Because of tax limits established in 1978 by Proposition 13, local governments generally receive more revenue from sales and hotel room taxes than property taxes. Proposition 13 limited property tax rates to 1% of a home’s taxable value and restricted how quickly that taxable value could increase after a purchase.
Last year, Brisbane hired a consultant who found that the city would net $1 million a year in tax revenue by approving the Baylands. But if the city instead approved a project with lots more commercial space, a larger hotel and no housing, Brisbane would gain $9 million annually — an amount equivalent to more than half the city’s current day-to-day operating budget.
I have suggested before that tax incentives are part of why we have this issue. This isn't exactly the way I figured it was screwing things up, but it is evidence that tax structures are part of the problem.