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Teacher's Pet: Homeowners like Tracy Sullivan have seen their property values soar thanks in part to a yearly $290 education tax.

Get Rich: Raise Taxes

Let Los Gatos homeowners show you how

By D.K. Sweet

NO BELIEF of conservative ideology is held with greater certainty than tax increases are, always and forever, a bad deal. Unless you're a government bureaucrat or a welfare sponge, the thinking goes, tax increases will produce nothing but a domino effect of negative outcomes--reduced profits, constricted investment, fewer jobs. Eventually the marketplace becomes desolation row, where everyone from Billy Bob to Billy Gates plays productivity hooky, asking each other, Why should I work so hard when the government takes so much?

What to think, then, of a city where voters, over the last 14 years, have repeatedly agreed to an extra tax burden? What to think of a town whose great wealth-building strategy is to increase property taxes to be spent solely on that right-wing poster child for wasteful spending--the public school system?

Los Gatos, Calif., population 28,600 and counting, is, more than any place in the United States, the proving ground where conventional socioeconomic wisdom has been debunked. Once known for small houses, cheap rents and a funky downtown where Hell's Angels often detoured on return trips from Santa Cruz, Los Gatos has become its 1970s opposite: soaring property values and a downtown as undistinguished as an upscale shopping mall.

The transformation can't be ascribed to any single factor, but a lot of credit, in the minds of resident observers, goes to a successful community investment program locals refer to simply as "the parcel tax."

First approved in the 1990 real estate slump by 75 percent of the voters, and reapproved every four years thereafter by solid majorities, Los Gatos property owners tax themselves an additional $290 each year to pay for the city's public schools. The city's 9,000 parcels provided some $2.6 million to schools this fiscal year.

What has their $2,900, 10-year investment returned?

In strict economic terms, the words "Los Gatos Schools" written on a property listing yields a homeowner somewhere between a $50,000 and $200,000 bonus, according to 20-year veteran appraiser Rick Allen. He says it is not unusual for smaller Los Gatos houses to receive an appraisal tens of thousands of dollars more than larger homes located across the street that happen to be in another school district.

God Bless Taxes

Lifelong valley resident Tracy Sullivan is among a group of homeowners with a San Jose address and Los Gatos school privileges. Sullivan, who has two daughters, owns a home located miles from downtown "LG" in the Guadalupe Mines hillsides. She bought it for $650,000 and estimates it's worth $950,000 today. "We bought in this development in 1998 to get Los Gatos schools, and we figured resale values would be slightly better one day," she says. "But it's turned out far better than we ever imagined." With a big grin, Sullivan concludes by saying, "God bless the parcel tax."

Sullivan has reason to grin about higher taxes and fatter home equity. If she were to sell her five-bedroom home now, even with the capital-gains taxes, her family of three could live for years on the difference. The return on her parcel tax is now in the neighborhood of 2,800 percent.

Whatever the precise financial gains, what does Sullivan's $290 extra a year buy her kids in improved education? In short, everything and more that Contra Costa County parents are now losing after defeating a miniscule $75 annual parcel tax March 4. Some of the items include small class sizes in grades four through eight, elementary school music and arts programs, student support services including psychological counseling, and a building and maintenance program the envy of even wealthier school districts.

Though Los Gatos Union School District Superintendent Mary Ann Park credits the parcel tax for its crucial role in funding what the back-to-basics movement might call "education frills," she seems to regard it more as the embodiment of Los Gatos' local values, rather than its driving force.

"I've worked for schools in two other cities (Morgan Hill and Milpitas) and can tell you this district enjoys substantially more community support," she says. "Perhaps that's because of its smaller size and traditions of community input. People are truly passionate about education here. They bring fundraising and other organizational skills to the table most districts don't have in anywhere near the same abundance."

Park says wasteful school systems overspending on administrative functions is another myth. "I've worked in the private sector and can tell you they're not nearly as efficient with their money as we are. We have to be. We're subject to a lot more government scrutiny."

