The local allocation of property taxes was set by Proposition 13 and a follow-up 1979 state law. That law fixed local allocations at what the cities, schools and districts were receiving at the time. Scotts Valley was a relatively new city in 1979 (13 years old) with a population of about 6,800, few services and light debt load. As a result, the Scotts Valley founders set up the city to be a low-tax city. In recent years, the City sued to increase its property tax allocation to get to the current rate of 6.5%. Now, despite the city’s population growth and changes in services and financial structure, Scotts Valley is fixed at this low level.
Changing the property tax allocation would require a California Constitutional Amendment or a change in state law. Attempts to do so have been unsuccessful as any increase in one city’s allocation means there is a trade-off with a corresponding decline to another entity’s allocation. As the tax patterns have been set for over 30 years, any “losing” community and its elected representatives at the local and state levels have and would strongly oppose the change. Any changes to the tax allocation structure would require a 2/3 vote in the Legislature. It is generally accepted that the property tax allocation is highly unlikely to change.
There have been legal challenges to Proposition 13 but in 1992, the U.S. Supreme Court upheld the constitutionality of Proposition 13.