Measure D: Belvedere charter-and-tax measure would fund road upgrades
Updated: Sep 28, 2022
Belvedere is asking voters to approve a 0.8-percent real-estate transfer tax to help fund $20 million in seismic upgrades to Beach Road and San Rafael Avenue — the first phase of a planned seawall-and-infrastructure project city officials say is crucial to ensuring resident safety but critics say is being used to justify an unfair tax that skirts voter protections and would generate a blank check for City Hall.
Measure D, as it will appear on the Nov. 8 ballot, would also convert Belvedere to a charter city, a requirement for being able to levy the transfer tax, which would be applied on all real-estate sales in the city with limited exceptions.
The single two-part measure requires a simple majority to pass.
If approved, the tax would generate an estimated $1.6 million annually in general-fund revenue officials say would be used to pay off the debt from a bond issued for the seismic work — though as a general tax, it cannot legally be specified for any purpose, the reason why it only requires a simple majority.
Despite claims by the Coalition of Sensible Taxpayers of Marin repeated by other local news agencies, the tax would automatically sunset after 30 years and cannot become a “forever tax.” It could be ended sooner by voters with another ballot measure, whether initiated through a signature campaign or, as officials have pledged, by the City Council itself if the debt is repaid early.
The proposed charter is tailored to allow only the tax and would not broaden the city’s ability to gain and retain more local control; any further changes to the charter, or to revoke it entirely, would again require voter approval.
And, despite claims in joint advertisements by Belvedere City Council candidates Carolyn Lund and Richard Snyder, the charter does not — and cannot — end the two-thirds majority requirement for city-project taxes to make it easier to tax residents with a simple majority. Transfer taxes are already simple-majority general taxes under state law, and the charter allows the city to levy it. Special or school-district taxes, any tax levied on parcels of property and any tax dedicated to a specific purpose would still require two-thirds’ approval from voters.
For Belvedere voters, the question is whether they believe the project itself is necessary and, if so, whether the proposed charter-and-tax plan is the right way to fund it.
Project has evolved over years of analysis
Proponents say the project is necessary because Beach Road and San Rafael Avenue serve as the two main arteries in and out of the city but are 80 years old and have not been upgraded.
Mayor Sally Wilkinson — who signed the official argument in favor of the measure and who’s been working on the plan since her time on the Finance Committee — said the roads have sunk by 4 feet and noted the city has done two emergency repairs to sinkholes underneath Beach Road.
“They simply won’t last for much longer, and they need to be repaired,” she said, adding that the roads are also not seismically stable and are at risking of sliding during a moderate earthquake, which could in turn disable the utilities that sit underneath them.
In 2015, U.S. Geological Survey scientists updated statewide earthquake probabilities, stating there’s a 72-percent chance an earthquake with a magnitude of 6.7 or higher will strike the Bay Area before 2044.
“We can never predict when earthquakes will come, just like we can never predict when wildfires will come, but they happen and we need to prepare for those things,” Wilkinson said.
on the web: To review the city of Belvedere’s critical-infrastructure project page, including engineering reports, committee reports and project plans, visit cityofbelvedere.org/461.
Belvedere officials for years have stressed the urgency of fortifying the city’s seawalls along Beach Road and San Rafael Avenue to protect the two main roadways and vulnerable intersections in the event of a massive 100-year storm and future sea rise.
In 2019, the City Council approved a roadmap for a seawall and seismic-upgrade project that also would have included connecting existing flood barriers on West Shore Road and working with Tiburon for a new barrier on Main Street — a plan that later expanded to include multiuse paths, landscaping and parks to mask and improve new above-ground infrastructure.
The plans were controversial, with many residents of Belvedere Island arguing that flood-protection costs should be borne by the Belvedere Lagoon and West Shore Road residents most at risk.
More recently, city officials have said they believe the most-urgent need is to fortify the 80-year-old roads that house essential utilities — such as internet, water, power, sewage and gas lines — which in the event of an earthquake or flood could be rendered impassable for first responders and all residents, including those on Belvedere Island.
