PROPOSITION 13’S CONTESTED LEGACY: That was then
Second in an occasional series
When Doug deHaan got his property assessment in the mail, he knew that a heart-to-heart talk with his wife was coming. The couple was going to have to sell their home.
Just 18 months earlier, DeHaan and his family had moved into a new place in the Gold Coast. And in that short time, their property taxes had tripled.
“We overextended ourselves, like everyone else would do at that time, when you’re young,” deHaan remembered. Even if they had stayed in their old place, their taxes would have doubled, he said.
Then Proposition 13 came along. And deHaan, now a two-term city councilman, voted in favor of it.
“You never know the aftermath of any of these things,” deHaan says now.
Local leaders who are working to change the property tax-slashing measure have blamed it for the Golden State’s tumble from grace. But the measure’s backers say that their opponents fail to understand the problems that led to its passage.
So The Island took a trip back in time to 1978, interviewing longtime residents and reviewing months’ worth of newspaper clippings to see what was happening locally in the moments before Proposition 13 passed, and to get a sense of its immediate aftermath.
Back then, deHaan’s story was not an uncommon one, according to several people interviewed by The Island.
Gretchen Lipow bought a “big, beautiful house in the Oakland hills” in 1973 for $39,500, she said. And she and her neighbors watched as their home values went up, up and up.
“We’d look at each other and go, ‘What’s your house worth today?’ And it was ridiculous,” the longtime Alameda teacher and union leader said.
Data from the California Association of Realtors show that median home prices nearly tripled in the decade before Proposition 13 passed. And with those increases came sharply higher property taxes that Lipow and others say drove many people out of their homes.
Homeowners here and across the state were angry about what they saw as out-of-control government taxation and spending, and they pressed state leaders to come up with a solution. But anti-tax activist and apartment owner lobbyist Howard Jarvis beat them to the punch, funneling all that anger into what would ultimately become a nationwide taxpayer revolt.
“The general consensus at the time was that state government was out of control with spending. This was a way to shut that down,” longtime resident and onetime City Council candidate Pat Bail said. “But it didn’t work.”
The local newspaper supported Proposition 13, as did then-Mayor C.J. “Chuck” Corica. But local seniors groups, public employee unions and other local leaders – along with some of the state’s biggest corporations – opposed it.
In a letter to the editor of the Alameda Times-Star, the head of the local police officers association said Proposition 13 would lead to “massive reductions in city operations and services” and a statewide rise in unemployment.
In a separate article, Hayward’s then-mayor, Ilene Weinreb, was quoted as saying that the measure would lead to increased income, business and sales taxes and expensive user fees for services.
In that same article, Kaiser Aluminum and Chemical president Cornell Maier spoke out against the measure.
“While the company would realize an immediate substantial saving in property taxes, the measure is not in the longer term best interests of either the company or the state,” Maier was quoted as saying. “Everyone stands to lose more than they would gain.”
But anger carried the day on June 6, 1978, and the measure passed with 63 percent of California’s voters – and a majority of Alameda County voters – casting a “yes” vote. The measure was to go into effect less than a month later, on July 1. And one then-member of the city’s management team said it heralded a sea change in the way cities did business.
“Before Proposition 13, if we were deficient in any of (our revenue sources), we could just raise the property tax (to pay for services),” said Rob Wonder, who at the time served as assistant to City Manager John Goss. “Now all of a sudden, we’re faced with, you can’t raise property taxes. And that’s amazing.”
The measure also rolled taxes back to their 1975-76 levels, a move the local papers reported would drop property taxes for both homeowners and commercial property owners by 60 percent, or about $7 billion statewide.
And Alameda, then as now, relied on property taxes more than neighboring cities with stronger business bases. Goss told the local Rotary that passage of the measure wiped out 30 percent of the city’s revenue.
City leaders said the reductions translated into a loss of $4.2 million from a $14.5 million budget, while the school district calculated that it could lose upwards of $5 million off a $21.3 million budget. And they scrambled to come up with ways to close the massive deficits.
Teachers were fighting a school district proposal to cut their salaries by 20 percent, while district leaders considered slashing the budget for adult school, eliminating daily school cleanings, increasing class sizes, closing and consolidating schools, eliminating sports and even requiring teachers to pay their own substitutes.
Meanwhile, city leaders reduced operating hours at the city’s libraries and its animal shelter, trimmed salaries for a handful of top managers, shut off a third of the city’s street lights and passed on health benefit price increases to all city employees. And they handed out layoff notices.
City leaders talked about closing Edison Park, which was then a public park (a pair of local families raised money to save it), and they eliminated and then restored crossing guards. They also briefly considered stationing firefighters in local parks to handle gardening chores.
But city staff were also assembling a long list of new and increased fees that included higher fees for library services, recreation programs and golf; a property transfer tax increase; a sewer connection fee; engineering, building and construction fees. They also considered a utility users tax and a new fee designed to recoup some of the property tax windfall that was coming to the Island’s two major shopping centers.
Some local residents were outraged, and they wrote letters to the newspaper demanding to know why city and school district leaders didn’t seem to be getting the message that they wanted the fat to be cut from government.
Corica pushed to cut management positions, and at one point he raised a series of unsuccessful votes on whether to lay off specific people. But the city employees’ contracts gave more senior workers “bumping” rights that pushed the layoffs to the city’s lowest level, front-line workers, including maintenance workers and library staff.
The state, which was sitting on a $5 billion surplus, started handing out money to local school districts and governments. But it wasn’t enough. On June 28, the council approved a budget that cut funding for both parks and libraries by a third. Police and fire saw much smaller cuts of about 4 percent, in part because the state funds were to be used to help maintain public safety services.
But less than a month later – and a week before dozens of layoffs were due – city leaders reshuffled their budget, adding $690,000 in city surplus and capital improvement funds to save jobs. Fewer than three dozen people, none of them full-time, permanent employees, lost their jobs. The final cut, made after nearly two dozen revisions, was about $1.1 million.
The school district, which faced a $1.4 million deficit of its own, eliminated nearly all of its capital improvement projects, cancelled summer school classes, cut its adult school budget and also funding for community access to school buildings.
Schools Superintendent Clarence Kline later complained to the local Rotary that the measure robbed locals of control over their purse strings and handed it over to the state. Before the measure passed, the district got about a third of its money from the state. But after it passed, that amount doubled. And the money came with strings attached.
Wonder, who left as Alameda’s longtime assistant city manager in 2003, said his feelings about the measure are mixed.
“I look back at that time and I see uncertainty, difficult choices and tremendous challenges as being what governed us for almost a whole year there,” he said. And he conceded that it sapped funding for things like road and tree maintenance and the city’s recreation offerings, which once included a legendary youth baseball program.
Still, Wonder said the effect of Proposition 13 was largely positive, because he feels it ushered in better management of taxpayer dollars.
“It said, ‘Guys, you’ve been too free with the money. Now you need to be more accountable for it.’ I think that’s what you really want in an enterprise, to be more accountable with the resources that you have,” he said.
DeHaan said Proposition 13 has caused some real problems. But he thinks that bad local decision-making is what lies at the heart of the city’s current financial ills.
” Is Proposition 13 the thing, the driving force that caused it all? No, I don’t think so,” deHaan said. “It could have been done better. But it’s not the complete cause of where we’re at.”