A Tale of Two Parcel Taxes: Comparing Local Benefits, Oversight, and Accountability

This November, Berkeley voters will be asked to consider two new parcel tax measures: (1) the Arts Tax and (2) the Bank Tax. Both measures would impose a new parcel tax on homes and businesses. However, they differ significantly on where funds are used, how tax rates are determined, and whether Berkeley can provide program oversight.
Our comparison is not an endorsement of either policy objective. Rather, it examines how Berkeley residents and businesses asked to fund tax measures can have the expectation of clear local benefits, predictable tax obligations, and meaningful accountability.

Local Benefits: Guaranteed vs. None Required

Perhaps the most important distinction between the two measures is where the money can go. The Arts Tax measure establishes a dedicated grant program restricted to funding  activities within the City of Berkeley. Revenue is dedicated to Berkeley nonprofit arts organizations, Berkeley-based events, artists, and arts and cultural facilities.

By contrast, the Bank Tax is intended to capitalize a regional lending institution. If the bank ever receives regulatory approval to operate, proponents propose to finance projects throughout the East Bay, including Oakland and Richmond. The ordinance contains no minimum requirement that Berkeley receive benefits proportional to its financial contribution.

That distinction raises an important policy question: Should Berkeley homes and businesses ever be asked to authorize new parcel taxes without a guarantee that Berkeley will receive a proportional share of the benefits?

Future Tax Increases: None vs. Inflation-Based

The second major difference concerns what taxpayers can expect over time. The Arts Tax establishes a fixed parcel tax rate of 7 cents per square foot for the duration of the measure. Homes and businesses know exactly what the rate will be each year unless voters approve a future change.

The Bank Tax begins at 6-9 cents per square foot, but the ordinance requires  automatic annual increases based on inflation or cost of living, whichever is HIGHER. Unlike existing parcel tax measures, the Berkeley City Council has no discretion to make needs-based adjustments. During periods of elevated inflation, annual adjustments could approach 10% depending on the applicable inflation or income index.

Local Oversight: Berkeley Oversight vs. Limited Oversight

The third difference involves governance and accountability. The Arts Tax establishes a detailed local oversight structure. The ordinance assigns responsibilities to Berkeley's Civic Arts Commission, requires public grant review, annual financial reports and audits, and provides for City Council oversight through implementing regulations.

The bank proposal is structured differently. Rather than creating a city administered program, it would provide capital to a proposed bank whose lending activities would occur through the bank's governance once established. The ordinance provides comparatively little detail regarding how lending priorities would be established, how Berkeley would influence those priorities, or what ongoing oversight Berkeley officials would have over lending decisions. Effectively, it is a $58 million blank check for a yet to be created organization.

Ultimately, the two measures reflect very different models of accountability. The Arts Tax is centered on ongoing local Berkeley oversight while the Bank tax is not.  The Bank Tax is centered on a regional financial institution operating under its own governance if it is ever established.