Initiative Update

Initiative Update: New Attack on Proposition 13

The proponents of the split-roll initiative that qualified for the November 2020 ballot filed a new version (Initiative 19-0008) August 13 in an attempt to fix drafting errors and make the measure more appealing to voters – in part by allocating tax-hike revenue to some school districts that would not have received as much funding under the original version.

In an interview, the proponents said they will not remove the original version from the ballot until the new version (also aimed at the November 2020 ballot) qualifies.

The revised initiative still repeals Proposition 13 protection for most business property by requiring frequent market-value reassessment of commercial and industrial properties – regardless of whether the properties change ownership or undergo new construction – and thus remains a major property tax increase on California businesses.

The tax increase would lead to higher consumer prices for goods and services in California and would prompt many employers to leave the state or close operations due to the additional cost of doing business.

In a press release announcing the refiling, the Schools and Communities First campaign put a positive spin on its decision to spend millions to replace a qualified initiative, stating that the new version includes “notable improvements to implementation dates, expansive new small business tax relief, clarified education financing and stronger zoning language to ensure large corporations cannot avoid reassessment.”

Like the original initiative, the new version was filed by leaders of the California League of Women Voters, California Calls and PICO California. Major public employee unions had endorsed the initiative filed by the three pro-tax groups, and provided relatively minor financial support after it qualified, but were not actively engaged in the campaign or drafting of the initiative. However, the California Teachers Association, the Service Employees International Union and the California Democratic Party indicated this week that will play a significant role in backing the new version.

The proponents must collect 997,113 valid signatures by May 1 to qualify the new version for the November 2020 ballot, at an estimated cost of $5 million to $10 million.

Californians to Stop Higher Property Taxes, the opposition campaign co-chaired by CalTax, said that now that split-roll proponents have acknowledged the deep flaws in the original split-roll initiative, they should officially withdraw it from the ballot.

“This reboot doesn’t change the fact that the property tax increase would increase the cost of goods and services used by Californians, and would prompt more employers to move out of the state or shut down entirely,” CalTax President Robert Gutierrez added. “Fewer jobs and a higher cost of living – two things that Californians definitely do not need.”

Gutierrez also noted that the tax hike is unnecessary, as the state has an operating surplus and record-high reserves – even after approving $13.4 billion in increased spending in the 2019-20 budget – and local governments have been enjoying strong property tax revenue growth.

“Any attempt to repeal Proposition 13 protections will be met with strong opposition, no matter how it is repackaged,” Gutierrez said.

The alterations in the new initiative include:

  • Changing the implementation date. The original was intended to be qualified for the 2018 ballot, but when it instead qualified for the 2020 ballot, assessors complained that its implementation date would be impossible to meet.
  • Changing the threshold for qualifying for a “small business” exemption from frequent market-value reassessments. This limited exemption from the reassessment requirement would be allowed if the market value of all property owned by the taxpayer in the state and used for business operations totals less than $3 million, up from $2 million in the original. This exemption could be repealed by future initiatives, and would be unpredictable for taxpayers, as the government’s opinion of “market value” could change dramatically from year to year.
  • Changing the provisions that allocate the tax revenue to schools.

“Split roll proponents have known for a year and a half that their ballot measure was flawed, yet they spent nearly $3.5 million to qualify the measure and refused to withdraw it from the ballot,” said John Kabateck, state director of the National Federation of Independent Business and co-chair of Californians to Stop Higher Property Taxes. “How are we supposed to trust them with something as important as our property taxes?”

CalTax noted that Proposition 13 has made home-ownership more affordable by making property taxes predictable and manageable. Proposition 13 solved the property tax unaffordability crisis that impacted the state for more than a decade before it was approved by voters.

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