A member of the committee tasked with drawing up a charter for Costa Mesa has an idea for the document, and he knows it's a controversial one: Allow the city to gradually give up and not collect its slice of property taxes.
This could be done gradually over a 20-year period, according to Hank Panian, who says his so-called evenhanded solution may help solve the inherent inequities created since Proposition 13, the pivotal 1978 voter decision that capped the tax.
Much to the ire of its critics, under Proposition 13, newer property owners pay their property taxes based on the present-day assessment of their properties, while older owners — Panian included — pay based on 1970s valuations.
"I think the proposal is plausible," Panian said in an interview. "Whether it's acceptable is another matter."
The county collects property taxes, which then get divvied up among various governmental agencies, including school districts. Under Panian's scenario, those other entities would keep their portions of the revenue.
The technicalities of Panian's idea, both financial and legal, are still unknown to city officials, however.
What would happen to Costa Mesa's portion of the property tax dollar should the city forfeit its cut? Would it effectively lower owners' tax bills? Or would they pay the same and have the city's cut simply distributed elsewhere?
Costa Mesa collected $21.5 million in property taxes last fiscal year. Officials estimate receiving $22.2 million in the 2013-14 fiscal year — nearly 22% of the city's general fund.
Before everyone left, Panian passed out information. He briefly summarized the basics, calling his idea fully plausible, highly controversial and worthy of serious consideration.
"It's a moral imperative, I think," Panian told the group. "Even though I might be good at heart, I may be wrong with the idea."
Committee member Ron Amburgey expressed immediate enthusiasm: "Where do I sign?" he quipped.
In his four-page handout, Panian, a retired Orange Coast College history professor, lamented today's economic climate.
Young families have "less discretionary funds than those of us who bought into Costa Mesa decades ago," he wrote. "As a college teacher who worked primarily with young adults, I have felt a moral responsibility to address this inequity."
The 20-year phase-out, Panian wrote, would result in a 5% loss of property taxes each year for the city — $1.1 million the first year.
"Think about how competitive the Harbor Boulevard of Cars would be with a 5% reduction in their property taxes," he wrote.
Panian theorized that Costa Mesa's "bundle of other income sources," such as robust sales tax revenue from South Coast Plaza, may help offset the loss. The City Council would also have to reorder its spending priorities accordingly, Panian wrote.
Panian, who served on Mesa Water District's board for 21 years, used that agency as an example.
"If you look at the current tax bill that people get from Orange County, you will notice that the Mesa Water District is not in the tax bill," he told the Pilot.
Decades ago, Mesa Water phased out its collection of property tax revenue. It now primarily relies on its ratepayers.
Panian said the city, with constitutional authority from a charter, could possibly do the same. The county tax collector could simply not collect each corresponding 5% during the phase-out.
"There has to be a relationship between each government entity and the tax collector, because the tax collection varies between city to city," Panian said.
Panian hasn't had any luck with his past charter proposals. To better reflect a growing city, he suggested expanding the City Council and Planning Commission from five members each to seven.
He also wanted to see a districting system that ensures all areas of the city are represented. Mesa Water, the school district, the college district and others already do this, he contended.
The ideas found no support.