Ballot recommendations, Nov. 2018: Oakland and area

Thank you for continuing to read my ballot writeups. See my statewide recommendations for Props 1-12 in my previous post here.

My measure discussions for Oakland can be briefer, because a guiding principle unifies most of them. As I introduced my last post:

I think most of my readers would now accept that we are in the long-term grip of a loose cabal of plutocrats who care about nothing but their own power and wealth, and have let everything else go to pot. So I will take it as my starting point that more public spending on these key priorities is a good thing and does not need an elaborate fact-based defense. 

We have many opportunities on the Oakland ballot to support, defend, and enhance the public sphere. Sometimes this is via collecting tax revenues progressively – targeting where the most wealth is. But there are also proposed taxes that are not as progressive, and that is not an inherently bad thing. Some taxes will always have to hit the whole economy; a revenue system that collects only from the wealthy is not sustainable. Parcel taxes in particular, set amounts per parcel of land, are not highly targeted to wealth, but are one of the few collection mechanisms state law allows to local measures; and by falling more on property owners than on renters, it is wrong to call them flat or regressive.

Don’t think of these local issues as ultimately distinct from national. A vote for properly funding public services is a vote for the solidarity and opportunity that constitutes a true alternative to the horrors in DC.

Quick-reference chart (local, state measures here):

Jurisdiction
Measure
Topic
Recommendation
Oakland
V
Cannabis tax (reduction)
Yes
Oakland
W
Vacancy tax
Yes
Oakland
X
Real estate transfer tax
Yes
Oakland
Y
Eviction by just cause for duplexes / triplexes
Yes
Oakland
Z
“Time’s Up” hotel labor standards and protections
Yes
Oakland
AA
Early education and college preparation parcel tax
Yes
East Bay Reg. Parks District
FF
Parks parcel tax renewal
Yes
Peralta Comm. College District
E
Community college parcel tax renewal
Yes
Peralta Comm. College District
G
Community college bond measure
Yes

Measure V: Cannabis taxes: Yes

This measure would reduce local taxes on licensed Oakland cannabis (marijuana) sellers – both medical and recreational – and raise the prospect of more reductions in the future.

Right now the city taxes medical cannabis business at 5% of gross receipts – that’s however much money comes through the door, not looking at expenses or profits – and recreational cannabis at 10%. These taxes were both passed as city ballot measures, long before 2016’s legalization. (The recreational tax passed in 2010, the year a statewide legalization measure failed.)

We’ve now had legal recreational sales since January, and retailers are increasing sharply in number. Oakland has developed an equity program to allow half of licenses to go to people from certain marginalized or criminalized backgrounds – a laudable effort to prevent new wealth from accumulating mostly in white hands, which would be the predictable result of “neutral” administration. But the city has never exactly been a well-oiled machine, and the licensing process drags on, even as the equity licensees suffer from a lack of startup capital. Reportedly, new market entrants wonder why they should wait when the taxes, all together, will be around the highest in the region. There is concern that the entire city could see business pullout.

That sounds like corporate propaganda, but the taxes really are quite high when you consider the multiple taxes we added statewide in 2016. Prop 64 (legalization) added $9.25 per ounce at the cultivation level, and 15% of the retail price, not counting sales tax which is also due for anyone without a medical card. 5% or 10% of gross receipts at the city level made sense in the old days when Oakland was one of the only cities sticking its neck out to license dispensaries. Then, high taxes were a tradeoff a few businesses could accept to live in this small space of semi-legality. Now, they are probably excessive.

So Measure V would:

  • Allow the city tax to be assessed as a percent of gross receipts net of raw material costs, a significant effective cut
  • Allow the Council, at its discretion, to lower, but not raise, the 10% recreational tax (it can already do this for the 5% medical)

We should hope for a regularized cannabis industry that takes over from the illegal trade, ensures product testing and environmental safety, and channels taxes to public services and community reinvestments as Prop 64 directs. A healthy industry is also necessary for the equity program to work. Measure V enables this.

