Prop 13 caps the rate of property tax increase... only if there is either no new development on a property, or if the property changes hands in one of the ways that triggers the property valuation reassessment.
A city should be strongly encouraging the periodic demolition and/or radical improvement of existing structures... whether they be commercial or residential. New construction and new improvements get taxed at their "market rate" valuation. Given how insane prices are in the area (and how very, very little teachers make), I find it hard to believe that tax revenues from new construction wouldn't cover the costs required to support new families.
> Look at the development in Palo Alto over the last ten years. It's largely commercial and this isn't an accident.
coughredliningcough :)
AIUI, (and I might not understand correctly) that's not quite right.
If you make significant improvements [0] to a piece of land the value of just those improvements are assessed and added to the assessed value of that land. So -IIRC- if the owner of a two-story multi-family dwelling demolishes the building and builds a fifty-story building in its place, his assessed property value would be the same as it would if he had purchased that property with the new construction on it.
[0] Like -for instance- adding on a new room to a house.