Outperforming the private sector happens, to some degree, by borrowing its management techniques. For example, Park credits a district-funded study of other successful California schools for a number of ideas implemented throughout the district. Says Los Gatos parent and consultant Carrie Anderson, "Syncretism incorporates the best ideas from outside an organization. But in a corporate environment, obstacles such as the 'not made here' syndrome, PR concerns and stockholder politics derail implementing good ideas so often it's sort of darkly humorous. But I don't think you'd find much Dilbert fodder watching how Los Gatos Union gets things done."

You don't have to attend a school board meeting to detect the town's ardor for top-notch public education. Whether hand-painted and hung outside a school building, on a poster taped to a store window on the Santa Cruz Avenue main drag, or on hundreds of bumper stickers and lapel buttons, the LGEF (Los Gatos Education Foundation) logo is one of the most prevalent visual symbols throughout town.

When LGEF members received a heads-up in December that the Schwarzenegger administration was about to announce an $850,000 raid of Los Gatos' education taxes, LGEF raised $1.4 million dollars in less than four weeks. That saved the jobs of 13 teachers who otherwise would have been sacrificed on the altar of fixing the state budget deficit.

Los Gatos schools have also benefited from the philanthropy of Apple co-founder Steve Wozniak, who has outfitted whole schools with computing systems that would make some design shops jealous.

Marie Antoinette

Sixteen-year Los Gatos resident, real estate appraiser and self-described "fiscal conservative" David Akina minimizes the parcel tax by pointing out that Los Gatos' reputation for good schools dates back well before passage of the first parcel tax measure in 1990. Akina's observation is shared by most Los Gatans of equal or longer tenure. But regardless of the exact portion of its advantages, he does see the parcel tax as a net gain for the greater community. "The parcel tax says something about Los Gatos that a lot of places can't: we take full responsibility for our public schools instead of waiting for someone else to fix them."

It's a wonder, then, why liberals haven't turned Los Gatos into the poster child for "Everything Conservatives Say Is a Lie." The explanation for that may come down to one word: race. Los Gatos schools cite minority enrollments as statistically "insignificant." Inevitable comparisons to school districts with significant minority populations force uncomfortable questions.

Among them, why lily-white Los Gatos has a greater appetite for increased taxes and top-notch schools than an even wealthier town with "significant" Asian-American enrollment like Los Altos. Here, the explanation may rest more with class and culture than with race. While it has plenty of wealthy citizens, the "Let them attend public school" mentality pervasive among wealthy peninsulans, who send their kids to private schools, is viewed with scorn in Los Gatos. That Marie Antoinette attitude creates a de facto two-tiered education system whereby the energies, expertise and empathy for public schools go missing in action.

Perhaps more discomforting is trying to explain why west Contra Costa County voters also failed, despite a 62 percent majority, to pass Measure J, a parcel tax increase for improving their schools. With significant African American and Latino enrollments, the state backing away from university preferential treatment and alarming test scores and drop-out rates, one might expect sufficient momentum towards taking greater local responsibility for schools.

So while white Los Gatans--liberal Democrats and Republicans alike--increase their taxes and watch their personal and community wealth grow, cities with significant minority populations create the self-fulfilling prophesy that raising taxes to spend on something so "broken" as public education is a waste of money.

Like the accountants at Enron who persuaded auditors to accept expenses as a complicated form of revenue, conservative propagandists have succeeded in convincing many Americans of an equally absurd idea. Private-school parents paying tuition is the market affirming value while taxpayers doing the same thing for public schools is money down the bureaucratic rat hole.

The enviable success of the Los Gatos public education system may not prove everything the right wing says is a lie. But these irrefutable facts are shooting a hole in the right's anti-tax mythology. In Los Gatos, Calif., higher taxes are spent with an efficiency rarely seen in the private economy, producing a wildly popular outcome for voters and a high yield for homeowners. That return on investment is leaving Wall Street and its free market fundamentalists in the dust.

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From the April 7-14, 2004 issue of Metro, Silicon Valley's Weekly Newspaper.

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