The defect of Measure V is that it seems to have been written such that the Council can lower taxes at its discretion, but not raise them again – it builds in a ratchet effect. It didn’t have to do this. Emeryville has a similar measure this year, which specifies that its Council may raise or lower taxes as long as they remain below 6%. And we may need to raise taxes later! The experience of other legalization states is that as the market gets crowded, competition craters the retail price, and we will start to worry whether taxes are too low. So Measure V may necessitate another public vote in the future. But that is some years in the future, and our situation will be unpredictably different then, so a Yes vote will keep moving us in the right direction for now.

Measure W: Vacancy tax: Yes

This measure would impose a uniform tax on properties in Oakland that are being deliberately kept vacant. Specifically, this would be $6,000 per year for most parcels, or $3,000 for single units within larger structures.

Oakland has long griped at the large tracts of visibly unused space: we need housing, businesses, community space, and it does nobody any good for buildings that could go to use to stay vacant. But it does happen, evidently because many owners are happier to wait for a huge payday from an ideal and nonexistent tenant than to accommodate the applicants that exist. (Prop 13 tax caps on commercial property also blunt the incentive to put space to use.)

The city estimates, plausibly, that thousands of spaces are vacant, and this tax could raise up to $10 million annually. This revenue would be earmarked for homelessness, dumping cleanup, blighted property cleanup, and affordable housing. But it could be that most affected owners choose to put their properties to some use to avoid the tax, and that would be a perfectly acceptable outcome too.

Measure W has all the right exemptions to keep it from applying unjustly: it does not hit nonprofits, people with very low incomes*, senior or disabled people with merely low incomes**, or properties under construction or awaiting approvals or permits. It lets the City Council further define hardship exemptions or other necessary exemptions that the text did not identify. It also defines “vacant” as used for less than 50 days during the year, so intermittent or seasonal use would be allowed.

SPUR, an urban improvement policy shop I have a lot of respect for, after praising the vacancy tax concept, ruefully recommended a no vote, saying the “vague language would make it very difficult for staff to implement the tax fairly”. But I don’t see how the measure could or should have specified every contingency: the Council will put meat on the bones over time, indeed, is instructed to. City staff will not be on their own. As SPUR notes, many cities around the world like Seoul, Vancouver, and Hong Kong use vacancy tax as a component of urban policy. If we think it’s a good idea in principle, we ought to give it a fair try in practice, and these warts they’ve seized on are minor and inevitable.

* Very Low Income levels for this area from HUD: $40,700/year for a single person on their own; $58,100 for a 4-person household.
** Low Income levels (seniors): $62,750 for one person; $89,600 for four people.
*** Disabled defined as on SSI or SSDI – with income under 250% of federal poverty level, so $30,350 for one person, $62,750 for four people.

Measure X: Progressive real estate transfer tax: Yes

Right now the city imposes a 1.5% tax on value when a property is sold. This Measure X would change that rate from its current single bracket to four brackets: 1% for the lowest-value properties, up to 2.5% for the highest-value (more than $5 million). It also reduces the rate by half a percent for first-time buyers with low or moderate incomes – in the HUD definition, that’s up to $104,400 for a family of four, $73,100 for a singleton.

That’s really all there is to it; there are no pitfalls or defects. The money would not be earmarked for any purpose, allocation up to the Council, making it a welcome respite from ballot-box budgeting. Nonprofits developing affordable housing are exempt. The money will dry up in property slumps, but that’s normal and we can prepare for it. Collect more from those benefiting the most from our unequal society. Go team!

Measure Y: Just cause eviction for more units: Yes

In 2002 Oakland required evictions be for just cause only – not at the landlord’s whim or desire for a richer tenant – for most buildings built prior to 1980. In 2016 we expanded this law, pushing the cutoff date to 1995. However, in both cases we exempted buildings of fewer than four units where the owner was the resident in one of the units – that is, duplexes and triplexes. Measure Y would bring duplex/triplex renters under the same protections given to most other renters.

We have the potential to build more housing in Oakland to accommodate everybody, but even if we do that, communities and longtime residents will still be displaced like crazy unless we put in measures that combat displacement directly. Converting housing into duplexes and triplexes also should be a tool in our belt to increase capacity (the missing middle), so such units shouldn’t be a permanent exception to our principles.

