Taxation or Misrepresentation? : Post-Prop. 13 Cash Scarcities Replace the Big Bite With Many Little Ones

The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.

--Jean Baptiste Colbert,

Louis XIV’s minister of finance

Most San Diego public officials probably have never heard of the Sun King’s finance minister. However, from the perspective of some skeptics--alarmed by what they see as a disturbing trend in local taxation--those same officeholders have become skilled practitioners of Colbert’s 325-year-old theory.

“Get the most money from the public with the least squawking--that’s the iron law of politics,” former San Diego City Councilman Fred Schnaubelt said. “And politicians have become very clever about it. They take a little here, a little there, always in such small amounts that there’s no public outrage. But, over time, it adds up.”

Over the past decade, local governments have turned with increasing frequency to special sales taxes, so-called assessment districts or service areas, user fees and other similar devices to expand their budgets in the post-Proposition 13 era.

In the last two years alone in San Diego County, half-cent sales taxes for transit and jails were approved, and the city and county enacted temporary waivers of the so-called Gann spending limit.

New Taxes Under Consideration

The city is now reviewing a plan calling for a special $50-million-plus annual tax to hire more police, with a property-tax increase, a utility user’s tax and the sale of general obligation bonds being the major fund-raising options under consideration. The county, meanwhile, is pondering a special property-tax assessment to pay for libraries.

Elected officials argue that the special taxes--each of which, they emphasize, was approved by the voters--are needed to handle growing responsibilities at a time when measures such as Proposition 13, the landmark 1978 tax-cutting initiative, and the Gann limit tie their hands fiscally.

Critics, however, see the special taxes as a way of nickel-and-diming the public, and ask: What happened to the days when you paid your taxes once and government made do?

“There’s ample justification for feeling that, as soon as the hand of government is withdrawn from one of your pockets, it slips into another one going after more money,” said former San Diego Mayor Roger Hedgecock, now a radio talk-show host.

‘Government’s Insatiable Appetite’

Dot Migdal, who monitors City Hall and the County Administration Center for the San Diego Chamber of Commerce, attributes the myriad special taxes to “government’s insatiable appetite.”

“Whether it satisfies that appetite in one big bite or a bunch of little ones, the result is the same,” she said.

Dismissing those attitudes as overly cynical, city and county officials contend that such characterizations of the special taxes also overlook compelling political realities--starting with the way in which Proposition 13 shifted budget flexibility from San Diego to Sacramento.

“What a lot of people still don’t understand, 11 years later, is that Proposition 13 left (local governments) with the responsibility to provide services at the same time that it took away their ability to raise revenue,” said David Janssen, the county’s assistant chief administrative officer.

Before Proposition 13, local governments could meet budget demands by simply nudging up property taxes, with fractional increases capable of generating tens of millions of dollars in new revenue. By capping property taxes at 1% of assessed value, however, Proposition 13 eliminated that option and left local governments heavily dependent upon the share of property-tax funds that they received from Sacramento.

As a consequence, local officials argue, they have little alternative but to turn to special taxes to address pressing problems that create financial demands that outpace inflation.

Moreover, the requirement for voters’ approval of all new taxes precludes--in the officials’ eyes--criticism of the measures as a kind of sinister government plot to sneak small taxes by an unknowing public. Far from being violations of the spirit of Proposition 13, as opponents charge, supporters argue that the special tax proposals simply give voters opportunities to continuously chart government spending.

‘Gives Voters a Chance’

“What anyone who criticizes these (taxes) as a way of putting something over on the public is really saying is that the voters are stupid, and I don’t believe that,” Supervisor Susan Golding said. “No one’s forcing the voters to approve this. It simply gives voters a chance to say, this is something we want to spend more money on, or, no, we don’t. What’s wrong with giving voters that choice?”

