2020 California Proposition 15

The 2020 California Proposition 15, also known as the Schools and Communities First Initiative, is a citizen-initiated California ballot proposition that would create a split roll property tax system and spend the revenue increase on education and other public services. It will appear on the statewide ballots in the 2020 California elections on November 3, 2020, at the same time as the Presidential and Congressional elections, and many other state and local elections. It would amend the Constitution of California to adjust the original 1978 California Proposition 13, and enable commercial properties to be taxed at their fair market value, as opposed to the value at the time when they were purchased. It would apply only to commercial properties whose owners have more than $3 million in holdings, so it would exempt small businesses and individuals from this tax increase. Upon full implementation, this initiative would raise between 8.5 billion and 12 billion dollars in property tax revenue per year for education and other public services.[1]

See also: 1978 California Proposition 13 § 2020 California Schools and Local Communities Funding Act of 2018
Proposition 15
Schools and Communities First Initiative
Elections in California

Background

In 1978, the California voters passed 1978 California Proposition 13, which limited property taxes to 1% of assessed value, limited increases in assessed value to at most 2% per year, and set assessed value at the 1976 value. The assessed value only resets when the property is sold. This led to a drastic decrease in funding for education and other public services in California. Local government revenues decreased by 60%, and forced local authorities in California to rely on sales taxes, which can be more regressive.[2]

If Proposition 15 passes, it will adjust the formulas used by tax assessors, such that individual homeowners and business owners with private property values less than $3 million will still be protected by Proposition 13; while the biggest corporations will have to pay higher property taxes in light of their continuously assessed values.

Property transfer loophole

The initiative, often referred to as "split roll", was created in part to address a property transfer loophole, but would go beyond closing the loophole by mandating the reassessment of commercial properties at least every three years, at a rate to be determined by the California Legislature.[3]

Some businesses have exploited a property transfer loophole in Proposition 13 implementing statutes created by the California Legislature[4] that define what constitutes a change in property ownership.[5] To take advantage of this loophole, businesses only have to make sure that no partnership exceeds the 50% mark in control in order to avoid a reassessment. The Legislature could close this loophole with a 2/3 vote.[6] In 2018, the California Board of Equalization estimated that closing this loophole would raise up to $269 million annually in new tax revenue.[7]

There have been several legislative attempts to close this loophole (2014, 2015, 2018, and 2020), none of which have been successful. It was almost closed in 2014 by a bipartisan coalition in the state legislature but the effort died after progressive politicians, organized labor, and community groups refused to support the effort.[8] In 2015 and 2018, Republican efforts to fix this loophole were stalled by Democratic state legislators in legislative committee.[9] Another Republican attempt to close the loophole was made in 2020.[10] Democrat Don Perata, former California senate leader, said this loophole is intentionally left open by his party to create justification for ending Proposition 13.[11]

Support

This measure is supported by a broad coalition of federal, state, and local elected officials, advocacy groups, and the California Democratic Party. It is also supported by the Chan Zuckerberg Initiative, the Service Employees International Union, the American Federation of State, County and Municipal Employees,[1] and labor activist Dolores Huerta.[12] Elected officials who support it include mayors Eric Garcetti, London Breed, Libby Schaaf, and Darrel Steinberg, of Los Angeles, San Francisco, Oakland, and Sacramento, respectively. They also include United States Senators Kamala Harris, Cory Booker, Bernie Sanders, Elizabeth Warren, and California State Senators Nancy Skinner, Scott Wiener, and Bob Wieckowski.[1] Organizations that support this measure include the Sierra Club[13] and the League of Women Voters.[14] This initiative attracted 1.7 million signatures as part of the ballot initiative campaign, a number which organizers describe as 'record-breaking'.[15]

Many argue that the additional public revenue provided by this initiative is badly needed, particularly in light of the effects of the COVID-19 pandemic in the United States. The pandemic led to an economic recession and a sharp decline in government revenues, and so additional property tax revenue is badly needed. Mayor London Breed referred to this in her statement of support, saying “When I look at our dire budget deficits over the next couple of years, and then I see these revenue estimates showing how much we can invest in our community without having to raise any taxes on residents, it makes it more important for me to give my full support on this initiative.”[16] Dolores Huerta also argued that this revenue will help fund public health services such as clinics and public hospitals, which are facing the additional burden of the pandemic.[12]

