By David M. Greenwald
In one of the most competitive races in the city, all four candidates for the District 5 City Council met on Sunday evening in a forum hosted by the Davis League of Women Voters—Josh Chapman, Kelsey Fortune, Connor Gorman and Rochelle Swanson. They had 90 seconds to respond with a possible one minute follow up.
Question 5: The city faced financial problems before COVID, so how can it dig out of an even deeper hole now?
Josh Chapman: “The key is to bring in more revenue,” he said. “More revenue, what does that look like? That looks like building more housing—we have to look at the redevelopment of properties. We have to look at increasing our tax base. We have to look at infill, that’s one of the things I’m so excited about the Downtown Plan.” He is also looking to increase our redevelopment dollars in our downtown and increase our tax base. “We also need to stand back and look at our grant writing process and how we prioritize grants that we go after,” he said. He also said we need to look at providing spaces for businesses to grow—he said to look at DISC, “we need incubators, we need space 
for businesses to grow, create jobs, and housing for more people living within Davis to increase our tax base.”
Connor Gorman: He said that there are two ways for the city council to address these physical issues. Indirectly, “the city should use its platform to push for larger changes on the state and federal level and in particular universal healthcare which will be helpful on its own and also likely reduce employee health care costs for cities,” he said. He also suggested the city support Prop. 15. He said on the direct side, “I think that having downtown rent control and/or a vacancy tax would incentivize the landowners to allow more small businesses to move in and that would be a good way to rejuvenate downtown,” which he believes would help produce more revenue for the city. “Revenue is important and this would be one way to generate it,” he said.
Rochelle Swanson: “The city has one of the largest roles to play in the economy, it’s part process, and it’s also spending and it’s revenue,” she said. She said we have a better process than when she was first elected in 2010. At that time she said they did not have a solid process and were structurally imbalanced. She said, now we have quarterly check-ins and a two-year budget as well as controlling the number of employees. “That was very difficult to have to do cuts back then,” she said. “It put us in a better place.” It’s different now with this being “a global pandemic” with “people being out of work for months on end.” She said in the short term they are looking at furloughs, but in the longer term they need to look at services, what she believes is our long-term conversation with the community. “These are conversations that should be happening now while these issues are on the forefront and people understand what are the trade-offs,” she said.
Kelsey Fortune: “It’s a bit disappointing that after the longest period of growth in recent history, that the city is not able to balance its budget in normal times,” she said. She noted that the pandemic has thrown things off in the short term but believes that we need to look at the bigger picture as well. “Why are our expenditures higher than our revenue?” she asked. “How are we going to prepare for this type of thing in the future—we know that natural disasters and other things are going to become more and more regular as climate change continues. We need to be prepared for emergency situations.” She said that we need to be prepared for when revenue drops for whatever reason and put in place revenue-saving mechanisms for the city. She agrees that Prop. 15 will help the city to meet its revenue needs. “Having Prop. 15 in place allows for more equity in who’s actually paying for the services that the city provides,” she said.
Josh Chapman: He responded to the issue of Prop. 15. He said that as someone who owns a business, he can tell you firsthand the effect it will have on the economy and on downtown businesses. “This is going to be a tough one—they are balancing it against education,” he said. “We have seen what happens when businesses have gone out of business when John Brinley sold his property. That was a direct reflection of property taxes going up on businesses whose owners live here and whose businesses have closed.”
Kelsey Fortune: “The idea behind Prop. 15 is that this wouldn’t happen anymore. We wouldn’t have these jumps when businesses are sold.” She said this is a process by which we would enter into a more equitable system by updating property taxes more regularly. “So that when property changes hands you don’t see these huge jumps,” she said.
Connor Gorman: “At least in the long term it would not only directly generate revenue but it would also potentially even incentivize lower rents, and maybe even incentivize selling property to the actual business owned instead of these large corporate owners holding a lot of it,” he said.
Rochelle Swanson: She said that what happened with the Brinley property was a huge motivator to create the new downtown plan and prevent this from happening in the future. He said that if Prop. 15 does pass, “it’s going to be imperative that the city work together with the businesses immediately that are impacted by those changes and also come up with a plan.”
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Prop 15 would be very harmful directly to ag businesses, and indirectly to retailers that rent property.
