City won’t forgo its share of property tax

As it looks now, the proposed charter for the city of Costa Mesa won’t include giving up the city’s share of property tax.

Charter Committee member Hank Panian’s seemingly radical idea to gradually forfeit the revenue — which, in turn, would theoretically lower Costa Mesa property owners’ tax bills a bit — was soundly rejected by his colleagues Wednesday night.

All the committee members but Ron Amburgey turned down adding the idea to the charter, which is expected to face voter approval this November.

Panian introduced the proposal late last year as a method of smoothing out the inequalities created by Proposition 13, the landmark 1978 voter decision that limited property taxes in California.

For decades, the proposition has based property taxes on a property’s 1975 valuation or, in case of property sold after that point, on the value of property at time of purchase, rather than at current value, and restricted annual increases in assessed value. Panian is among older property owners who have benefited from the initiative passed in 1978.

About 20 cents of each property tax dollar collected by the county goes to fund cities. The largest chunk goes toward school districts.

In Costa Mesa’s case, finance officials estimate receiving $22.2 million in property tax revenue this fiscal year — an amount equal to nearly 22% of the general fund.

Panian suggested that, over a 20-year period, Costa Mesa could gradually stop collecting that property tax slice and, in the ensuing years, adjust the budget accordingly. The first cut would have amounted to $1.1 million.

This kind of action was taken years ago at the Mesa Water District, he contended, because it no longer collects property tax revenue and instead primarily relies on funds directly from its ratepayers. Panian served on Mesa Water’s board for 21 years.

He theorized that because the idea would apply to all property owners — of both residential and commercial properties — it would lead to tax revenue boosts elsewhere with increased consumer spending, making businesses more economically competitive.

“I think the proposal is plausible,” Panian said in an interview about his idea in November. “Whether it’s acceptable is another matter.”

During its Dec. 11 meeting, a majority of the committee expressed curiosity about the feasibility of Panian’s idea, to which city staff responded by gathering data that was presented Wednesday.

According to the staff’s research, 3,517 of about 25,000 land parcels in Costa Mesa — roughly 14% — fall under Proposition 13’s 1975 valuation structure. City staff said they were not able to assess how many of those properties kept the Proposition 13 structure by passing it down to relatives.

Committee member Brett Eckles said he felt unsure about the idea’s impact on city funding, but said it would have merited a separate committee just to research it.

“Especially when we’re talking about all [these] unfunded [pension liabilities], deficits, economy and recession, now we’re taking away a chunk of a significant revenue stream?” he said.

Committee member Mary Ann O’Connell said she isn’t a “fan of not being diversified in our income sources.”

Panian said he appreciated the city’s thorough research into his idea.

“The city and community owes you and your staff a great deal of support and appreciation for the data,” he said. “I don’t know how you pulled it all together since Dec. 11.”

He later added, “Regardless of what we decide, I think it illustrates that we’ve done our best to address the issue, no matter how the issue turns out.”

Throughout the committee’s deliberations, a committee majority has also rejected two of Panian’s other proposals: expanding the City Council and Planning Commission from five members each to seven and instituting a districting system for elections, as Mesa Water and the Newport-Mesa Unified School District already do.