Tax swap bill could aid Costa Mesa

Deirdre Newman

Residents concerned about a lack of housing claim that a proposed

bill to replace a portion of cities’ sales tax with property tax is

too late to revert what they consider a downward slide in the city’s

quality of life.

Assemblyman John Campbell has coauthored a bill that would swap

out half the amount of sales tax revenue cities generate for an equal

amount of property tax revenue. The goal is to spur cities to resist

the siren song of sales tax from commercial development and build

more housing instead.

While some residents, especially those who opposed the Home Ranch

development, say the concept is a good one, they fear it won’t help

Costa Mesa, which is almost built out.

“I think it would have been nice if something like this had

occurred earlier,” former mayor Sandra Genis said. “It may save some

of the cities in the Inland Empire from committing the mistakes made

in Orange County. We’re starting to have retrofitting and

redevelopment of some areas, but Orange County has made major

commitments in some areas that are not necessarily wise.”

CITY MADE MISTAKES, RESIDENTS SAY

About 46% of the city’s general fund is derived from sales tax

while only 18% comes from property tax.

That simple statistic is what’s wrong with Costa Mesa, said Robin

Leffler, one of the staunchest opponents of Home Ranch, which will

transform about 93 acres of the Segerstrom family’s lima bean field

into a mix of development, including a 17-acre Ikea; 791,050 square

feet of office space; 252,648 square feet of industrial use and 192

homes.

“Costa Mesa has made a big mistake to go for the sales tax, not

just because of our housing imbalance, but because of what it does to

the quality of life around here,” Leffler said. “Costa Mesa’s been

oriented toward a pleasant residential neighborhood, now it’s

sublimating it to the commercial interests and that doesn’t make for

a good residential community.”

During the Home Ranch approval process, opponents involved with

Costa Mesa Citizens for Responsible Growth said the project should

include a lot more housing instead of Ikea.

“The proportion of residential is shrinking while business and

commercial use are growing exponentially,” Leffler said in October

2001.

If Campbell’s bill does become law, Genis said she hopes it would

not only increase the amount of housing, but make it more affordable

as well.

“Based on supply and demand, it should result in at least less

expensive housing, but when you have a lot of retail jobs and when

people say they are going to build offices and these are good quality

jobs, for every executive, there is somebody who will be sweeping the

floor at night and answering phones on a fairly modest salary, [so]

it really creates a demand for low-cost housing,” Genis said.

CITY PROGRESSING ON HOUSING ISSUE

According to the annual review of the 2000 general plan, the city

is making progress on meeting its share of regional housing needs.

Between 1998 and 2002, the city approved 455 residential units and

granted final permits for the construction of 210 units. It also

approved the building of six units by Habitat for Humanity for

“very-low income” households.

City leaders say Campbell’s bill will not make a huge dent in

Costa Mesa because the city is already so built out.

“Where are you going to build housing?” said Planning Commission

Chairwoman Katrina Foley. “We don’t have a lot of land left and what

type of housing?”

When the Planning Commission approved a condominium project at

1901 Newport Blvd. last month, there was an outcry that the design

was too dense for the area.

BILL WOULD NOT HAVE CHANGED PROJECT

City Manager Allan Roeder said he didn’t think Home Ranch would

have necessarily turned out any differently if Campbell’s bill were

already law because he believes land-use decisions are not based

strictly on how much income they will generate. For example, although

there was a lot of discussion about putting homes on the parcel next

to the Los Angeles Times bureau on Sunflower Avenue, they were

ultimately scrapped because of environmental concerns, Roeder said.

And if more housing and less commercial development had been

included in Home Ranch, it would have cost the city, he explained.

That’s because the cost of serving residential development is

higher than serving commercial or industrial projects because of all

the services that go with it, like parks and recreation and fire and

police services, Roeder said.

BILL CAN HELP COSTA MESA

But Roeder is a fan of Campbell’s plan.

He likes the bill because it levels the playing field to give

cities more incentive to build housing and because it will hopefully

broaden Costa Mesa’s financial base, since it relies so much on sales

tax now.

“One of the things I annually bring up with the council is the

reliance the city places on sales tax dollars,” Roeder said. “It is

the leading source of our revenue and, accordingly, we are very much

subject to the ups and downs of retail sales ... A bill such as this

could broaden that base and lend us more long-term financial

stability.”

Roeder said he has talked to Campbell and that the assemblyman is

amenable to refining some of the details of the bill. While Roeder

admitted he and other city officials from around the state are

suspicious about the legislature’s motives for the revenue swap, he

is glad someone is tackling the severe dearth of housing.

“Because housing is a real crisis statewide, it really is,” Roeder

said. “In my own personal opinion, had we not had the energy shortage

of 2000-01 and now the state budget crisis and general economic

decline, housing would be an issue of the order of magnitude of

either one of those.”

NEWPORT NEARS BUILD OUT

Newport Beach officials share the same concern that Campbell’s

bill doesn’t do a lot of good for a city that is so built out.

“There’s very little land to provide any housing on and, secondly,

we just got our senior housing project,” said Councilman John

Heffernan. “I think we worked on that for 20 years to find a piece

[of land].”

Heffernan also said the state should not mess with property tax

revenue until a property tax lawsuit that is currently in the court

system is resolved. The lawsuit could require cities to refund

millions of dollars in property taxes to homeowners. The case is

based on “recapturing,” or the raising of property assessment above

the 2% limit required by Proposition 13. Orange County Superior Court

Judge John Watson declared recapturing unconstitutional in December.

Heffernan said Newport Beach would have to give back $5.5 million

the first year and then take a hit of $3 million annually if the

class-action lawsuit is successful.

“I wouldn’t be touching any taxes until that case gets decided,”

Heffernan said.

CAMPBELL’S TAKE

Campbell said, for built out cities like Costa Mesa and Newport

Beach, the bill would only be effective in areas being rebuilt or

redeveloped.

“If you take Costa Mesa, they’re not going to build another South

Coast Plaza or another Auto Row, so they really don’t have a way to

increase their sales tax substantially,” Campbell said. “But if

property values in the city improve ... then they can get some more

revenue from [property tax].”

The assemblyman tried to assuage skepticism that cities wouldn’t

get the property tax the bill guarantees by saying the state could

just take the sales tax away and not give anything back.

Campbell said the main concern he has heard from city leaders has

been a request to make the revenue swap a constitutional amendment to

provide more security. He said he would be open to discussing the

idea.

* DEIRDRE NEWMAN covers Costa Mesa and may be reached at (949)

574-4221 or by e-mail at [email protected].