Opposition

This measure is opposed by the Howard Jarvis Taxpayers Association, which has its historic roots in spearheading the initial Proposition 13 in 1978. It is also opposed by business interests represented by the California Chamber of Commerce and the California Business Roundtable.[1][17]

Polling

Polls have been conducted between 2018 and 2020 indicating that this initiative attracts between 46% and 56% of Californians' support. [1] The most recent poll, conducted by the Public Policy Institute of California in April of 2020, shows this initiative attracting 53% support.[18] In order to pass, it needs a simple majority (>50%).

References
  1. "California Proposition 15, Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative (2020)". Ballotpedia. Retrieved 2020-07-25.
  2. "Analysis: The California Schools and Local Communities Funding Act". Southern California Grantmakers. 2019-12-05. Retrieved 2020-07-25.
  3. California Schools and Local Communities Funding Act of 2018, Section 6.
  4. Proposition 13 implementing statutes were adopted by the California Legislature and are not part of the actual constitutional provisions of Proposition 13.
  5. Chapter 2 of Part 0.5 of Division 1 of the California Revenue and Taxation Code.
  6. Eskenazi, Joe (2012-01-04). "Proposition 13: The Building-Sized Loopholes Corporations Exploit". SF Weekly. Archived from the original on 2012-03-08. Retrieved 2018-11-26. Meanwhile, it would require a two-thirds vote in the Legislature to close loopholes regarding corporate "change of control."
  7. "Legislative Bill Analysis" (PDF). State Board of Equalization.
  8. Abramsky, Sasha (2015-12-22). "Have California Voters Finally Had Enough of Prop 13?". The Nation. In 2014, San Francisco–based state Senator Tom Ammiano, a Democrat, proposed legislation to redefine “ownership change” for businesses. The bill would have ended abusive, patently unfair practices such as those surrounding the Miramar Hotel deal. On the surface, it seemed likely to pass: The GOP wasn’t averse to the reform, the California Chamber of Commerce came out in favor, and the Howard Jarvis Taxpayers Association made statements indicating the group could live with it. Yet the bill died—and not just, or even primarily, because of corporate opposition. Paradoxically, many progressive politicians opposed it, as did organized labor and a large number of community groups. They believed the bill was far too narrow in scope and worried it would take the wind out of a bigger and broader reform movement that was finally coming into its own—one that wouldn’t just change the definition of ownership, but would also require regular reassessments of the value of commercial real estate, both the buildings and the land on which they sit.
  9. "Do Democrats in Sacramento really want to fix Prop. 13 problems?". Orange County Register. 2018-07-05. Retrieved 2019-12-20.
  10. "Senator Patricia Bates Authors Measure to Clarify Prop. 13 (1978) Property "Change of Ownership"".
  11. "Opinion: Don't alter California's revered Prop 13 tax initiative". The Mercury News. 2019-10-20. Retrieved 2019-12-20.
  12. "Sí se puede: Dolores Huerta on a November ballot measure on commercial property". SFChronicle.com. 2020-06-23. Retrieved 2020-07-25.
  13. "2020 Endorsements". Sierra Club. 2019-10-03. Retrieved 2020-07-25.
  14. "Prop 15 – Schools and Communities First". LWVC.org. 2017-12-19. Retrieved 2020-07-25.
  15. "Schools and Communities First". Schoolsfirst. Retrieved 2020-07-25.
  16. "California measure to reform Proposition 13 qualifies for ballot". SFChronicle.com. 2020-05-30. Retrieved 2020-07-25.
  17. "California gears up for blockbuster year of ballot measures". politico.com. Retrieved 2020-07-25.
  18. Baldassare, Mark; Bonner, Dean (April 2020). "Californians & Education" (PDF). Public Policy Institute of California.
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