I imagine that I have an Italian friend, Angelo, who’s thinking about moving to Santa Rosa. I imagine that Angelo is a silversmith who noticed Santa Rosa seems to be without a silversmith since Barney Hays retired some years ago. Angelo already owns a small commercial rental property here. He calls me from Alba, in the Piemonte region of Italy, and says, “Buongiorno, Bob. You know we have troubles here in Italia, mostly taxes and debt. I worry about taxes and debt if I move to Santa Rosa. What can you tell me?”
“Well, Angelo,” I respond, “the State of California has income tax rates that can go up to about 9.3 percent of taxable income or even 10.3 percent with something called the Mental Health Tax. And the Federal government has income tax rates that can go up to about 35 percent of taxable income. And, if you’re working and have earned income, you’ll have to pay Social Security and Medicare taxes, too.”
“Capisco, Bob, I understand,” says Angelo.
“Also, Angelo, you already know about property taxes on your commercial building here, don’t you.”
“Si, si,” says Angelo, “But I thought the tax was to be 1 percent of the assessed value and the bill is higher than 1 percent. On my bill, there are things called Agency Taxes for Warm Springs Dam, Santa Rosa elementary and high schools, Sonoma County Junior College, MS-Sonoma Mosquito #1 and Santa Rosa Storm Water. Do I have to pay those taxes, too?”
“Yes, Angelo, that’s the way our property taxes work. It raises the property tax bill by about 13 percent. Have you also been filing city of Santa Rosa business tax forms on the rental income from your commercial property?”
“What are you talking about, Bob? I know nothing of this business tax.”
“Oh, yes, Angelo. I’m not an accountant, but I think Santa Rosa treats rent from even a single commercial building as a business, subject to the business license and tax. If you haven’t been paying the tax, the city can go back as far as 2009 and collect taxes, interest and penalties. The same thing applies if you have four or more residential rental properties in Santa Rosa. I think the city is actively trying to identify property owners who would owe this tax.”
“I’m devastated, Bob. Maybe I should sell my property. Tell me the city won’t tax that.”
“Well, Angelo, aside from the normal costs of sale and possible state and federal income taxes, you’ll probably have to pay a city of Santa Rosa transfer fee equal to $2 for each $1,000 of the sale price. The county of Sonoma will also take $1.10 for each $1,000 of the sale price. So if your property sold for $600,000, the total transfer fees would be $1,860. Santa Rosa and Petaluma are the only two cities in the county that charge the transfer fee.”
“Misericordia, Bob. Does the city impose any other taxes?”
“Yes, Angelo, the city of Santa Rosa has a 5 percent tax on telephone service, cable service and utilities.”
“You mean if my bill for electricity and gas is $500, as it is here monthly in Italia, the tax would be $25?”
“Yes, Angelo, I think so. And there would be other fees and taxes on your bills as well. For instance, my own electricity and gas bill has an Energy Commission Tax, Gas PPP Surcharge, Public Purpose Programs charge, Nuclear Decommissioning charge, DWR Bond charge, Ongoing CTC charge and Energy Cost Recovery charge.
“And my telephone bill has a Federal Subscriber Line Charge, Federal Universal Service Fund Fee, California Lifeline Telephone Service Surcharge, California Deaf & Disabled Telecom Program Surcharge, Property Tax Allotment Surcharge and 10 other fees and taxes. My cable TV bill has a franchise fee, a utility tax, a PEG access support fee, a PEG fee recovery, an FCC user fee and a sales tax.”
“I’m astounded, Bob. What about this ‘sales tax’?”
“I think it’s 8.5 percent in Santa Rosa. Like your VAT, it applies to most things you buy. The state of California wants to raise the tax beginning next year. You have to pay sales tax on gasoline and diesel fuel, on top of about $0.69 per gallon of state and federal gas taxes. I think only New York has higher combined gas taxes than California.”
“Bob, tell me the situation is better with respect to debt in Sonoma County.”
“No, Angelo, I can’t tell you that. The county of Sonoma borrowed almost $600 million from investors to deposit money in the pension plan for county employees. They’re called Pension Obligation Bonds. Even after almost 20 years since the first bonds were sold, the county still owes about $500 million. This is the highest amount per capita of any county in California. It works out to around $1,000 for every person living in the county.”
“Also, the city of Santa Rosa borrowed more than $50 million with Pension Obligation Bonds and is still paying them off. The city has an unfunded liability for its employees’ pension plan of more than $100 million. And the county of Sonoma has an unfunded liability for its employees’ pension plan that might be as much as $400 million.”
“This word ‘unfunded’ doesn’t sound good to me,” says Angelo. “But at least, if I’m a silversmith in Santa Rosa, there won’t be the terrible regulations we have in Italia, yes? I’m using that thing you call potassium cyanide as a base chemical for plating.”
“Oh, Angelo, I have some bad news for you….”
