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Voters could change California's landmark property tax law after measure qualifies for ballot

Sacramento Bee logoSacramento Bee 5/30/2020 By Matt Kristoffersen, The Sacramento Bee

California voters this November will likely see an initiative that would undo part of a landmark law that has capped property tax increases for decades.

The so-called “split-roll” initiative would change how California taxes properties, retaining a limit on tax increases for residential properties but allowing new assessments of commercial sites worth more than $3 million.

California voters enshrined a strict limit on property tax in 1978, when they passed Proposition 13. It allows reassessments only when a property changes hands or undergoes redevelopment. It also restricts annual tax increases.

For longtime corporate land owners like Disney, whose property value has risen since the 1970s, a split-roll initiative that removes Prop. 13 protections for commercial property could lead to a significantly higher tax bill. And even though the initiative provides exemptions for small businesses, opponents say those exemptions don’t go far enough.

Funds collected from the higher taxes would go to schools and other local governments as soon as 2022. “That money would go a long way,” Alex Stack, a spokesman for the initiative, said.

The initiative, supported by teachers unions and Democratic leaders, cleared its last hurdle to appearing on the ballot Friday, when it was certified by the Secretary of State for the November election. Proponents could still strike a deal with lawmakers to remove it from the ballot before a mid-June deadline, an option Gov. Gavin Newsom has expressed interest in brokering.

It’s opposed by a network of business groups that argue the initiative would weaken the state’s popular cap on property tax increases, and eventually raise the cost of rent for small businesses.

They also say businesses can’t afford the tax hike as they struggle for profit in a new recession.

“We are going to have the largest tax increase in California history at exactly the wrong time in our economy to be able to afford it,” said California Business Roundtable President Rob Lapsley.

State analysts project that the amendment could bring in as much as $12.5 billion in additional tax revenue each year for schools and local governments, depending on the real estate market.

The California Business Roundtable funded a multi-million dollar effort last year to convince Californians to defend Proposition 13, mostly focused on the law’s residential property tax rates. Lapsley told The Bee last year that it built an email list of Californians who said they support the current law as part of that effort.

Now the group has launched an official campaign to defeat the split-roll ballot measure. It’s working alongside other groups like Howard Jarvis Taxpayers Association, a group named for the politician who championed Proposition 13 in 1978.

“We are prepared for that fight,” said Lapsley of the Business Roundtable.

Lapsley’s organization and other opponents have reported raising $2.6 million this election cycle for official campaigns against the initiative.

For decades, challenging Prop. 13 was considered a politically toxic move for Republicans and Democrats alike. Former Gov. Jerry Brown initially opposed the initiative in 1978, but later embraced it.

Today, some of the state’s top Democratic leaders are supporting the split-roll initiative, including Senate President Pro Tem Toni Atkins and Los Angels Mayor Eric Garcetti. Supporters reported raising over $14 million this election cycle, including large contributions from the California Teachers Association and Chan Zuckerberg Advocacy.

The initiative going to voters represents its supporters’ second effort to put a split-roll measure on the ballot. They collected signatures for a similar effort in 2018, but spent millions to rewrite the measure to include exemptions for small businesses owners whose properties are worth less than $3 million.

The California Chamber of Commerce Board of Directors said the new proposal still “would be the largest tax increase in California ever.” It projects that property taxes could rise by 25 percent for businesses.

Sophia Bollag of The Sacramento Bee Capitol Bureau contributed to this report.


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