Responding to critics who note the utilities are the responsibility of the utility companies, Wilkinson noted it could take weeks or months to repair them locally if other Bay Area cities are also dealing with the fallout from a major quake — and that the health of the aging, sinking roads themselves are the responsibility of Belvedere.
The city mapped out a single $28-million roadway-and-seawall project and was considering asking voters to approve a 1-percent real-estate transfer tax to generate revenue to pay for it. However, in June, the council decided to split the project, dubbed the Protect Belvedere Project, into two phases, placing an immediate priority on the $20 million in seismic retrofits for the roads and delaying the flood fixes until later.
Under the new plan being put to voters, the first phase would see 40- to 50-foot steel sheet piles installed along most of Beach Road and sections of San Rafael Avenue to bolster old roads that city officials say have sunk at least 4 feet in the past 80 years. Engineering reports say they’re expected to sink at least another half a foot in the next 30 years.
A draft environmental impact report is due in October, with the final design expected in early 2023. Officials say there would be no visual impacts of the completed roadwork-only project.
The city has not discussed a timeline for starting the second phase of work to raise the seawalls, though City Manager Robert Zadnik has suggested a delay of no more than five years.
Officials have acknowledged splitting the project will likely drive up the total cost. The $20-million estimate for the seismic work includes a 30-percent contingency; the estimated $7 million-$8 million cost of the seawall fixes are likely to increase with delays, Zadnik has said, given rising construction costs over time.
In backing the bifurcation of the project, councilmembers cited feedback they’d collected from residents during small in-home discussions, noting residents said they felt more comfortable with a phased plan. As part of the phased approach, the city also decided to lower the proposed tax rate to 0.8 percent.
The city intends to take out a bond to pay for the seismic work and repay the debt over a maximum of 30 years — an estimated total of $40.5 million after 5.15-percent interest.
Under city projections, the 0.8-percent tax rate would generate about $1.6 million annually, which would raise about $48 million over the full 30 years if home values and sales remained flat.
Those revenue figures do not include the city consultant’s projection of an annual 4-percent increase in assessed property values, which was based on historical trends in Belvedere and required by the city to price out its other tax and bond options. If sales remained flat but values were to increase as projected, the tax would generate $89.7 million over 30 years, according to The Ark’s calculations. At that pace, the bond would be paid in just less than 18 years.
While Wilkinson has disputed the calculation, saying the city’s financial consultants assumed the assessed-value growth of 4 percent only as a necessary calculation, she has separately said she expects the tax to be paid off more quickly in part due to rising home values over time.
Faster repayment would require a commitment by future councils. Because the tax as proposed would only sunset automatically after 30 years, and because there’s no requirement the revenue is used toward the debt, any future council could choose to pay the minimum debt service and keep the additional revenue in the general fund for other uses. Or, if the project is paid off early, the city could keep collecting the entire tax for general use until the 30 years are up or voters end it with another ballot initiative.
Critics doubt accountability
The Protect Belvedere Project and the proposed tax measure have received considerable criticism from residents, primarily from the Accountable Belvedere group led by residents David Flaherty, Suzanne Du Molin and Gregory Wood.
An argument filed against the ballot measure and signed by the three, as well as Snyder and resident Fred Goldberg, states Measure D will diminish government accountability while unnecessarily and unfairly raising taxes and giving City Hall a “blank check.”
In an interview, Snyder pointed out because the real-estate transfer tax is a general tax, requiring just 50-percent approval, revenue must go into the general fund for general use and cannot be specified solely for the infrastructure project. Any promise made by this council — or on behalf of future councils — is nonbinding.
“(It’s) just to increase the coffers,” he said. “If it goes into the general fund, then funds can be spent in any way without any public control.”
He says that if he’s elected and the measure passes, he’ll work with the council to put a measure on the next general-election ballot for voters to rescind it.
Accountable Belvedere also says it estimates the tax is going to raise much more money than the city needs before it sunsets.
