While the public is paying for the new real estate, there is another cost that might not be so apparent: When properties are moved out of private ownership, local schools, cities, towns and other agencies miss out on property tax revenue they would have received if private owners had bought the same properties.
The lost property tax revenue is at least $328,000 a year, but the actual amount local agencies are not receiving is potentially much more. That's because if private owners had bought the properties instead of the fire district, property taxes would also have been paid on any improvements made to them. Many of the properties contained old or dilapidated structures.
The district's purchases have also taken, or eventually will take, at least seven family homes out of the local housing stock.
One property's details
A look at one of the purchases, that of a home on Almendral Avenue in Atherton bought by the fire district in June for $4.6 million, serves as an example of some of the revenue local agencies are missing out on.
The fire district says it has no current need for the Almendral Avenue property, but that at some point in the future — which Chief Harold Schapelhouman has said could be between 10 and 30 years away — the district might need the land to expand its adjacent fire station.
The district's board had asked that the property be rented on the open market, but currently a district employee is living in the home several nights a week at no charge and the board hasn't yet decided its future use.
Had the three-bedroom, two-bath 1950 home and its lot of just under an acre been purchased by a private owner instead of the fire district for $4.6 million, with no improvements to the property the owner would have owed $46,000 a year in property taxes, plus $4,779 toward paying off bonds, according to the San Mateo County tax collector's website. The property taxes would then have increased annually by 2 percent a year or the increase in the California Consumer Price Index, whichever was less.
Using information from the spreadsheet posted on the town of Atherton's website to help residents figure out where their property taxes go, the biggest loser from the Almendral property's being taken off the tax rolls is the Redwood City School District, which loses $10,028 a year in property tax revenue, plus $1,895 per year toward paying off bonds, for a total annual loss of $11,923.
San Mateo County is out $10,074 a year for the property, while the Sequoia Union High School District loses $8,386 a year — $6,624 plus $1,762 toward paying off bonds. The fire district itself loses $6,670 in property tax revenue, while the town of Atherton is out $4,508.
The Almendral property had been marketed on real estate websites as "a rare opportunity to build your custom dream home," which "could total 7,220 sq. ft. not including basement." If such a home were built, the property's assessed value — and the amount of property tax revenue lost to each agency — could easily double.
The district's response
Chief Schapelhouman said that instead of looking at the properties purchased by the fire district and seeing what other agencies won't get, "I look at those same properties and see resilient, modern, essential working emergency facilities that help to better serve the community by supporting our daily operations." He said the district's buildings aren't "day spas," but are "buildings that see hard use day and night, all year long for decades."
The chief said that in his 37 years with the fire district, "I've personally witnessed our inability to provide additional or more effective services to the community because of the limitations of our older facilities." Among those limitations, he said, are the exposure of employees to toxins like diesel emissions and close calls while backing fire vehicles into the stations.
Fire board President Chuck Bernstein said the district is "buying properties that complement our existing properties in order to be able to meet our obligations to respond in a timely manner to emergencies and disasters now and in the future."
Some won't be needed for many years, he said. "If it turns out that the properties are not needed in the future, it is likely that we will not keep them," he said. "In the meantime, the property itself is, in my opinion, an effective investment vehicle for the reserves we must generate to pay for new facilities."
He said that if the fire district ends up needing to build in different locations, "the purchased properties will serve as a hedge against inflation and preserve the district's buying power."
Fire district purchases
The following is a list, provided by the fire district, of properties purchased since 2006. Tax figures come from the San Mateo County tax collector's website and from the fire district's stated purchase prices for the properties. If the property was purchased before 2017, the applicable annual increase in the tax amount has been applied. All taxes are for the properties as purchased, and do not include improvements, which could easily double the amount of annual taxes on each.
• 2110 Valparaiso Ave., unincorporated West Menlo Park, acquired in February for $3.2 million. Property taxes would be: $35,133, including $3,133 toward paying off bonds for the Midpeninsula Regional Open Space District, the Las Lomitas Elementary School District, the Sequoia Union High School District and the San Mateo County Community College District.
