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State Taxing Options Studied

Long Beach Press Telegram
By Dorothy Korber

SACRAMENTO Warning that "no perfect solution exists," the Legislative Analyst's Office issued several options Thursday for revamping California's property tax system. Two of the options would trigger major amendmentsto Proposition 13, a political sacred cow since itpassed in 1978.

Last year, the Legislature asked its analyst to consider ways to increase local control options over property tax dollars and studied to diminish the importance of sales tax to cities.

"Local finance reform will always have winners and losers," Legislative Analyst Elizabeth G. Hill told a press briefing at her Sacramento office. "You can become paralyzed looking for a perfect L.A. County solution." Hill's comment did not reassure Lakewood City Administrator Howard Chambers.

"To discount winners and losers is absurd," said Chambers, reached by phone at a California League of Cities meeting near Palm Springs. "We're wary of reform that is worse than the status quo.

"Here's where things are: We're being asked to trade a ham for two wienies - and then we'll all sit down and argue over whether the wienies have mustard."

Contract cities such as Lakewood, Bellflower and Cerritos fear they'll be on the losing side of the equation if some of Hill's proposed reforms become reality.

With little or no income from property taxes, these towns have hitched their financial futures to sales tax.

One of Hill's alternatives - she called it "Making Government Make Sense" - would shift control of sales tax to the state and allow cities and counties to decide how to spend property tax. Each community's property tax allocation would be set by the state, based on local need. Then, cities would be permitted to raise or lower their own property tax rate by a majority vote of their residents.

This would be a drastic change from the system established by Proposition 13, which sets the tax rate at 1 percent of a property's purchase price. The state tells counties how to parcel out property tax to schools, cities, special districts and themselves.

Sales tax, on the other hand, is collected by the state and shared with the city where the sale took place. The city gets to keep a penny of every dollar spent within its borders.

Cities such as Cerritos, which gets $21 million of its $61 million general fund from sales tax, want to see that money remain in town.

Another of Hill's alternatives, dubbed "Re-balance the Tax Burden," would also bring sweeping change.

Under this plan, each city would get a larger share of property tax and could increase or decrease its property tax rate. To compensate for higher property tax, the state sales tax rate would drop 1.25 percentage point.

(In Los Angeles County, that would mean a reduction from the current sales tax of 8.25 percent to 7 percent.) Also - a striking modification to Proposition 13 commercial property would be taxed on its current market value, rather than its value at the time it was purchased. Hill said this would resolve inequities resulting from the slower turnover of business properties, compared with residences.

The analyst did not recommend any alternative but suggested that the Legislature create a special committee to evaluate the possibilities and the tradeoffs each would entail. Whatever alternative is adopted, Chambers said, most cities don't expect the state to act in their best interest.

"We're dealing with a state government that stole our property tax money and has not paid it back -even in a time of tremendous surplus," he said. "We are suspicious and distrustful."

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