While administrators complain that earmarking the taxes for specific purposes curtails their ability to shift funds from one area to another to meet unanticipated needs, they concede that asking the public to spend money on a particular program perhaps is more politically palatable than simply seeking a general tax increase.

“In essence, this allows voters to set the priorities,” San Diego City Manager John Lockwood said. “From a management standpoint, that poses some problems because it reduces flexibility. But, politically, it’s understandable why people might be more willing to spend more money on something they consider important than to just give more money to government with no strings attached.”

Another option that has been considered--without much success--involves the possibility of local governments generating revenue in order to reduce the need for tax dollars.

Last week, for example, the City Council rejected a proposal to build a McDonald’s fast-food restaurant in Balboa Park, a plan that would have generated six-figure annual payments to the city. In the mid-1980s, the Board of Supervisors turned down, on aesthetic and financial grounds, a proposed retail-hotel development on the bayfront parking lots flanking the county building.

Even if such proposals prove feasible, officials say, they probably will never generate more than a small percentage of local governments’ budget.

Where to Draw the Line

“The question isn’t so much whether you can do it--it’s where you draw the line on commercialization,” San Diego City Councilman Bob Filner said. “If we really wanted, we probably could sell advertising on the walls of City Hall. But do people really want a Shearson Lehman Brothers Andy Williams Isuzu City Hall? I don’t think so.”

Recent special taxes--and proposals for future ones--have dealt with many high-profile issues. Voters’ approval of them, officials argue, demonstrates the public’s willingness to pay more to solve major problems.

The half-cent sales tax approved last November by voters, for example, is projected to generate about $1.6 billion over its 10-year life to build new jails--where inmate populations are now more than double their official capacity--and more courtrooms. An earlier half-cent sales tax approved in November, 1987, is expected to raise nearly $2.25 billion over 20 years for new highways, street improvements and transit systems.

The various $50-million-a-year funding options being examined by the city to hire about 440 more police officers are envisioned as a means of meeting the San Diego City Council’s longtime goal of having two sworn officers for every 1,000 city residents. There are now 1.62 officers per 1,000 residents--a rate that makes San Diego, the nation’s seventh-largest city, ninth among the nation’s top cities in terms of numbers of officers per capita.

And, if the supervisors eventually propose a special tax to retire the library system’s $1.6-million-a-year debt, that election will show whether San Diegans consider libraries important enough to justify the estimated $7-per-person charge needed to prevent cutbacks.

“The public identifies the issue and the public decides whether to spend more money on it,” San Diego City Councilman Ron Roberts said. “No one’s ever excited about paying more taxes, but this way, at least the voters get heard very clearly.”

Basic Assumption

Inherent in much of the debate over the special taxes is the assumption that local governments cannot meet those needs without more money, a matter that most officeholders regard as so common-sensical as to be indisputable. Although inflation, business expansion and population growth swell tax revenues annually, thereby enlarging municipal budgets, the price of needed services consistently grows even faster, they contend.

Critics, however, are unwilling to accept that assumption on faith alone. With the county operating under a $1.3-billion annual budget and the city’s budget topping $807 million, they argue that more efficient expenditure of those dollars would make it unnecessary to resort to more special taxes.

“It’s easy to say government is inefficient and the money could be spent better, and, to a certain extent, that’s true,” Filner said. “But, unless you just start abandoning entire programs--and I don’t sense any public mandate for that--at best, you might get an extra couple million dollars here or there by tightening up. That’s nowhere near enough when you’re talking about needing $50 million for something like police.”

Both city and county officials also complain that they get shortchanged from both Sacramento and Washington in the distribution of tax dollars.

County officials point out that San Diego ranks 57th out of the state’s 58 counties in per capita tax revenue that it receives from Sacramento. That inequity figures prominently in lawsuits that the county has filed against the state, seeking reimbursement for the tens of millions of dollars that it contends have been improperly denied it.

Programs mandated by state or federal laws make up about 95% of the county’s budget, transforming the county, in the words of Supervisor George Bailey, into “basically a funnel, a middle man.”