Those commercial properties would be reassessed every three years. That would lead to spiraling increases in retail and commercial rents.
I think it’s interesting that most jurisdictions have opposed rent control, but they are willing to give commercial entities tax control. I would probably like to see a full analysis of the issue and how it can be resolved – I think the current system doesn’t work, but how to fix it, not sure.
Tax control?
Probably not the most artful term, basically they are holding assessed value steady to prevent commercial entities from having their taxes go up. So if you hold rent steady, it’s rent control, hence I called it tax control.
got it
I do. Stop making decisions which result in costs exceeding revenue. What can be more simple and straightforward than that?
Proposition 13 allows taxes to rise more than 2% per year, already (when considering reassessments triggered by sales).
But, I’ve heard of “shenanigans” regarding ownership of commercial properties.
That’s so loaded I don’t know where to start or if I want to start…
Well, since it’s too late to start at the “beginning”, maybe it just needs to be addressed from this point forward.
Davis is not alone, in this. A change will be forced upon the system, statewide.
That’s why it’s a statewide initiative
True, but an initiative is not necessarily the same thing as “forcing”.
Nor does it necessarily address the underlying problem (limited amount of increases, but no corresponding requirement to limit costs). Unless that’s solved, revenue/tax increases may not make a difference. There are vested interests working against that solution.
It’s quite possible that increasing revenues won’t solve the problem, in the long term.
Increasing revenues only solves financial problems if it works in conjunction with cost containment.
Cost containment will apparently remain “voluntary” across California. How long do you suppose that cities/counties will keep those costs in check – regardless of this measure? Especially when there’s vested interests working against that?
As a side note, I think that Don has this right in regard to small businesses.
If by voluntary you mean to be determined on a city by city basis – then yes. That’s generally how local governance works.
Not very well, one might add.
Projected revenue is not generally a “secret”.
It’s outrageous that liabilities were allowed to be “unfunded”, for decades. Gee, what could go wrong with that approach?
Ron O
Cost containment to a large extent occurs at the ballot box. The hiding of labor costs in distorted assumptions about pension investment returns is a travesty, but the other decisions about costs reflect the preferences of voters. And voters also exercise their preferences on taxes to fund those costs. There is NO basis for limiting tax increases externally so long as they are set directly or indirectly through the electoral process. It is important to be transparent about the required revenues to cover the desired costs, but that is far from a “mechanism” to limit one or the other.
Seems to me that a lot of it occurs via “representatives” who are more beholden to various interests.
If you’re going to repeal Prop 13, repeal it for everyone. Not just businesses. This is a simple attempt to get people to vote for something that they think won’t hurt them. But it will hurt small businesses and farms. I’m not thrilled with who I’m aligned with on this issue, but it’s a valid analysis.
Am I missing something here? My understanding, including from reading the Voter Information Guide, is that Prop 15 exempts commercial properties worth $3 million or less and agricultural land.
You are missing something – most of the buildings downtown that hold small businesses are worth over $3 million. But again, that’s one of the points I think Connor made is that this may encourage a change in the structure of how buildings are owned and who owns them.
Commercial properties commonly exceed $3 million in value. With farmland in CA at, say, $30K per acre for orchard land, it doesn’t take much land for an ag business to have that value — though the income is definitely not proportional to the value of the land compared to commercial properties. Ag land is exempt, but property improvements are subject to reappraisal every three years. For many long-time farm operations, the first reappraisal is going to be a major shock.
There is a point there, about repealing it for everyone. Spread out the pain.
And yeah, having an exemption line like that — that’s gonna result in some strange imbalances. Why they never consider gradational stepping in these initiatives or government bills in general I’ll never understand – it’s usually a hard cutoff.
The reason is that initiatives are typically authored by well-funded special interests and once made public, there’s no opportunity for modification. While government legislation often has the same issues, there is at least the opportunity for opposition input and compromises as a bill moves through the legislative process. Gradual implementation is not uncommon in legislation.
David, Don – Helpful. Thanks.
You’ve got that right, though I’m not sure we’d apply those labels the same way, across-the-board.
Welcome to politics.
The pain is real. Caused by the original Prop. 13. Fixing the mistake is going to hurt. What we as a State are suffering already hurts.
