California's famed Proposition 13 property tax limitation law could be in for a change. Groups supporting a split-roll, where commercial properties would lose Prop 13 protections, have collected over 860,000 signatures to put the issue before voters in 2020.
Prop 13 was part of a nationwide tax revolt in response to surging home prices that resulted in skyrocketing property tax bills. Once Proposition 13 passed, property assessments for the 1978-79 fiscal year were required to be rolled back to 1975-76 values, establishing the first base year values in California. Properties that have not sold or undergone new construction since February 1975 are said to have a 1975 base year value.
Prop 13 caps property taxes at 1% (for the general state levy - plus voted indebtedness) of assessed value at the time of acquisition, and limits upward reassessments of property values to a maximum 2% per year as long as the property doesn't change hands or new construction occurs on the property. Over time, it has created widely variable property taxes on similar properties, depending on how recently they were built or bought.
California Schools and Local Communities Funding Act
The new ballot measure, known as the "California Schools and Local Communities Funding Act," seeks to amend the state constitution and end Prop 13 tax restrictions on commercial and industrial properties. Single-family homes would retain their current property tax limits.
Backers of the measure project it could raise as much as $11.4 billion annually for state and local governments with about $4.5 billion going to schools, which desperately need additional funding.
On the other hand, opponents warn that higher commercial property taxes will ultimately be passed on to consumers and will become another contributor to the high cost of doing business in California, which will damage the economy and repel investors.
Stakes are High
Analysts are predicting this could become one of the most expensive California ballot initiative fights in history. Business groups, including the California Roundtable, expect to spend up to $100 million to defeat the ballot measure. The coalition backing the changes to Prop 13 is currently prepared to spend as much as $50 million to win its passage.
Voters defeated a previous effort to impose a split-roll system. Proposition 167 lost by a 2-to-1 margin in November 1992. However, a poll by USC and the Los Angeles Times found that if the vote were taken now, it would be a close race with support for a split-roll at 54%.