by Kristen Taketa
Forty years after the passage of the landmark Proposition 13 ballot initiative in California, a coalition of social justice organizations, labor unions, elected officials and other groups is working to roll back the part of that proposition that lets many businesses avoid steep increases in property taxes.
The coalition, called Schools and Communities First, says it has collected more than 860,000 signatures to put a measure on the November 2020 ballot. The group needs 585,407 state-verified signatures to get the measure on the ballot.
When Proposition 13 passed in 1978, it limited property tax increases on both residential and commercial property. The constitutional amendment generally limits property tax increases to no more than 2 percent a year, even if the market value rises more than that. With some exceptions, only when a property changes ownership does an owner have to pay taxes based on a property’s current market value. Businesses can avoid paying taxes based on market value if less than a majority percentage of their property changes ownership.
The proposal by Los Angeles-based Schools and Communities First would eliminate that tax benefit for commercial properties, but not for residential properties — something known as a “split roll” initiative.
“We think Proposition 13 did a good thing when it helped residents stay in their homes,” said Christopher Rice-Wilson, associate director of Alliance San Diego, one of the local groups endorsing the Schools and Communities First proposal.
The proposal would leave the tax benefit in place for small businesses who have less than $2 million in property in California.
If passed, the Schools and Communities First initiative is projected to collect between $6 billion and $10 billion more per year from businesses, with 40 percent going to schools and 60 percent going to local governments, according to a February review of the proposalby the state’s nonpartisan Legislative Analyst’s Office. The actual amount raised would “heavily depend” on how well the real estate market is doing and would “be considerably more volatile than property tax revenues have been historically,” according to the review.
Proponents estimate the proposal, if passed, would transfer about $1 billion from businesses and give it to schools and local governments in San Diego County.
One of five simultaneous news conferences touting the proposal was held at Monroe Clark Middle School on Tuesday. Press conferences were also held in Los Angeles, Berkeley, San Bernardino and Fresno at schools and community centers.
San Diego Education Association board member Kisha Borden said at the San Diego news conference that the proposal would provide more revenue to schools for needed resources like counselors, nurses and school supplies. Proponents said revenue is also needed for roads, bridges, medical services, services for veterans and homeless and other needs.
Schools and Communities First cites the support of more than 270 organizations and elected officials. Many of the organizations are located in the Bay Area or the Los Angeles area.
There are relatively few backers in San Diego County, where the measure is endorsed by Alliance San Diego, a social justice group, and San Diego Organizing Project, a coalition of 31 religious congregations, as well as a Chula Vista Elementary School Board member and a Poway Unified school board member.
“A lot of educators have been looking at, how do we bring more resources to education? The only way that we have found so far is to start looking at, OK, who’s not paying their fair share of the taxes?” said Chula Vista Elementary School District board member Francisco Tamayo, reached by phone later in the day. “We see it every year, doing the budget — there’s not enough resources.”
Poway Unified School District trustee Kimberley Beatty confirmed that she supports the measure as well.
“I have supported this initiative for over a decade, since connecting with like-minded parents across California who have done research on the lopsided commercial property tax structure,” Beatty said by email. “Because of the ability to structure sales to avoid reassessment on commercial properties, the state loses millions per year and a larger percentage of property tax revenue comes from homeowners. Despite recent increases to public education funding, California is still well below the national average.”
The coalition has raised about $3.2 million from January to June of this year, according to Secretary of State records. Its three biggest financial backers are The San Francisco Foundation, the Million Voter Project Action Fund and Chan Zuckerberg Advocacy, a group connected to Facebook founder Mark Zuckerberg.
If passed, the proposal would likely influence businesses’ decisions about whether to grow or locate in California, according to the Legislative Analyst’s Office.
Taxpayers associations and other pro-business interests fear that eliminating the commercial property tax protections of Proposition 13 would significantly hike costs to many businesses and drive businesses away from the state. A split roll would cause California to lose about 400,000 jobs and $72 billion of business output, a 2012 Pepperdine University report predicted.
“There’s absolutely no need for a massive tax increase that would drive up consumer costs and would result in job losses,” said David Kline, spokesman for the California Taxpayers Association, in a phone interview. Kline said California has large reserves and has significantly increased public education spending in recent years, so there’s no reason for an increase in taxes, he said.
Rice Wilson of Alliance San Diego disagreed.
“The idea that it’s going to chase away business — false,” said Rice-Wilson, who cited a June UC Santa Cruz report that said most of the potential commercial property tax revenue not collected under Proposition 13 comes from only 8 percent of business properties.