“When you look at how much money we have no discretion over, that $1-billion budget looks a lot smaller,” Bailey said.

Used for Basic Services

Although opponents concede that many of those arguments have some merit, they object to the way special taxes have come to be used or proposed for basic services such as streets, jails and police protection.

“These are services that, historically, people have become accustomed to receiving without getting hit with a special tax bill,” said Mark Nelson, executive director of the San Diego Taxpayers Assn. “It’s fair to ask, if local government isn’t doing that , what is it doing?”

The growing number of special taxes and assessment districts also draws critics’ ire. Over the past five years, for example, the number of assessment districts--areas where residents agree to pay higher taxes in return for special services--has tripled to 24, according to William McGuigan, the city’s budget services manager. Most of those assessment districts pay for landscaping in specific communities.

Officials stress that assessment fees are not imposed by City Hall, but rather result from communities’ petitioning of the council. In each case, they point out, more than two-thirds of the districts’ property owners signing petitions telling the council that they were willing to pay extra tax dollars to have, say, flowers planted along roadsides in their community.

Opponents, though, express skepticism about any attempts to portray the special taxes’ enactment as democracy in action. True, the public must approve the taxes, they say, but the officeholders who propose them are not simply disinterested bystanders. Indeed, some political observers go so far as to argue that the officials shrewdly manipulate the process.

They do so, opponents charge, by choosing what Migdal terms “sexy programs” for submission to the voters for extra financing. Although agreeing with that assertion, John McTighe, a former county policy analyst who now runs his own consulting firm, does not fault officials for taking that tack.

“Let’s face it--if you ask people whether they want to pay more for welfare or things like Edgemoor (geriatric hospital), the answer probably would be no,” McTighe said. “But government still has to provide those services, too.”

The special taxes’ relatively unpainful financial effect on individuals often makes for persuasive campaign slogans.

During last fall’s campaign over the proposed half-cent sales tax for jails, for example, officials hammered away at the theme that, “for pennies a day,” San Diegans could ensure that dangerous criminals who might otherwise go free because of jail crowding would be incarcerated. Similarly, Filner, who proposed the $50-million-a-year plan for more police, has noted that his plan would cost the owner of a $100,000 home $34 to $87 annually.

“I guess I have no problem asking voters, ‘Is it worth that much to you?’ ” Filner said.

Numbers Don’t Lie

The incremental increases in an individual’s overall tax burden produced by the special taxes, opponents suggest, are small enough and so widely dispersed as to generally avoid massive public opposition.

“Taken in isolation, none of these taxes or extra fees seems like that much money,” Hedgecock said. “Over the years, of course, they accumulate. But, before you start seeing anger or majority opposition, people have to start doing some arithmetic. For whatever reason, that hasn’t happened so far.”

Schnaubelt, whose Libertarian-cum-Republican philosophy prompted innumerable lectures on that topic during his years on the council, concurred with that assessment.

“It’s like the story of the frog in boiling water: If you turn up the heat little by little, it stays in the pot until it’s too late,” Schnaubelt said. “And that’s what’s happening to taxpayers.”

County administrator Janssen, however, disputes such analyses.

“I don’t believe in conspiracy theories, and that’s what that sounds like,” Janssen said. “First of all, I don’t think people are that cunning or that smart. Plus, all I see is an honest attempt by honest people to do what’s beneficial to the public.”

Lockwood, meanwhile, views the debate as simply another chapter in a recurring story that he has heard often throughout his nearly four decades at City Hall--one that, from his perspective, illustrates the largely no-win position in which public officials find themselves.

“Since before I was shaving, the only two things said around here have been, ‘We want more service and reduce the cost of government,’ ” Lockwood said. “There’s a tremendous inconsistency there, because those goals have you moving in opposite directions. But that gap is there now, always has been there and probably always will be. Knowing that makes this job a little easier.”