Yesterday’s Solutions Creating Today’s Headaches

You may have heard that today’s problems are often yesterday’s solutions. In this post, we will discuss how an attempt to fix soaring real estate assessments in an era of high inflation both created a homeowners’ tax boon and sowed the seeds for a future problem — namely the future that is now. I am speaking about Proposition 13.

Many of us are too young to know what headaches the homeowners of the1970s faced. Inflation took a heavy toll on the average American, and the economy was stalled, leading to a situation called stagflation. Homeowners struggled to pay ever-rising taxes, trying to put food on the table and pay for basic services like water and electricity, while wages lagged far behind. Despite the rising promise of Silicon Valley, things didn’t look very encouraging in Santa Clara County. In the 1970s many potential home-buyers were hesitant to commit, afraid their property taxes would rise steeply as the real estate prices those taxes were based upon kept rising steeply. Those who already owned homes struggled to keep up, and seniors who remembered the Great Depression feared losing their homes due to unpaid property taxes.

Enter Proposition 13, an initiative pushed by Howard Jarvis and passed by the California voters in 1978. Proposition 13 set property assessments at their 1976 assessed value, and it restricted annual assessment increases to at most 2% per year. The resulting property tax bills based off these assessments likewise were capped at no more than a 2% yearly increase. When it passed, Prop 13 was revolutionary, and probably saved many people’s homes. However, it also applied to commercial property, capping their assessments. Property, including large commercial or industrial properties, can now only be reassessed in the case of new construction or transfer of ownership, and even those have some limitations. This has created an incentive for large commercial property holders to invest in and hold property — for decades. This tax imbalance has resulted in a long-term reduction in revenue for the state of California. Such revenue from large corporate properties could be funding schools and public services. Also, Prop 13 proponents had hoped that Prop 13 would keep rents low, as landlords benefitted from predictably low taxes. That did not happen. There is now a huge tax imbalance between long-term property holders and recent buyers. While we see the impact of these unintended consequences, to accurately assess these consequences we need comprehensive and accurate property data - the exact data that the Santa Clara County Assessor is required by law to maintain. Unfortunately, that database has been poorly managed by the current Assessor.

You and I continue to bear the burden of yesterday’s outdated solutions, often unknowingly. The obsolete database at the Assessor’s Office is a similar relic of past solutions. It was very useful when it was created, shortly after Prop 13 was passed, but it’s been lingering (malingering?) well past its time. And unlike Prop 13 which has had major upgrades, the database is aging badly. Prop 13 was modified by later initiatives such as Prop 8. The Assessor’s Office has never successfully upgraded its database. This is theoretically to “save money,” but this is a clear case of being “penny wise, dollar foolish.” By the incumbent Assessor never modernizing the outdated database, Santa Clara County residents now carry the burden of increasing costs for maintaining an ancient COBOL-coded database. When the database finally gets overhauled, this decades-delayed upgrade will eat up all the alleged “savings” from the incumbent Assessor’s procrastination, growing more expensive year after delayed year. Indeed, this upgrade can not be put off much longer. Today’s problems are nightmares, and we must wake up.

Hanging onto old unworkable solutions will only cost us in the long run. We need to change with the times. The incumbent Assessor has repeatedly failed over 28 years to modernize the Assessor’s database. The incumbent Assessor has failed the residents of Santa Clara County. We need a new Assessor - vote for Andrew Crockett by June 7th.