Edwards told the Inland Valley Daily Bulletin that the billboards near Needles are on land valued far higher than adjacent parcels, meaning they are properly taxed.
  
  Meanwhile, the Fontana Herald News notes (February 28 edition) that two former Fontanans are in the race. Mr. Williamson graduated from Fontana High School (and has been married to Martha for 32 years, with three sons), while former Assessor R. Gordon Young served a term on the Fontana School Board and two terms on the Fontana City Council. He now lives in Loma Linda with his wife, Lois, and says his main objective is to reduce the 82.8 percent increase in spending in the Assessor’s Office since he left. Ms. Foster, from Redlands, is a former assistant assessor who currently works as business services manager in the county’s Economic Development – Public Services Department, and, from 1983 to 1996, owned Foster Appraisal Service in Redlands. She has been married 30 years to her husband, Jim, and they have five children.

• Solano County. In a debate February 27 in the Dixon City Council chambers, Solano County assessor candidate Al Wise said he would support Solano County’s adoption of the “Super Williamson Act” to preserve agricultural property. He criticized his opponent, county Supervisor Skip Thomson, for not supporting the issue when it was before county supervisors. Mr. Thomson countered that the proposal did not protect the most vulnerable agricultural land near city fringes. He also accused Mr. Wise of “pandering” to voters. According to the report in the Vacaville Reporter (February 28), when Mr. Thomson was asked about a “capital appraisal” assessment method, he said he did not know the method. Mr. Wise, who works in upper management in the Contra Costa County Assessor’s Office, touted his appraisal experience and said, “I’m very surprised my opponent doesn’t know about it.” Mr. Thomson responded, “My responsibility is much larger than doing the actual appraisals.” In another development, Mr. Thomson has questioned Mr. Wise’s ballot designation as “chief deputy appraiser,” contending an organizational chart of the Contra Costa County Assessor’s Office has no “deputy assessor.” However, Contra Costa County Assessor Gus Kramer said Mr. Wise and one other in his office are the only two that carry “chief deputy” responsibilities. “He is one of the few that can serve as assessor in my absence,” Mr. Kramer said. “He’s one of the top managers in this office.” Mr. Wise said the job title is an honest description of his duties.

• Stanislaus County. In the last issue, we erroneously identified one of the candidates for assessor as Doug Harris. His real name is Doug Harms. Sorry for the error. In addition, retiring Assessor Mike DeFerrari, who is endorsing Mr. Harms, told Caltaxletter that four of the five county supervisors are endorsing Mr. Harms. The Modesto Bee (February 26) reports that Mr. Harms has been endorsed by the Stanislaus Taxpayers Association, Del Norte County Assessor Gerald Cochran, and Wally Morrow, former Stanislaus County auditor-controller, among others. His opponent, Modesto City Councilman Mike Serpa reports the endorsement of Helen White, Stanislaus County planning commissioner, and Linda Flores, Yosemite Community College District trustee.

Additions to Reported Election Tax Measures:

• Hotel Taxes. Trinity County voters will decide whether they want to double the county’s hotel tax from 5 percent to 10 percent. Supervisor Chris Erikson told the Redding Record Searchlight, "This tax specifically targets tourists. This tax is painless to residents." Former Supervisor Robert Huddleston said the tax increase would hurt tourism, pointing out when the tax was raised in the 1980s, two bed-and-breakfasts went out of business and three motels changed ownership.
  
  In Kern County, Measure D would keep the county hotel tax at 10 percent. The county had approved an increase in the tax from 6 percent to 10 percent in the 1990s without voter approval. The Kern County Taxpayers Association supports the measure.