Why does the local government of a well-to-do city have so much trouble meeting its basic obligations? Recent stories about affluent Moraga focused on its inability to pay for crumbling infrastructure, even as its residents make an average of $169,000 and the streets are lined with million dollar homes. It appears repairing two basic city problems - a deteriorating bridge and a sinkhole—have put the city into a fiscal emergency.
After the Chronicle correctly, and boldly, identified the property tax limits of Prop 13 as the culprit, the defenders of the status quo predictably rose to the rescue. With their usual slight of hand they ask homeowners to focus on their left hand while their corporate right hand reaches around to steal your money.
Completely missing from this story is the hidden secret of Prop 13 - a huge portion of this city’s, and other city’s like it, financial shortfall comes not from homeowners, but from wealthy commercial landowners and corporations who benefit from a loophole paying a very small fraction of market value in property taxes. These properties house CVS, TJ Maxx, Chevron, gas stations, and other corporate commercial facilities in Moraga. Very wealthy commercial and industrial property investors, both domestic and foreign, are getting a huge tax break on their property in Moraga and throughout the state. And that is the real culprit.
Most people don’t know that Proposition 13 includes a loophole that protects commercial and industrial property as well as homeowners. In Moraga, some of these investors bought and developed land in the 1970s. This land, under one of the two major shopping centers in Moraga, is assessed at a loophole value of $2/square foot, while newly purchased commercial property in Moraga is as much as $68/square foot – more than 30 times the cost of similar property. The largest owner/developer died in 2002, but no matter—commercial property passes on indefinitely to his company, now owned by his family, without reassessment ever taking place.
The lost revenue from these commercial property areas is easily $2 million annually , and likely far more. In fact, through the Proposition 13 commercial property loophole the largest commercial landholder in the city avoids taxes totaling over $1 million per year. Many of these properties—large, highly valuable and profitable—pay less than a single new homeowner in Moraga.
Recent articles from those who use Prop 13’s protections for homeowners as cover for maintaining these corporate loopholes suggest that the city has no one to blame but itself. But consider the cumulative losses the city has sustained from undervalued commercial properties, totaling many millions over many years. That would certainly be enough to maintain a bridge and fix a sinkhole.
Short of supporting wealthy investors and corporations over the needs of residents, there is no excuse for allowing large commercial landowners to pay taxes on buildings in an affluent city based on what those properties were worth when they were essentially farmland 40 years ago. While it is true that Moraga receives only a small share of the property tax, that also stems from the limitations of Proposition 13 going back to 1978. If we can have a real discussion about re-assessing commercial property, we could also have a serious discussion about improving our outdated system of property tax allocation.
There is always plenty of blame to go around when a road goes unrepaired or a bridge unfixed but in the case of Moraga and cities like it let’s place the blame where it belongs. We can all join together and defend the need to maintain protections for homeowners and residential renters. But let’s rid ourselves of the allusion that Prop 13 is infallible. The commercial property tax loophole starving cities of funding needed to provide basic services must be closed. And that is the true culprit behind Moraga’s plight and it’s solution.