Measure H – Real Estate Rip Off

By Dante DeAmicis

We want it and we want it real bad.  How do we get it?  Either we pay for it or someone else pays for it.  Nice paved roads in Clearlake – we want them.  Who should pay for them?  Who used to pay for them?

At one time all someone had to do to call themselves a developer was draw a bunch of squares on a plot map and sell them off like numbers in a football pool.  There was no legal requirement to put in any property improvements such as roads.

Some lot buyers were just speculating themselves.  Others were shocked to find out how much basic improvements would cost, even if they could get enough of the neighbors together to form assessment districts or associations.  The result was many attempts to live in desirable places under undesirable conditions.  Another result was the passage of the State Map Act where developers would be required to submit subdivision maps to the State for approval with a plan on how to provide short list of property improvements.  You could say its caveat emptor as far as individual buyers were concerned but these land scams were blighting whole regions.

Fast forward to 1981.  Clearlake incorporates.  As part of the incorporation process the new city will get to decide which roads that people are using will be designated official Clearlake “streets”, with the obligation for future City maintenance.  The people on dirt roads will still have to form assessment districts to get their roads paved.  The people on badly paved roads, unchosen by the City, would also have to form assessment districts. If there were any new developments greater than 4 parcels those property related improvements would be put in by the developer.

The situation in this long inhabited, new city that was never a town, is as follows:  Four or five road assessment districts have been formed.  There is one state freeway, one old state highway, and a half dozen paved arteries from the time the County ran things.  State listed arteries have received recent cash infusions but this bond and stimulus money can only be used on those arteries.  People who want the roads to their homes paved will still have to pay for their roads or be put a a waiting list if they are on the City’s short list of responsibilities.

This is the way roads should be paid for, if they are to be paid for:  The roads that connect all parts of a government jurisdiction are called “arteries.”  These benefit everyone in the City whether they go by a particular person’s property or not.  Emergency personnel and HazMaz deliveries need functional roads or all could suffer.  State and Federal governments realize this which is why these major roads are partly funded from outside the City.  This outside funding is also the reason why these few roads are not in too bad of shape.

Residential roads, including their “connectors” to the arteries, primarily benefit the property owners that they access.  If paved roads make property more valuable then it is the property owner who will primarily benefit.  These property owners and renters could have formed or continued assessment districts to pave their roads anytime they wanted. They chose not to.  They had more important things to do with their money.

Of course, everyone who drives a car will benefit to some extent but not nearly as much as with the arteries.  People who do not drive will not benefit at all outside of the arteries.  These people and most renters will be net losers.  After all, if paved residential streets cause property values to go up then landowners should be able to charge more rent.  Why should renters subsidize their own higher rents?  It is unlikely that landlords will share their capital gains with them.

But the free lunch advocates irrationally cling to their feeble argument that any possible benefit justifies a net upward transfer of wealth.  Their reasoning is irrational, because if one were to ask these same deep thinkers if they derived any possible benefit from a service would it justify a transfer in the other direction, the response would be confusion and silence.

With such a clear value in having your road paved and such a high current cost in having it done, there is an incentive to try and get someone else to pay most of the cost.  This would have to be people who can be fooled into thinking they will be getting something they are not.  This is easiest to do with a sales tax.  Sales taxes are easy to collect so they are hard to resist.

Get it?  Sales taxes are easy and assessment districts are hard.  So why don’t the pavement prophets advocate that taxes be expanded to include those who would gain the most from better roads?  Where are the demands to make real estate interests pay their fair share with a local real estate capital gains or real estate sales tax.  No advocate of the last several attempts to impost a new sales tax have proposed any of these measures.

The best sales tax proponents can do is point to the partial exclusion of food from the tax . The reason that this is a partial exclusion is because of all the food that is not excluded.  As much as 20 percent of the average American’s calories are carbonated beverages, which are taxable. One can argue that they shouldn’t be but it is not reasonable to expect people to alter eating patterns to make a sales tax exclusion appear more significant. Also, many people rent rooms and substandard housing without cooking facilities.  They make do with a lot of “value menu” and promotional item eating at fast food joints.  This is also taxable.

Personal care and household products clearly affect health and quality of life almost as much as food.  I doubt any proponent of sales tax real estate subsidies has ever suggested that additional escrow fees for roads might be more appropriate than taxing bars of soap for the same purpose.

Looking on down the road, it is not hard to see how increasing the desperation factor for the powerless increases other costs for everyone. These are our residents who have taken post real-estate-bubble hits in their SSI and other government program assistance.  Even people with low paying jobs have seen ceilings put in right above their entry level pay rate. Compromising these people further will add to the health and law enforcement costs for the whole community.

Probably the largest group of deluded residents are people who live in “The Avenues.”  Except for roads to the dump, the hospital, and three roads from an expired assessment district all roads here are dirt. Amazingly some of these residents think they will get a little something from a 1 percent sales tax.  They have not read the measure.  It is for maintenance and repair of existing roads, not for building new roads.  For purposes of this measure, a dirt road is not any type of road at all.  In ten years of paying they will get nothing except for the laughter of real estate flippers in the better parts of town.

This additional 1 percent local sales tax would be in addition to the one-half percent City tax we already have and the new one-quarter cent State tax (which I voted for).  No civic leader ever proposes that we tax those who passively benefit from what others pay.  This is because real estate interests have the organized resources to credibly threaten lawsuits against any entity who suggest that they pay their fair share.  No, let’s squeeze more from those with little who are getting less.

Other taxes for roads are a possibility as well.  Anyone who has looked over property tax bills knows many types of property related taxes are possible even outside the structure of assessment districts.  These taxes, which could be designated for roads, can be charged per lot or “ad valorum”, based on value.  Without using assessment districts these property tax funds could be spent on roads “in general.”

Since only people more concerned with real estate values than roads are pushing this sales tax we have to ask, are there any specific groups within this broad category that are paying even less than average for what is already a subsidy from residents least able to pay?  In fact there is.  These are people we rarely see in Lake County because they are either part time residents or property owners who are not residents at all.

The last real estate bubble in Clearlake included people who were priced out of the housing market in Napa and Santa Rosa.  Clearlake had hundreds of pre Map Act lots that lured “spec builders” here to serve this market by building oversized cracker boxes.  These quasi residents still work over the hill.  Their friends are over the hill.  They recreate and shop over the hill.  In all ways except age they are over the hill residents where most of their functional life still is.  They contribute little to the life or sales taxes of Clearlake.  However, that will not prevent them from profiting on better roads our renters pay for.

Local sales taxes seem to hold absentee land owners in highest esteem. Most of those lots not snapped up by spec builders are still owned by people who have not set foot on them in decades, nor do they intend to. Vacant lots are just poker chips to them.  Paved roads will improve their position at the casino.  Many in Clearlake will struggle to stake them at the table.  Anyone with a shred of decency or common sense should be able to see that properties without residents are the roadway free riders, not our residents without property.

Bottom line is there’s a certain class of people who posture themselves as “our leaders” who believe they are too good to pay what are essentially their bills.  There is nothing wrong with asking people to pay for their roads. They could have done it anytime.  They could do it now if they really wanted to.

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