Where Do Your Property Taxes Go?

This is where property taxes go in LafayettePhoto byCity of Lafayette

Lafayette, Calif – Have you ever wondered where the revenue from property taxes goes?

As seen in the above graphic, the largest share (57%) goes to school districts, including the community college; 14.1% goes to the Contra Costa Fire District; 11.1% to the County; 3.9% to utilities (EBMUD & CentralSan); 3.4% to parks (including the East Bay Regional Park District); and 3.9% going to various other public agencies (including BART). The City of Lafayette receives only 6.67%. Thus, for a single-family house assessed at $1M, while the property owner will pay $10,000 annually for the Countywide tax; the City receives only $670.

“People think that because Lafayette is considered an affluent community with expensive homes that, the City must get plenty of money from property taxes,” says City Manager, Niroop K. Srivatsa; “however, that is not the case.”

In fact, the City of Lafayette receives a lesser percentage of the Countywide property tax revenue than most surrounding cities. “Many people are surprised to learn that the distribution of property tax varies widely among the incorporated cities,” Srivatsa points out.

In Contra Costa County, the rate ranges between 5.4% to 27.7%.” As to why that is, the answer is somewhat complicated, but it goes back to 1978 when Prop 13 was passed. At that time, the City had not imposed any local property taxes, while other cities had. When Prop 13 standardized the Countywide general 1% rate, cities got the same percentage of the Countywide tax that had previously been levied locally. That percentage was zero in Lafayette's case. Over the course of the next 10 years, Lafayette’s rate has increased to the current 6.67%, and that is where it has been for the last 36 years.

When asked if the City can get a larger share of these property taxes, the City Manager answers, “Unfortunately, No.” She explains, “100% of the general property tax has been accounted for; thus, increasing Lafayette’s share would mean decreasing another agency’s share, which would be virtually impossible.”

Even with this “low” allocation, the City’s number one source of revenue is still property taxes, generating approximately $7M each year – about 35% of the total General Fund revenue. With the addition of other funding sources like sales tax, franchise, and service fees, the City provides Lafayette residents with important public services such as:

• Maintaining public streets and storm drains in their present condition and providing timely pothole repair.

• Wildfire preparedness activities.

• Keeping the number of sworn police officers at the current level

• Providing services for senior citizens.

• Landscaping and maintaining City parks, open spaces, paths, and playfields.

• Traffic safety programs for all public road and pathway users, including people driving, biking, and walking.

• Continuing support for our community partners like the Chamber of Commerce and the Lafayette School District.

However, mostly due to inflation, the City is now facing a deficit of more than $2M annually. Without additional revenue, City officials will have to make difficult decisions about which programs and services to cut back or altogether eliminate.

As part of the budgeting process, City leaders evaluated several possible options for generating additional revenues. They determined that instead of asking voters to raise property taxes by an average of $200 per parcel, they are asking the voters to authorize a 1/2% increase in the City’s Sales Tax, which amounts to one-half of a penny for every taxable dollar spent locally.

A half-cent increase will generate approximately $2.4 million annually; enough to close the budget deficit and maintain the status quo but not enough to address new or unfunded projects and programs. A sales tax is paid by visitors who dine and shop in Lafayette, as well as by residents; therefore, funds are brought into the community to benefit Lafayette residents by people who reside outside the City.

If authorized, Lafayette Sale Tax will increase from 8.75 to 9.25%, which is less than the rates in Moraga and Orinda.

The funding Measure will appear on the November 5, 2024 ballot. Passage requires simple majority support (50%, plus 1 vote). Revenues from the Measure will be placed into the City’s General Fund. The City Council will appoint an Oversight Committee to monitor the way these monies are spent, and there will be an annual audit, which will be made available to the public.

The City Manager concludes, “Our goal is to keep pace with existing services and programs, while maintaining the City’s finances.”