P. V. Estates Studies Major Tax Revision

Has this wealthy city found a way out of its peculiar tax situation in which “small houses pay the same as big houses” and residents vote on taxes every two years?

Robert Ringle, a retired Northrop Corp. executive and chairman of the city’s Tax Equity Committee, believes it has.

“We have come up with an idea that is as near to equitable as we could make it,” Ringle said.

His committee--appointed by the City Council to reflect a wide range of community thinking on taxation--has proposed a new 15- to 20-year general property tax designed to replace a system in which voters, since passage of Proposition 13 in 1978, are asked every two years to decide on special taxes for such basic city services as paramedics and street maintenance. A council-enacted utility users tax to finance capital improvements also would be replaced.

But Mayor Ronald Florance, who supports the concept of a general tax for the city, said it is too early to tell whether this proposal will fly.

‘Suspicious of General Taxes’

“There will be controversy on this,” he said, explaining that Palos Verdes Estates is a fiscally conservative community where people “are suspicious of general taxes and want a voice in taxes” at the voting booth.

The tax proposal calls for a two-part rate structure, based on both the square footage of land parcels and the square footage of habitable structures. The approximate initial rates suggested by the committee are 2 cents per square foot for parcels and 7 cents per square foot for structures. The committee also recommends limiting rate adjustments to once a year.

Since passage of Proposition 13 cut deeply into city revenues, voters here have rejected two general taxes, the last in 1983. But two temporary property taxes--for firefighters and paramedics and for parkland maintenance--have been approved. The more recent one carried by an overwhelming margin last year.

The council enacted a 10% utility tax in 1983 to finance a capital improvement program that includes replacement of deteriorated storm drains and the addition of new drains. The city has been hit by a series of lawsuits by residents alleging that their property was damaged because of faulty drains.

Obeying Prop. 13

The committee proposal is an effort to work within the strict confines set by Proposition 13, which prohibits a tax rate raise based on property value. It also requires approval of two-thirds of the voters to enact a special tax for specific services.

However, city officials believe the general tax measure being proposed would require simple majority approval.

While conceding that the present system of temporary taxes and the utility levy is providing the revenue the city needs, Ringle contends that it is no way to run a city.

“It’s hand to mouth,” he said.

The city staff agrees. “One of these taxes comes due every two years, and if they’re not passed, we’re in a fiscal crisis,” said interim City Manager Bill Fawell.

The temporary property taxes supply nearly $1.5 million of the city’s current budget of $6.5 million, officials said. The utility tax brings in $1.2 million a year for capital improvements.

March ’86 Vote Probable

The general tax proposal has gone to the city Financial Advisory Committee, which is expected to make a recommendation to the council March 12. Florance said the measure, if approved by the council, most likely would be on the city election ballot next March.

The property tax also would be deductible from residents’ federal and state income taxes, unlike the present utility tax, he said.

The committee report said property owners would pay no more under the general tax than they now do for the combined temporary taxes and the utility measure. The tax would be limited to supporting only those functions financed by the measures it would replace.

Ringle said the tax’s best selling point is its two-part rate structure because it corrects the inequities of the temporary taxes, which charge real property owners the same amount regardless of size or usage of the land. “Small houses pay the same as big houses and a lot of people think this is unfair,” he said.

Requires ‘Selling Job’

“I think the tax will be acceptable if the right effort is put in to get the people to understand it, and that takes a selling job,” said Ringle.

Mayor Florance agreed, saying that the reason the last general tax failed was because people did not understand it. “It’s going to take a lot of bootstrapping, a lot of grass-roots committees going out, a lot of brochures, meetings, coffees and wine-and-cheese parties,” he said.

As an example of the challenge, Florance said that a key point made by the committee--that there is inequity in everyone paying the same amount--is not a problem to some people: “They feel that the need for paramedics and police is the same, regardless of whether you live in a big house or a little house.”