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Panel considers giving up property tax portion

Charter committee member Hank Panian gets some positive reaction to his plan to equalize payments in the wake of Proposition 13.

December 12, 2013|By Bradley Zint

The Costa Mesa Charter Committee on Wednesday asked city staff for more information on a seemingly radical idea: the city forfeiting its share of property taxes.

Committee member Hank Panian’s suggestion for the city’s charter, as it takes shape, aims to address the inequality created since the passage of Proposition 13 in 1978. Under the measure, property tax is assessed based upon when a property was acquired, benefiting longtime homeowners. Property is reassessed to full market value only when sold.

Panian proposed that the city could, over a 20-year period, phase out and eventually give up its small percentage of the property taxes collected, which nonetheless will amount next year to nearly one-fourth of the general fund. The remaining amount from residential and commercial properties in Costa Mesa would be distributed as usual, to various agencies including the school district.

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This, Panian suggests, might help even out the taxpaying playing field.

Last fiscal year, Costa Mesa collected $21.5 million in property taxes. Officials expect a slightly higher amount in the coming year: $22.2 million, amounting to about 22% of the entire general fund.

Some committee members expressed enthusiasm for the idea; others were skeptical or against it. Nearly all wanted to know more and directed city staff to provide additional information.

"I'm somewhat surprised," Panian said of his colleagues' interest. "I expected people to be resistant, more resistant than what was expressed. I really appreciate the analysis you folks had."

Committee member Ron Amburgey called the idea "brilliant."

"We're thinking outside the box a little bit," he said. "I think it's great that you proposed it. I really like the concept of making things more fair for the younger people."

Committee member Mary Ann O'Connell said she wasn't so sure. Costa Mesa relies on a hearty but volatile sales tax base — the city's single-largest source of income, she said.

Losing the property tax, and therefore having less financial diversification, is "putting most of your eggs in a sales-tax basket, which did not do well in the last recession," O'Connell said.

Committee member Gene Hutchins, who also serves on the Pension Oversight Committee, said the city's dangerously unfunded pension liability makes Panian's idea fiscally unfeasible.

"Unfortunately, the city has a financial problem right now that would make it very, very tough to try and reduce its income," Hutchins said.

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