O.C. Going After Bigger Slice of Property Tax Pie

When it comes to divvying up property tax dollars in the state of California, Orange County is a big loser.

Local officials have long argued that Capitol funding fights left Orange County hamstrung, while less wealthy counties came out winners. But after years of doing little more than gripe, miffed Orange County officials say they are ready to battle back.

With native sons playing prominent political roles these days in Sacramento, county-based lawmakers are making a run at rejiggering the arcane funding formulas that drive the way California’s property tax dollars are divided.

Assemblywoman Marilyn C. Brewer (R-Irvine) last week introduced a bill she hopes will begin to address an inequity that dates back to the dramatic changes in the way county governments were financed after passage of tax-cutting Proposition 13 in 1978.

Democratic strongholds in urban areas such as San Francisco and Los Angeles scored big in those post-Prop. 13 fiscal wars, but the Republican bastion of Orange County--along with dozens of other suburban or rural counties--went begging. Democrats say it had nothing to do with partisan politics; Republicans heartily disagree.

Whatever the reason, the political tables have turned in Sacramento. The GOP now controls the Assembly and is vying the reverse the Democratic edge in the Senate. Given that, local lawmakers and groups such as the Orange County Taxpayers Assn. contend the stage is set to put all 58 California counties on more equal footing.

“It’s time that the debate is joined,” said Assembly Speaker Curt Pringle, a Garden Grove Republican who is expected to help push Brewer’s package during the upcoming budget negotiations. “It’s time to consider the inequities of the past and fully debate the disproportional funding that was put in place years ago. It’s not something that just affects Orange County. It affects Riverside and San Bernardino and Fresno and lots of other counties.”

Pringle will be expected, as one county official put it, to “carry the water” for the county along with Senate GOP Leader Rob Hurtt (R-Garden Grove) when the Orange County pair gather in late June as part of the “Big Five” discussions on the state budget. The other participants are Gov. Pete Wilson, Senate President Pro Tem Bill Lockyer (D-Hayward) and Assembly Democratic Leader Richard Katz of Sylmar.

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Capitol insiders expect that Brewer’s bill, along with a few other GOP measures, could be incorporated into the budget debate in one form or another. With two local lawmakers in the negotiating room, it is a historic opportunity for Orange County.

“One has to look at what [former Assembly Speaker] Willie Brown did for San Francisco and [former Senate Leader] David Roberti did for Los Angeles and hope that Curt Pringle and Rob Hurtt can do the same for Orange County,” said Supervisor Marian Bergeson, herself a former state lawmaker from Newport Beach. “This would be the single most important legislative effort for Orange County I can think of.”

But it’s going to face a tough fight in the Capitol. Already, foes are lining up to oppose any efforts by Orange County and other less-fortunate counties eager to see more money flow into their coffers.

The biggest hurdle would seem to be the Senate, where Lockyer opposes Republican tinkering. He argues that prosperous counties such as Orange should be willing to get a smaller cut to help out more needy jurisdictions, suggesting it all evens out in other ways.

Orange County may get a smaller cut of the property tax dollar, Lockyer said, but it has benefited more from school construction bonds in recent decades than built-out urban areas such as San Francisco.

“We’re in this lifeboat together,” Lockyer said. “It doesn’t make sense to throw anyone overboard. . . . We don’t need to scatter into tribes and lose the humanitarian impulse to help each other. I believe a poor Hispanic kid in Santa Ana or a black youth in Watts is every bit as much my social obligation as my own daughter.”

But officials in Orange County are finding it hard these days to look anywhere but inward. They see the formulas as patently unfair and want them changed.

Some, in fact, argue that the county’s parched take of property taxes helped lead to the fiscal calamities of 1994 that ended in the biggest municipal bankruptcy in U.S. history. They contend the county’s small cut of the tax pie made it easy to embrace the risky investment strategies of former Treasurer-Tax Collector Robert L. Citron.

In fact, Citron was, near the end, a bigger revenue producer for county government than property taxes. In one recent year, county officials were counting on the then-revered treasurer’s investments to produce $160 million in revenue; they were expecting $100 million from property taxes.

