The Real Message from the Rejection of Proposition T

The Blame Game has begun. With the rejection Proposition T, RIFT supporters have unleashed a barrage of explanations and recriminations. These mostly deal with the money spent by “out of state” developers. We’ve also been reminded that virtually half of Santa Monicans supported the measure.

Supporters of Prop T seemed to miss the message imbedded in the vote.

This was not a close election. By example, I would point out that the gap between the two presidential candidates was 7%, and no one is arguing that it was a nail biter. The margin of victory of Prop T was 12%. This was a fairly sound rejection of the measure. While Prop T supporters argue that 16,000 folks voted for it, it should be noted that 20,000 residents voted against it.

Yet, I read and hear that this election was bought and paid for by “greedy” developers who subverted the residents’ wishes. The suggestion by the Prop T proponents that these 20,000 voters were somehow duped or misled is naive. That their vote somehow distorts the “residents,” wishes or that they are somehow less representative of the "community" is insulting. Prior to the election, I was told more than once by Prop T proponents that Santa Monicans are smart, that they would “see-through the developer mis-information.” So either, all of a sudden we’ve gotten dumb, or 20,000 Santa Monicans thought Prop T was not good policy. If the Prop T supporters don’t at least consider this in their post-election introspection than they are deceiving themselves.

Even the Santa Monica Mirror, hardly a tool of the development community rejected Prop T in its endorsements. The paper argued, as have many others, that the City has undertaken a public planning process, albeit a slow one, resulting in a plan known as LUCE, as imperfect it is, that ought to be respected. It is neither a top down document, nor is it the product of a handful of community advocates, but one with a whole host of authors , contributors and critics.

Clearly Santa Monica is not a monolithic community. It does not have one resident constituency, but many. It is a constituency that will continue to evolve in unpredictable directions. LUCE is a document that is full of compromises reflecting the heterogeneity of opinion to be found in this wonderful city. This election seems to me to be an acknowledgement of those differences and shows respect for this multi-year process. That’s the message I think we should be taking from last Tuesday’s Election Day.

Way to Go Santa Monica!!

Well, we dodged a big one last night. Proposition T was defeated by a 12% majority. That strikes me as a victory for the LUCE process, and a defeat of ad hoc planning by a strident minority. Over the next few weeks I will transform this blog into one that advocates on urban design and planning issues in the city, but for now, I will just enjoy. Congratulations to all who worked against this measure, to our re-elected council members, and to everyone who voted for Measure R, an important part of this overall effort.

Reason #4. This measure will require cuts in services, increase in taxes, or some both to maintain a balanced budget.

If Proposition T were adopted in to law, and didn't work, it would be bad enough.

If the measure were adopted into law and prevented the construction of the Purple line, and affected our ability to concentrate development where it is most needed and appropriate, it would be worse.

If RIFT were to become law and precluded any chance for the transformation of Lincoln, Pico and Olympic into humane, walkable and sustainable boulevards, it would be even more disappointing still.

If RIFT were in opposition to efforts to promote affordable living, and reduce global warming it would be outdated.

But if Proposition T were to become law and it didn't work at reducing traffic, and all those possibilities for social and environmental progress were precluded or prevented, and THE PROPOSITION WOUND UP COSTING THE CITY BADLY NEEDED REVENUE, that would be a catastrophe!

So, in June, an independent analyst completed their evaluation of the initiative. I encourage you to review this study for yourself, because there are lots of good bits in it that are quite interesting:

http://www01.smgov.net/cityclerk/council/agendas/2008/20080624/s2008062403-A-1.pdf

Here are some of the highlights of this analysis:

First the report comments on the present condition, by noting that the city of Santa Monica:

• [Enjoys] A healthy balance between revenues and expenditures, due to a diverse economy and multiple revenue streams, and careful budget management;
  
• [That it is] One of very few cities in the U.S. with a triple-A bond rating from all three securities rating agencies
• [is one where] Residents, businesses and visitors enjoy an unusually high level of service, but
• [the] Finance Department warns of looming structural deficits in coming years and Public Safety Departments have requested significant additional resources

And here's the thing -- throughout the country, commercial development brings in more revenue than residential development and requires much less in services, and that dear RIFTies is no less true in Santa Monica than anywhere else. In most cities, commercial development is a net postive to the city's coffers, while residential development is a net negative, i.e., commercial development subsidizes the residents.

But the RIFTies have stated that this city has many revenue streams; it does not depend on developer fees for its financial health. That's true enough, but the revenue sources the city does depend on are not from developer fees per se, they include: sales taxes, transient occupancy taxes, business license taxes and parking facilities taxes, all of which are exclusive of residential development. Furthermore, the commercial development cap is likely to significantly effect the value of underdeveloped commercial property, reducing property taxes from those properties.

Okay, you say, but Proposition T, doesn't stop development, it merely slows down commercial development. The city will still see growing revenues under RIFT.

The analysis compares the base-line (as development occurs today) with LUCE (the land use element that the city has been working on and we citizens have been participating in and paying for these last few years) with RIFT. Here's what the analysis shows:

• In 2023, when all projected space is built, RIFT projection generates $11.4 million less than LUCE ; and
• RIFT's projection of property tax revenue to SMMUSD and SMC is also significantly reduced over LUCE, say to the tune of $4.2 million/year to the public schools and roughly $880,000 to the college.

With LUCE, by the year 2023 (the expiration date of RIFT) the city is looking at an increase of net revenues (increased revenue - increased costs) of $3.4 million. With RIFT, by that same year, the city is facing a decrease in net revenues of $5.9 million. So the overall difference to the city (in 2008 dollars) is $9.3 million. Again, let me spell this out -- that's net, i.e., after all revenues have been collected and expenses have been paid.

The report concludes:

RIFT’s negative fiscal results would require cuts in services, increase in taxes, or some of both, to maintain a balanced City budget.

Now supporters of RIFT argue that:

....studies, [which ones?] including one done by our own city, [that's interesting, as that's the one I've been quoting, so which are the other studies...I mean really, I want to see them] show that the revenues generated by new commercial projects DON'T MAKE UP FOR their greater environmental costs in electricity, water, waste, and public services."

A curious remark indeed, as page 28 of the study provides an easy to read little bar chart showing the LUCE alternative: $29 million in new revenue - 25.6 million in new expenses associated with that new development= $3.4 million; and the RIFT alternative: $17.6 million in new revenue - $23.5 million in new expenses associated with that new develompent =$ -5.9 million.

By my estimates, this could be as much as 3% of the city's revenue. Given the amount of fixed costs any city has (interest on bond debt, rent, salaries for essential employees, etc.) that's a huge loss for the City. An additional hit will be felt by SMMUSD and SMC. Is it any wonder that teachers, school administrators, school board members, police, fireman and the like are all against this?

RIFT is a revenue sink hole, and tragically, it still won't work.