In split votes, San Benito County supervisors and Hollister City Council members this month agreed on a new formula to divide property tax revenues from some new residential developments.
While the amounts are relatively small—limited to only some of the explosive new growth in the entire county—this month’s votes by elected officials in the city and county reflect battle lines being drawn on the eve of an election year over the pace of residential and commercial growth.
Every 10 years, San Benito County and the City of Hollister revisit a formula that divides property tax revenue from new residential developments in areas about to be annexed by the city. Under state guidelines, this enables the city to get some advance revenue to help pay for new police, fire, streets and other services for the future residents.
Not all new residential developments fall into this category. Some are already within the city limits, while others are in the county, outside of the city limits or its urban growth boundaries.
When the dust cleared this month, 3-2 majorities on each body—the city council and the board of supervisors—approved a new formula that would split the property taxes on some of these new residential developments evenly between the city and county.
This new 50/50 arrangement on Jan.1 will last 10 years and replace a prior 10-year arrangement that gave 75 percent to the county and 25 percent to the city.
The city majority liked it because it seems more fair for the city to get a bigger share.
The county majority liked it because it is limited to residential development, requiring separate deals on commercial development.
Because the current version of what is officially called the Master Agreement for Tax Transfer Upon Annexation expires Dec. 31, any delay or failure to reach an agreement would have stopped any new developments or annexation plans in their tracks.
That’s why Councilmember Rolan Resendiz bluntly said, “No more houses” when he voted against the deal on Dec. 16.
The slow-growth advocate knew if the tax deal fell apart, it would amount to a moratorium on numerous new housing developments at the city’s fringes.
That imminent deadline had some developers more than a little nervous. Since property owners pay the same tax regardless of the county/city split, the developers’ biggest concern was the need for an agreement on some plan, to be able to continue their pace of development.
Mayor Ignacio Velazquez joined Resendiz in opposing the deal, concerned about losses in property tax revenue from commercial developments.
Vice Mayor Marty Richman led the negotiations with the county, and the council majority approval of the 50/50 split, joined by council members Honor Spencer and Carol Lenoir. Spencer. This majority has consistently supported new developments, and Spencer has announced her mayoral candidacy against Velazquez in November.
On the county side, the city’s slow-growth counterparts are veteran Jaime De La Cruz and newcomer Peter Hernandez. The majority was led by board chair Mark Medina, former city councilmember Jim Gillio and veteran Anthony Botelho, who is not seeking reelection.
The early March 3 primary for supervisors puts the pressure on incumbents Medina and De La Cruz, who face primary challengers, to define their positions early.
The new tax-sharing deal gives each government opportunities to force a renegotiation of the agreement, including one automatic “trigger” that would occur if the city approves building permits for more than 3,000 new housing units in the coming decade.
PROPERTY TAX BASICS
The median property tax in San Benito County is $3,716 per year for a home worth a median value of $542,300. The majority of this revenue goes to education.
California’s counties, cities, schools and special districts depend on the property tax as a primary source of revenue. Counties get 15 percent, cities 12 percent, schools (school districts and community colleges) 54 percent, and special districts (water, fire, sewer) 19 percent.
Residential housing drives 70 percent of property tax revenue in California. In 2018, that totaled $85 million in San Benito County.
The total assessed value of property in San Benito County exceeded $8.5 billion in 2018, a nearly 8 percent increase in a single year, attributed to rising property values and new residential development—the fourth fastest assessment growth in the state. In the previous five years, the county total property assessment has grown at about 6 percent per year.