The main sympathetic arguments from duplex and triplex owners are that some seniors on fixed incomes may have trouble navigating the eviction process with the Rent Board; and some want to move their relatives in with them as they age. But we should not make policy based on exceptions. Rent Board proceedings should be transparent and navigable, for the sake of both owners and tenants, and there could even be cases where landlords deserve legal aid in the process. Owners wanting to move in relatives are going to be a small chunk, and will also be relatively well-off given the simple fact that they own property here.

Under current law, as I read it, an owner of multiple buildings could move into a different one of their buildings every year and use that as the excuse to evict everyone there. Expanding just-cause eviction is part of the project of making fair treatment of renters a baseline condition of how the market works. (Or putting it in economical language, evictions have huge externalities.)

Measure Y would also give the Council more power to increase just-cause protections over time – for example, making the protections apply on a rolling basis as each building turns 10 or 20 years old, rather than the fixed date of 1995. So that will likely reduce the need for future measures on this topic – strike a blow for shorter future ballots!

Measure Z: “Time’s Up” labor protections and standards, hotel focus: Yes

With Weinstein and the MeToo movement started last year, many progressive women of color tried to keep in the picture that the vast majority of work-related exploitation was against non-celebrity women in low-wage jobs. Measure Z would take strong action protecting women and men in one of the most notoriously unprotected jobs – hotel work.

Measure Z applies to hotels of 50+ beds and requires:

  • $15 minimum wage, or $20 without benefits (the current minimum wage for all Oaklanders is $13.23)
  • 10-hour maximum workday – employers may not mandate any hours over that threshold, although employees may consent with notice and non-retaliation
  • Workload limitations for cleaning staff: no more than 500 square feet per hour, or double pay on days this is exceeded
  • Firing only for just cause
  • Panic buttons for all staff working in hotel rooms, and no retaliation to staff for using them, or for leaving an area with a threatening guest
  • Strict recordkeeping requirements to enforce all this

Measure Z also makes a change for all employees, not just hotel workers: creating a new city department to enforce these and other standards that the city has passed into law over time, such as minimum wage and sick leave. It does not prescribe the level of enforcement, but if it did it would be ineffective.

So, better wages, better conditions, and new protections targeted to the specific situations that leave people victims. Yes, yes, and yes.

Measure AA: Early education and college preparation parcel tax: Yes

In June, there was a countywide Measure A that would have raised the sales tax to vastly increase the provision of childcare and early education. Unfortunately, while it got strong support of 66.2%, it needed 66.7% to pass under the state constitution. Measure AA helps fill the gap for Oakland only.

Most of the same arguments I made in favor of Measure A at the time also apply to Measure AA, except that it focus on early childhood education like preschool (62% of the revenue) as well as funding an existing city program supporting college attainment, the Oakland Promise Fund, rather than childcare.

On the early childhood education side, where it spends $20 million annually, AA’s labor protections are stronger than A’s were – it imposes a minimum wage of $15 for employees, union neutrality from employers, and other protections.

The Oakland Promise Fund seems like a good effort worth continuing, although the causes should already have been the norm. One noteworthy component is the “brilliant baby College Savings Account”, starting disadvantaged kids off with a $500 savings fund; another is in-school financial aid assistance centers; and of course, a portion goes to plain-vanilla full scholarships. The Fund has a good deal of philanthropic support ($32m to date according to its latest report), but the tax infusion of about $10 million a year would put it on a more solid footing. Some of its elements read as vague, conducive to cushy nonprofit contracts (one goal “instilling a college-bound identity in students”), but most is solid enough.

The tax level of Measure AA is $198 per year per single-family home; $135 per units in buildings. This is comparable to what Measure A would have cost, but is more progressive since it is not a sales tax.

Measure FF: East Bay Regional Parks District parcel tax renewal: Yes

$12 per parcel per year ($8.28/unit for units in buildings); supports the whole East Bay Regional Parks District; a renewal of a tax that already exists and would otherwise expire. Doesn’t just support the continued existence of parks, also helps them fund wildfire prevention by clearing invasive and otherwise unsafe vegetation. This, too, is a no-brainer.

There are now signs popping up around town reading “Stop Pesticides – Save Trees – No on FF”. This is a group of strong-hearted souls who oppose the eradication of eucalyptus. Don’t be fooled: longstanding environmental groups that accept ecological science, like the Sierra Club, the Save Our Redwoods League, and the Audubon Society all support FF.

