An initiative to reclaim up to $12 billion for California public schools and local communities could make its way onto the ballot in November 2020. Proponents of the measure say it will force large corporations to pay their fair share in property taxes.
The Schools & Communities First initiative would amend the current property tax law established under Proposition 13 in 1978. The measure has not yet qualified for the ballot, and proponents are in the process of obtaining signatures on petitions.
It would require commercial and industrial properties worth more than $3 million to be assessed and taxed at their current market value while maintaining the 1 percent cap.
The 1978 Proposition 13 set a 1% annual property tax cap. It also lowered property taxes by rolling back property values to their 1976 values for tax purposes. Property values could only be reassessed for taxes if there was a change in ownership or new construction.
Alex Stack, a spokesperson for the proposed initiative, said that the 1978 property tax law has enabled large corporations to pay low property taxes. Many large corporations have escaped reassessment because they’ve owned land for over 50 years or have structured deals on sold property to avoid reassessment.
For example, if a property sale is split up between three parties, where no more than one party is taking more than 50 percent, Stack says the property won’t be reassessed.
“An unintended consequence is schools and local communities don’t get the funding and resources they need to really succeed,” Stack said. “Right now, California ranks 39th in the entire country in per-person spending,” he added. “We have the most overcrowded classrooms in the country and some of the worst rates of nurses and counselors to students in the entire country.”
The proposed initiative would require commercial and industrial properties worth more than $3 million to be assessed and taxed at their current market value while maintaining the 1 percent cap.
The campaign for the initiative is being funded and supported by a broad coalition of educators, labor unions, Silicon Valley groups and grassroots organizations
The measure exempts residential and agricultural property from reassessment. Homeowners, renters, agricultural workers and anyone owning $3 million or less in commercial or industrial property will not see their property taxes change. Large corporations won’t see a change in their property tax rate, but rather a reassessment of their property value for tax purposes.
“At the end of the day, this is a very reasonable approach,” Stack said. “We’re just making sure that these commercial and industrial properties are being taxed at current market value while still maintaining the 1 percent cap.”
If passed, the initiative could reclaim up to $12 billion for schools and local communities. The Legislative Analyst’s Office estimates that the proposed initiative could generate $6.5 billion to $11.5 billion for schools and local governments after administrative costs are taken into account.
According to the LAO, about 60 percent of property tax revenue goes to local governments and 40 percent goes to schools and community colleges. In order to ensure that the money goes to schools and local communities, the initiative has included a number of accountability provisions. The funds generated from this initiative must be made public so that Californians can read and disseminate the information.
Opponents fear that, if passed, the initiative will continue to drive large corporations out of the state.
The campaign for the initiative is being funded and supported by a broad coalition of educators, labor unions, Silicon Valley groups and grassroots organizations. It has received major funding from the California Teacher’s Association, Chan Zuckerberg Advocacy and SEIU California State Council. Eight former and current presidential Democratic presidential candidates have endorsed the measure. A list of its endorsements is available on the initiative’s website.
The initiative has been characterized by some opponents as an attack on property tax law established under Property 13. Proponents of the initiative worry that the characterization may scare some voters into thinking their property taxes will be affected.
“They claim they are strengthening the measure to help it pass,” says Joel Fox on his Fox & Hounds site. But “what they are doing is recognizing flaws in the initial version and not changing the thrust of a measure designed to raise taxes, consumer costs and undercut Proposition 13.” Fox is the former president of the Howard Jarvis Taxpayers Association. The late Howard Jarvis spearheaded the effort to approve Proposition 13 in 1978,
Opponents have also voiced concerns about the impact the initiative will have on businesses. They fear that, if passed, the initiative will continue to drive large corporations out of the state.
The initiative must submit 998,000 signatures by April 14 to get on the ballot in November.
Others are concerned about the impact the initiative will have on small businesses. California Taxpayers Association President Rob Gutierrez told The Sacramento Bee that he felt protections for small businesses are not strong enough. Many small business owners, Gutierrez said, are renters who may see the cost of their rent increase if property taxes on their buildings increase.
The initiative seeks to protect small businesses by delaying reassessments for properties in which small businesses account for 50 percent or more of the occupied space until 2025-2026. Small business owners who own property with valued at $3 million or less will not be taxed. Stack argues that the initiative actually helps small businesses by leveling the playing field.
He added that the initiative will only impact “a handful of the oldest, largest corporations in the state.”
“One estimate we’ve seen is that nearly 80 percent of the reclaimed revenue, of the $12 billion, would come from only 8 percent of commercial and industrial properties in the state,” Stack said.
The initiative must submit 998,000 signatures by April 14 to get on the ballot in November. Volunteers began collecting signatures at the end of October. As of January, volunteers have collected roughly 750,000 signatures at a pace of about 250,000 signatures per month. Stack says the campaign’s goal is to collect and submit 1.6 million signatures by the deadline.