Commercial Real Estate Practitioners:
The effort remove Proposition 13 protections from your properties officially kicked off today in Sacramento. Although we have been closely monitoring – and warning about – the activities of this group for the past year, today’s announcement “makes it real” and should be shared broadly with your members and colleagues and clients. Below is some coverage of the announcement by the Sacramento Bee.
Union-led coalition launches campaign to change Proposition 13
By Dan Walters
A coalition of public employee unions and other liberal groups, including many churches, launched a campaign Thursday to alter Proposition 13, California’s iconic property tax limit, and raise billions of dollars by hiking taxes on commercial property.
The organization, Make It Fair, is headed by unions, including the California Teachers Association and the Service Employees International Union, which would be the main source of millions of dollars to qualify the initiative for the 2016 ballot and campaign for its passage.
The proposed measure would remove Proposition 13’s limits on what the organization considers to be commercial property – industrial, retail and office complexes, mostly – while leaving them in place for owner-occupied homes, residential rental properties and agricultural land.
If enacted, the Proposition 13 revision would raise as much as $9 billion a year that advocates say are needed to adequately finance schools and improve local government services.
“California is losing billions of dollars every year thanks to problems in the law that allow some big corporations and wealthy commercial property owners to avoid paying their fair share,” campaign spokesman Anthony Thigpenn said in a statement as backers rallied at Sutter Middle School in Sacramento.
However, the campaign to revise Proposition 13, passed by voters in 1978, will face stiff opposition from a business-backed coalition called Californians to Stop Higher Property Taxes.
“California’s small businesses struggle every day to overcome our state’s massive tax burden and keep their doors open,” said Rex Hime, president of the California Business Properties Association. “By continuing to raise taxes, the state is forcing businesses out of California, and they’re taking our jobs with them. A split roll property tax proposal is the last thing California’s businesses need. Further, the increased costs from this proposal will ultimately be passed on to California consumers at a time when many California families are struggling to make ends meet.”
Proposition 13 limits property taxes on all forms of property to 1 percent of value, plus what’s needed to retire bonds and other debts, and limits increases in value to no more than 2 percent a year, except when properties change hands. Newly constructed homes and commercial buildings are placed on the tax roll at their initial values, but are protected by the limits thereafter.
Critics say that business properties rarely change hands, and when they do the deals are structured to avoid triggering an upgrade of taxable values by never transferring more than 50 percent ownership in one transaction. The result, they say, is a loophole that allows business property owners to avoid a fair share of taxes.
Last year, business groups and some tax reformers agreed to a revision of those standards that stopped short of a “split roll” that would remove all limits on commercial property. But the agreement fell apart later and never was enacted.
Senior Vice President of Governmental Affairs
California Business Properties Association