Mayor Daniel Lurie’s plan to put a parcel tax on the November ballot to fund Muni service faces (like most tax measures) obvious obstacles: It’s another tax on a ballot that will have a regional transit sales tax and quite possibly some other tax measures. It’s a type of tax a lot of people don’t understand.
But I’m hearing there’s another problem, one that Lurie’s team could have anticipated but ignored: Tenants.
Parcel taxes are a type of property taxes, but they’re legal under Prop. 13. In essence, the city imposes a tax not on the value of a piece of property but on its size: larger lots pay higher taxes than smaller ones, but within each category the tax is flat. A $2 million 2,000-square-foot house on a standard 25-by-100 foot lot pays the same as a similar house assessed at $400,000.
The Lurie proposal has some progressive elements: Residential properties of more than 5,000 square feet would pay a higher rate, and big commercial properties would pay even more.
But the proposal would allow residential landlords to pass half the cost of the new taxes onto their tenants. And that has left some renter organizations unhappy.
To make it worse: Lurie, sources tell me, didn’t even reach out the tenant groups until a few weeks ago, when the plan was largely complete. His office worked with SPUR, the downtown organization, and the Building Owners and Managers Association—but activists tell me there were no tenant groups involved in the early stage of the plan.
Now the renter advocates are in a difficult situation: Nobody wants to oppose a measure that would tax property owners to fund Muni—but tenants who are already struggling to pay high rent are concerned about having to pay higher rates because the landlords pass the costs along.
Pass-throughs have been a big issue for decades in the city. Tenant groups have argued, with good reason, that landlords are already making a fortune in local rental units, that the city’s rent-control law already allows for annual increases that would cover these costs, and that the owners of the property should pay the taxes. Landlords, on the other hand, have threatened to raise big money to oppose all bond measures unless they can pass the costs onto their tenants.
That’s one reason the city only issues new bonds when old ones are paid off: No net hike in bond debt means no increase in property taxes, and no pass-throughs. This, of course, limits the ability of the city to borrow money for crucial infrastructure and affordable housing needs.
The parcel tax measure would cost most landlords a relatively modest amount of money. A typical 5,000-square-foot apartment building would pay $292 a year. Small apartment buildings would pay $249.
Still, the landlord in a two-unit building could pass $124.50 a year onto the tenants—not a huge deal, but for some struggling tenants, enough to make a difference.
There’s no reason this has to be a deal-breaker. Reducing the pass-throughs might anger a few landlords, but two-thirds of the voters are tenants, and opposition from tenant groups could easily sink this critical measure.
Again: No tenant group I have spoken to wants to oppose this measure. But Lurie bungled the process of drafting the measure by leaving them out, and now everyone is scrambling to figure out a fix.
The Lurie camp, I am told, wants to reduce the parcel tax on landlords, to make the pass-through smaller (say, no more than $7 a month). But that would reduce the amount of money coming in for Muni.
The Muni Now Muni Forever campaign and some other activists have proposed an alternative, and under that proposal, big commercial landlords would pay more, and small homeowners would pay less. Under the mayor’s proposal, a typical single-family home on a small lot would pay $129 a year; the alternative would cost $99.
On the other hand, under the mayor’s plan, Donald Trump, who owns half the Bank of America Building, would pay $179,000 under the mayor’s plan, and $236,000 under the Muni Now Muni Forever Plan.
I asked Lurie’s press office for comment on when they first reached out to tenant groups, and I have no response.
The whole thing shows the problems with a mayor who has very little experience in local politics—and has brought in a staff that also has also has little political experience. Attempting to pass a tax measure that could impact tenants without making every effort to get the tenant groups involved from the start was, as they say, a rookie error.