District use: residential rental until property is needed to expand Alameda de las Pulgas fire station in three to 10 years.
• 320 Middlefield Road, Menlo Park, acquired in December for $6.6 million. The property had been owned by St. Patrick's Seminary, which was not paying property taxes. However, had the seminary sold the vacant property to a private owner, as it did years ago with the entire Vintage Oaks subdivision, without any improvements the property would have generated $73,207 a year in property tax revenue, including $7,207 to pay off bonds for Menlo Park's parks and recreation, the open space district, the Menlo Park City School District, the Sequoia high school district and the community college district.
Planned use: Future training center, classroom, emergency operations center and parking within two years.
• 2470 Pulgas Ave., East Palo Alto, acquired in September for $5 million. A private owner would pay $54,895 a year in property taxes for the unimproved property, of which $4,895 would go toward paying off bonds for the open space district, the Ravenswood City School District, the Sequoia high school district and the community college district.
District use: Special operations warehouse. Currently moving in.
• 28 Almendral Ave., Atherton, acquired in June for $4.6 million. A private owner would pay $50,779 a year in property taxes on the unimproved property, including $4,779 toward paying off bonds for the open space district, the Redwood City School District, the Sequoia high school district and the community college district.
District use: District currently working on a cleanup and storage plan, and then would use for residential housing. Future use would be to expand Almendral fire station in 15 to 30 years. Adding a second residential unit to property has been discussed.
• 114 Santa Margarita Ave., Menlo Park, acquired in October 2016 for $2.8 million. A private owner would pay $32,312 in annual property taxes on the unimproved property, including $3,181 toward paying off bonds for Menlo Park's parks and recreation, the open space district, the Menlo Park City School District, the Sequoia high school district and the community college district.
District use: Additional office space and a meeting room.
• 1231 Hoover St., Menlo Park, acquired in July 2008 for $1.5 million. A private owner would now be paying $19,207 in property taxes on the unimproved property, including $1,891 toward bonds for Menlo Park's parks and recreation, the open space district, the Menlo Park City School District, the high school district and the community college district.
District use: On-duty firefighters are living in the house while a new station is being built. It will be torn down to make room for a district museum once the new station is completed.
• 2299 Capitol Ave., East Palo Alto, acquired in April 2008 for $685,000. A private owner would currently be paying $8,682 on the unimproved property, including $774 toward bonds for the open space district, the Ravenswood City School District, the high school district and the community college district.
District use: Demolished to make room for new fire station.
• 170 Middlefield Road, Menlo Park, acquired in April 2008 for $3.6 million. A private owner would currently be paying $46,097 annually for the unimproved property, including $4,538 to help pay off bonds for Menlo Park's parks and recreation, the open space district, the Menlo Park City School District, the high school district and the community college district.
District use: Administration offices and meeting room.
• 2293 Capitol Ave., East Palo Alto, acquired in June 2006 for $603,000. A private owner would currently be paying $7,951 for the unimproved property, including $709 to help pay off bonds for the open space district, the Ravenswood City School District, the high school district and the community college district.
District use: Demolished to make room for new fire station.
The lost property taxes on the unimproved properties add up to $328,263 annually, and would increase each year.
Some leases bring taxes
While public agencies are exempt from paying property taxes, county tax officials say that if the fire district leases one of its recently purchased homes to a private party, whoever leases the property may be responsible for paying a different type of tax.
Jim Irizarry, the county's assistant assessor-county clerk-recorder, said leasing the property to an employee or other private party "creates a taxable 'possessory interest,'" to be paid by the leaseholder.
An example, he said, is the lease of parts of San Francisco International Airport to private corporations. Irizarry said the county has three methods of assigning a value to a leaseholder's possessory interest, but most commonly makes the determination based on the net income the government agency receives from leasing the property.
Some entities, such as public schools, are exempt from paying the possessory interest tax. Irizarry said the Philips Brooks and Woodland schools, which lease property from the Las Lomitas School District, have such exemptions.
This story contains 1754 words.
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