Indeed, Orange County has never gotten as big a share of each property tax buck as have urban counties such as Los Angeles or San Francisco.

Consider the 1993-94 fiscal year. Just 10 cents of each dollar generated by property taxes in Orange County went to fund county government services--everything from public health to parks, welfare to courts. That compares with an average of 66 cents per dollar in San Francisco, and 21 cents on average in other California counties. Meanwhile, 61 cents of each property tax dollar in Orange County went to finance the county’s public schools, while San Francisco paid just 28 cents, and the statewide average was 51 cents.

That doesn’t mean Orange County schools are better funded. A landmark 1971 court case dictates that all districts in the state are financed equally. Orange County just pays more of its own school tab than counties where education is more heavily subsidized by state revenue.

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In a typical year, schools in Orange County get about 70% of their revenue from local property taxes and 30% from the state, according to the Orange County Taxpayers Assn. Schools in other counties receive on average about half their cash from local property taxes and the rest from the state.

The county’s dilemma dates back to the late 1970s. After tax-weary state voters approved Proposition 13, local government revenues plummeted by 57%. At the time, the state was sitting on a fat $6-billion reserve, so the Legislature agreed to finance a local government bailout package.

Funds were funneled to counties based on their historic property tax rates. That scheme was fine for Los Angeles County, San Francisco and other areas that had hiked tax rates during the mid-1970s to pay for a raft of expensive social programs mandated by the state. But for counties like Orange, the formula was a bust.

Unfettered by most urban ills, Orange County’s conservative local leaders had kept property taxes relatively low and avoided the pricey social programs embraced in more liberal counties. Partisan politics aside, when the Legislature’s bailout formulas were drafted, Orange County came up on the short end of the equation.

“It was like musical chairs,” said Peter M. Detwiler, a longtime state Senate consultant on local government. “When the music stopped, counties like San Francisco with high tax rates were able to sit down in comfortable stuffed chairs. Orange County was left to sit in this spindly Shaker chair.”

The building fiscal tension for Orange County didn’t stop there. During the 1980s, Southeast Asian and Latino immigrants poured into the county, driving up social service costs. Meanwhile, cities were busy incorporating and gobbling up territory through annexations, slicing further into the county’s property taxes.

In short, rising costs and stalling revenues combined to create “a sort of double whammy for Orange County,” Detwiler said.

With the bankruptcy adding injury to insult, the county has been hungry for new revenue like never before.

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The county’s legislative delegation attempted to address the equity issue during debate over a bankruptcy bailout last year, but to no avail. Brewer thinks her push has a better chance this year. Although the measure is in the rough-draft stages, she envisions baby-step legislation that would give only a small bump in the percentage of property tax dollars going to counties such as Orange.

But where would that money come from?

Additional tax increases are out of the question among Republicans, and Democrats don’t hanker for cuts in state programs to help Orange County. Given that, most analysts predict that Brewer’s bill could pit the counties against one another. Any increase in the percentage of property tax revenue going to Orange County would almost inevitably mean a decrease for counties that fared well since Proposition 13. That sort of “zero-sum game” can get bloody in the Capitol.

Predictably, the umbrella group for California’s counties is frowning on Brewer’s proposal.

“A discussion that makes one county better off than another is something we can’t support,” said Dan Wall, a deputy director at the California State Assn. of Counties. He would rather see the counties unite to push for a hefty share of the tax windfall expected during the coming year.

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Property Tax Inequity?

Local lawmakers complain that state funding formulas cut too thin a slice for Orange County government. Typically, urban counties like Los Angeles and San Francisco, which had higher property tax rates before 1978’s Proposition 13, have fared better than rural and suburban counties that had lower rates at the time. Here’s how the property tax pie was cut in 1993-94:

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REVENUE DIVISION County County Schools Cities Special Districts Los Angeles 25% 41% 16% 18% Orange 10 61 10 19 Riverside 14 50 6 30 San Bernardino 13 45 7 35 San Diego 19 58 12 11 San Francisco 66 28 * 6 Statewide average 21 51 11 17

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* San Francisco is incorporated jointly as both a city and a county.

Source: State Board of Equalization; Researched by ERIC BAILEY / Los Angeles Times