Several points on Prop 15:
– Land value is residual to the income and benefits generated from the use of that land. Landlords and owners cannot charge more than what the market will bear. So there is a limit on how much rent can be charged to businesses. Landowners will have to absorb a significant portion of the tax increase in reduced land values. Land does not have an intrinsic value unto itself.
– Small businesses tend to lease properties that are more frequently bought and sold by property management firms than corporate-owned properties. Property management firms generally make more money from the sale of the properties than from leasing. This means that the property taxes embedded in small business rents generally are much higher than the taxes on corporate owned properties. Small businesses have been misled on the relative impact of Prop 15 because the state Chamber is dominated by larger corporations who own that are relative beneficiaries compared smaller businesses that lease. Prop 15 has this provision:
-As to ag properties, this provision will protect a large proportion of parcels. This likely translates into parcels smaller than 400 to 600 acres.
https://ballotpedia.org/California_Proposition_15,_Tax_on_Commercial_and_Industrial_Properties_for_Education_and_Local_Government_Funding_Initiative_(2020)
If you (or anyone) has them, how about some actual statistics?
Also wondering how this might interact with the Williamson Act, and/or incentives to convert even more farmland to housing.
Just noticed that Don said that (all?) Ag land is exempt (though I’m not seeing that in the ballot language), but improvements are not.
Overall, I’m starting to think there may be some unintended consequences with this measure.
So, I’m wondering why Richard said “a large portion of (ag) parcels”, unless he’s referring to the improvements that Don referred to.
Seems like this is saying “all” agricultural parcels, with the exception of improvements.
In any case, why are costs allowed to rise faster than the amount allowed under Proposition 13 (which is actually HIGHER than 2% per year, when considering reassessments)? Those are ultimately “decisions” that are being made, somewhere along the “food chain” (regarding spending).
Sorry, but this makes no sense as written. Rents will go up if the property value goes up. Are you actually suggesting they won’t?
I don’t find this believable. Source? Meaning? Sorry, it doesn’t parse nor does it likely stand up to evidence.
Does this somehow negate my point that their rents are going to go up dramatically? The assessment provision is for a 3-year cycle. That’s all this says.
Go ahead and take current cropland value in California and do the math.
Sorry Richard, you haven’t made your case at all. Prop 15 will have adverse unintended effects on small retail businesses that rent their sites (I don’t, fortunately) and will have adverse effects on ag businesses because their property improvements will be reassessed every three years.
So, I thinking that those associated with school districts are once again behind much of this effort. (See breakdown of funds, in the link that Richard provided above.)
By the way, does anyone know the approximate percentage of property taxes that school districts already receive, statewide?
Who do I prefer to listen to? Those who are giving up a portion of their potential income to serve our community (every teacher I know is earning less than they could in the private sector), or corporations who have taken to heart Milton Friedman’s admonition that they focus solely on increasing shareholder profits? Tough choice–not.
Why do you always have to attack the messenger rather than taking on directly the arguments that are being made?
I’m not “personally attacking the messenger”. I’m just asking where the money goes, as well as how much tax money they already receive.
In any case, does anyone know how much taxes go to school districts, statewide? (Maybe by “category” of taxes?)
I personally believe that the taxes are incorrectly structured regarding school districts. But, I’m pretty sure that you and some others on here don’t want to explore that, so I’d prefer to refrain from discussing that further.
I remember a time when California was the shining star. Now everything is a total disaster due to the Liberal leadership . How proud democrats must feel now they have produced the worst schools, worst roads, crumbling bridges they fail to construct dams for a greatly need water supply and flood control we have the worst poverty rate in the nation and we have the highest gas prices in the nation and NOW they want to destroy Prop13??? I think not…
“we have the worst poverty rate ”
That’s not even close to being accurate. California actually has one of the lower poverty rates in the nation. 44 percent of those in the nation who are living in poverty live in the South.
https://www.thebalance.com/us-poverty-rate-by-state-4585001
You all do realize, I’m sure, that commercial property owners are ALREADY trying to convert their holdings for residential usage in cities like Davis.
How much more “incentive” would this provide?
You can find the 3 forum videos at the LWV Davis Area Facebook page, http://www.facebook.com/lwvdavisarea. Davis Media Access is in the process of adding the videos also. They currently have District 2 available. dctv.davismedia.org/content/election-2020-community-forums