“What in the world are they going to use that extra money for? No one has told us,” Du Molin said.
Wilkinson, however, said the city doesn’t have any other pressing financial needs, noting it has been run historically with an “incredibly conservative fiscal methodology.”
She said the city has “very limited debt, we have very high reserves,” adding that the city is currently fully funded in its CalPERS pension obligations and has set money aide for additional pension obligations.
“We’re incredibly fiscally conservative, and so I’m just not sure the city would spend extra money, if it were to happen, other than to retire the debt more quickly,” Wilkinson said.
She said the city has established “aggressive oversight” for monitoring how the funds are used and that audits will be available on the city website. The city’s Finance Committee will provide additional oversight, she said.
Wilkinson also said she expects residents to provide oversight and hold future councils accountable.
“If at any point in time the city was spending excess money that had been collected on unnecessary things other than retiring this debt as quickly as possible, I imagine that would be public knowledge very quickly, and that’s what elections are for,” she said. “I do not believe that anybody running for City Council today and probably in the future would choose to spend money other than to retire debt as soon as possible.”
Former Belvedere Mayor Bob McCaskill, chair of the “Yes on D” campaign and a member of the city’s Finance Committee, said to get the financial community to loan the money to Belvedere for the project, the term of the loan had to be 30 years. The city also set the 0.8-percent tax rate based on that term.
“The City Council has made it very clear that their intent would be that as soon as the bonds are paid off that they would recommend to the voters to end the tax,” McCaskill said. “And the voters would have the right to do that at any point in time to stop the tax, and the voters have the right to vote in a new City Council.”
Opponents have also argued the city should focus on obtaining grant funding first and then revising the proposed tax rate and terms to match “what is truly needed for necessary projects, after exhausting available grants.”
Wilkinson noted the city has been actively pursuing grants for more than two years, but “the likelihood of Belvedere being able to secure grants as a road to nowhere is highly unlikely and even less likely when there’s no longer a flood-wall component” to the initial phase of the project.
McCaskill pointed out Marin County is generally thought to be one of the wealthiest counties in the U.S. and said the federal and state government are not particularly interested in public projects that solely benefit wealthy populations like Belvedere.
Group calls real-estate tax ‘unfair’
Accountable Belvedere has frequently criticized the city for proposing a general tax that requires just a simple majority to pass rather than proposing a tax with a higher two-thirds threshold, such as a flat parcel tax or a proportional ad valorem tax on assessed property values.
Du Molin and other opponents say the tax-and-charter proposal is a scheme to end-run the state Constitution, which Du Molin calls “the wrong way to govern.” State law provides taxpayer protections by requiring a supermajority of voters approve projects with specified purposes, which are legally binding and don’t allow governments to redirect the funds; such projects may be funded only with parcel or ad valorem taxes.
Opponents say the city’s promises to allocate the money only to the specified infrastructure project reflect intent that should be covered by the state Constitution, and therefore Belvedere should propose only a tax with those built-in protections — a two-thirds’ approval requirement and legally binding allocation for the revenue.
Under state law, a local government can’t impose its own transaction tax on real estate, though it can claim that taxing right as a municipal affair under a charter. Belvedere officials have acknowledged the simple-majority advantage of the tax and note the city would not be unique: Of more than 120 California cities and towns that have adopted charters, more than two dozen also have voter-approved transfer taxes, most of them in the Bay Area.
However, most also use the tax to bulk up their general funds and have considerably lower flat rates or progressive rates for brackets of sale prices.
Du Molin calls the proposed tax an “exit tax,” noting those who pay it are likely going to be leaving Belvedere and won’t benefit from the infrastructure project.
Others who sell their homes but stay in Belvedere may be seniors who need to live in a more age-friendly home, she said — and in those cases, seniors might be subject to the tax twice: once when they sell their home and potentially again if they remain in town and have to pay a buyer’s share on their new property.
Both Du Molin and Flaherty have their homes listed for sale — Flaherty for $50 million, Du Molin for $11.5 million, or $400,000 and $92,000 in potential transfer taxes, respectively.