Measure E: Peralta Community College District parcel tax renewal: Yes

Measure E seems like an easy yes – keep funding the East Bay’s community colleges by renewing a $48/parcel tax that already exists – but the issues its opponents raise are important, if tedious and difficult to get to the truth of.

The former chair of the citizen’s oversight committee that monitors Peralta’s existing parcel tax package has pled for voters to reject E, on grounds that the administration has not used the money as advertised. They charge the district upped spending on administrators and consultants, and did not make use of the new $8m/year to increase instruction capacity. The rebuttal is correct that the prescribed audit found the funds were spent legally; but it is also true the audit was limited and might not tell the whole story.

I took a quick look over the district’s financial reports for the past several years and found evidence pointing in different directions.

Consistent with the “misuse” story:

  • The audit acknowledged that in 2015 and 2016, the majority of the special tax revenue went to non-academic salaries and benefits – although this is legal since the measure was supposed to help “protect and maintain core academic programs”.
  • Outside the special tax revenue, in 2014, the district’s financials added a new expense category “planning, policymaking, and coordination”, which could accommodate a lot of consulting and central administrative positions: $8m in 2014, $14m in 2017.
  • Even as district revenues rose sharply with the economy, it ran major deficits in 2015 and 2016; it recovered in 2017, but is back in the red this year.
  • The district’s performance audits over the years point to poor internal controls: account balances not being cleared, trust funds not being reconciled, capital expenses not being tracked. In 2016, the district’s response was to point to a restructuring of the financial office; in 2017, many of the auditor’s notes were repeated. It does not seem the house is in order.
  • This summer, Moody’s downgraded the district’s debt rating, citing management and accounting problems.
  • The number of administrative staff has risen in the years since the special tax passed, from 51 in 2012 to 74 in 2017.

Not consistent with that story:

  • The percentage of overall expenses going to instructional salaries (not including benefits) has increased over that time, from 55% in 2012 to 59% now; an $11 million increase.
  • While administrative staff has risen since 2012, academic staff has risen more: 77 more tenure or tenure-track faculty, 87 more temporary faculty (but note this is not necessarily full-time employees).
  • While significant, the special tax revenues are less than 3% of overall revenues, so administrators have little incentive to finagle how to best use it to their desires. 
  • The shortcomings in internal controls and management could well be a reasonable justification for spending more money than before on administration and consultants – a healthy school needs a healthy central office that can properly support the faculty.

The other story I can construct from the above that fits the facts about as well is: while Peralta administration has its share of problems, the critics are fierce proponents of more academic hiring (Mills either is or was the faculty union president) and are not sympathetic to any moderation of this effort. They may also not like to acknowledge the constraints created by rising salary and benefits costs.

There is always an impulse to ramp up spending in boom times, in ways that might not be sustainable in a recession, and administrators can fall victim to that impulse (the “featherbedding and consultants” story) or alternatively, they can encounter pushback for resisting that impulse (the “demanding faculty union” story). In the end, what we can be pretty sure of is that if a recession comes soon, removing the special tax revenue would be a body blow to a district facing many other challenges.

In the absence of an inside look at which story we’re really in, I recommend a yes vote out of a desire to keep from defunding our community colleges. But I would understand if someone reads these same observations and votes no. (It is true that there are two years before expiration in which time they could recraft the renewal to satisfy critics.)

Measure G: Peralta Community College District bond measure: Yes

This is a new bond measure that would allow Peralta CCD to spend another $800 million on infrastructure. It would come out of property taxes – $24.50 per year per $100,000 of assessed valuation, so a home assessed at $500,000 for tax purposes would have an extra bill of $122.50 for 40 years. It would pay for more classrooms, IT upgrades, building repairs and upgrades, acquiring new property, etc.

Measure G has no opposing ballot argument, so it has the tacit approval of the critics of the Measure E parcel tax renewal. This is probably because it does have the tighter kind of oversight they are looking for – an exclusive list of the exact items it will fund, a requirement to have a master plan of facilities needs, and annual independent financial audits of the money’s use. Measure G, unlike E, is an easy yes.

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