Jennifer Bestor doesn't sound like a radical, but she has methodically peeled back a veil that clouds the inequity caused by the way California taxes commercial property.
She is a stay-at-home mom in Menlo Park who just happens to have 20 years' experience in business and finance. She's also ticked off, but in a very nice way.
Bestor, who traces her Republican roots to an ancestor who served in the Illinois legislature with Abraham Lincoln, was drawn to look at how commercial property is assessed when her local school district came upon hard financial times. She examined the tax rolls for 352 commercial properties and found enormous unfairness. "Once you start digging," she said, "it's really hard to stop."
Bestor found a Trader Joes in Menlo Park that occupied an entire city block whose landlord pays a measly $7,400 in taxes. A competing grocery chain in the same commercial zone paid $66,000. She has scores of other examples.
The problem with commercial property taxation has been known for decades. In Los Angeles County, the share of the property tax borne by residential owners has increased from 53% to 69% since 1975. The share borne by businesses has gone down from 47% to 31%. But dry statistics like these don't motivate and outrage like the knowledge that the big business down the street may be paying little more than a homeowner, or that there are huge inequities when the tax burden of one business is compared with another.
We all know that there are inequities in residential property, too. My house, purchased in 1976 is assessed at far less than my friend's, who bought last year. But the inequities in commercial properties are larger, and they are subject to more financial manipulation. If a residential property sells, it is reassessed. But a commercial property might not be reassessed even if the owners change.
For example, the wine giant Gallo bought out another winery in 2001, but because none of the sellers owned more than 50 percent of the property, it was held that no reassessment was required. Similarly, when the J. P. Morgan banking house bought Washington Mutual, no property was revalued.
After a Bay Area newspaper reported her findings, Jennifer Bestor dropped a note to Warren Buffett, the influential investor who famously advised Gov. Arnold Schwarzenegger in the 2003 gubernatorial campaign that the tax system was goofy. The taxes on his $500,000 house in Omaha were more than six times that of his $4,000,000 property in Laguna Beach. And there were huge inequities between two California houses he owned. The governor, told him never to mention the subject again or he would be ordered to do 500 sit-ups.
Buffet wrote back to Bestor saying that he had just turned 80, was in no shape to do sit-ups, and that he hoped if Bestor got him in trouble that she'd do half of them. Bestor has started recruiting friends from around the state who might be willing to do a couple sit-ups for Warren if he'll come out and play.
What would cause a Republican from an upper income community--where the citizens had passed a parcel tax and where the local education foundation raised more than $1,000 a student last year--to poke a sharp stick at the one of the GOP's sacred cows? "I'm a Lincoln Republican," she said, "public education is not just for other people. It's crucial for a functioning democracy."
"Menlo Park can't solve this problem, it has to be solved statewide," she added.
She disclaims radicalism and has a very modest proposal: that commercial property should be reassessed every 20 years. "Where else in business can you lock in your prices for 20 years," she said. Bestor makes clear that she is not trying to overturn the entitlement of Proposition 13 that keeps assessments on residential real estate from ramping out of control in times of rapid inflation. In fact, she doesn't even want to tamper with home valuation at all. She just wants to shine some light in the dark corners of commercial real estate and to ask the question: "Is this fair?"
For a self-proclaimed non-political person, she's received a lot attention over the last few weeks. Last weekend veteran reporter Dan Weintraub wrote about her efforts in the New York Times, and the phone has been ringing off the hook since. Parents in other school districts are starting to ask similar questions. "It's not a movement yet; just a sense of disquiet."
One would think that there might be lots of parents willing to follow in her footsteps. And teachers, too: some of them will lack employment this fall. They're smart people, know how to read public records, and how to work a spreadsheet. Righteous indignation might spread.
Next week, Angelenos will decide whether to enact a five-year parcel tax--$8.33 a month for each piece of real estate, less than a cup of coffee a week--to help close the school district deficit and save hundreds of teacher jobs. That's a good deal. As L.A. Times columnist Steve Lopez notes, none of the members of the paper's editorial board, which opposed the measure, have kids in an L. A. public school. But a parcel tax is at best a bandage that will help schools through a very rough financial patch.
But Jennifer Bestor has a better longer-term solution to what ails California. She also has a very effective way of making the case. What if every neighborhood had someone like her?