Critics of Accountable Belvedere assert its leaders have the most to gain from Measure D’s defeat — that two people who don’t plan on remaining in the city are willing to sacrifice its safety because it would save them money when they depart.
While Du Molin acknowledged her own finances play a role in her opposition to the tax, she said she doesn’t believe her situation is unique. She noted the majority of Belvedere residents own their home, will sell at some point and will then have to pay a tax that won’t benefit them if they move out of the city, something she reiterated is “grossly unfair.”
She said she would support a parcel or ad valorem tax.
Other critics of the supporters and creators argue they back the tax because existing residents with the most to gain and deepest roots are unlikely to ever pay it themselves — especially if it’s paid off early — and are seeking to make those who are leaving and those who haven’t yet arrived pay to protect their own homes and home values. Wilkinson has young children in local schools, for instance, and may be unlikely to move before the tax is paid off, while other city officials and vocal backers are established longtime residents already in their retirement years, aging in place, and may pass their homes to family members — a major exemption in the tax proposal.
Wilkinson said the real-estate transfer tax was weighed against two other proposals and ultimately recommended as the best option by the city’s Finance Committee. That was in 2018, when Wilkinson, a former investment banker, sat on the committee and was credited with formulating the three tax options, delivering the recommendation herself to the City Council.
She said the committee asked several questions to determine which tax would be best: Is it fair? Is it consistent with the city’s disciplined approach to financial management? Does it solve the problem? Will it ensure there are sufficient funds to retire the debt?
The committee concluded a transfer tax was the fairest option.
At the time, she deemed it “an entry tax onto an island that is getting ahead of its … risk, and so your property values are protected because this is going to be an island that is still going to be livable.”
Officials have noted an ad valorem or parcel tax would be a lower amount — the flat parcel tax was estimated at $1,700 annually — but would have to be paid year after year and, ultimately, the total amount collected would be the same. The committee said collecting an annual tax would place a burden on senior citizens living on fixed income, and Wilkinson has noted Belvedere residents are currently facing another annual tax on the same ballot: Measure M, a $335-a-year parcel tax that will increase 2 percent a year, to nearly $600 by the time it expires, to save the 110-acre Martha Co. property on Tiburon Ridge as open space.
On the other hand, she says, a property-transfer tax can be negotiated between the seller and the buyer and only comes due once, at the time of a sale, when parties have the highest liquidity. Unlike parcel taxes, she said, it’s also tax deductible up to a third of the amount for the capital-gains tax.
Wilkinson said an ad valorem tax penalizes new residents with higher assessed values who are already paying much higher annual taxes than long-term owners.
Government entities would be exempt from the proposed transfer tax, which also includes exemptions for bequests or gifts of properties and transfers between spouses and domestic partners, among others.
Accountable Belvedere has accused the city of conducting a “bait and switch” in splitting the previously proposed project into two separate phases, questioning whether the city really needs $20 million to fortify the roads and expressing concern about switching to a charter city.
Wilkinson said she recognizes the city’s shifting messaging on the project over the years may have created some unease among voters but said that’s the natural evolution of policy. When the city receives new information, she said, they have to listen and make changes accordingly.
“I think we did exactly what we’re meant to do, which is take the information that we had and develop policy organically and iterate policy according to the information that we had,” she said. “If anything, I think the thing that we have fallen short at is not that we have evolved the policy, it’s that we didn’t do a better job of bringing the community along with that information.”
McCaskill pointed out that several iterations of the City Council have reviewed and discussed the project, which has garnered the support of 17 former mayors.
Wilkinson said if residents don’t vote to approve the tax, they’ll essentially be conceding they’re OK with living with the risk posed by the aging infrastructure.
“Of the tax options described, this seems the fairest and most efficient for residents,” she said. “I understand that there are opponents of this tax, (but) there would be as many, if not more opponents to a parcel tax or ad valorem tax.”
Reach Belvedere and public-safety reporter Katherine Martine at 415-944-4627.