Proposition 15: What is it and what will it do?

09/23/2020

Not everyone remembers Proposition 13. It was passed 42 years ago, in 1978. I am old enough to remember working with my colleagues in the League of Women Voters to defeat it back then and I still have my old bumper sticker “Vote No on Prop 13." So I have an axe to grind, but it’s for a noble purpose: a better California.

Proposition 15 amends Prop. 13. It deals with California’s arcane system of property taxation, and it is complicated. The closer we get to Nov. 3, the greater the flow of misleading information about it. Our league members are doing what we can to inform voters with factual, accurate information.  

Here is a brief outline of the changes it would make to the state’s property tax system. Prop. 15 would require regular market-value property-tax assessments for commercial and industrial property held by very large commercial and industrial corporations. At present, these assessments are made only when a property is sold. It also contains provisions to protect agriculture and small businesses, and it protects homeowners and renters by maintaining existing property tax limits for residential property. Residential properties, including single-family homes, apartments and mobile home parks, will not be reassessed until sold.

New revenue generated by the increased assessment values—estimated at between $10 billion and $13 billion annually—will be allocated to cities, counties, schools and special districts consistent with existing allocation formulas.

Of special importance to the agricultural community in West Marin, Prop. 15 exempts agriculture and commercial agriculture from reassessment until sold. This includes land and agricultural improvements such as barns, dairies and orchards. It also includes a $500,000 exemption for business personal property taxes on business equipment and fixtures such as tractors, above-ground irrigation systems and more. 

Small ranches and dairies would also be protected as small businesses if they are worth $3 million or less, are independently owned and have 50 or fewer employees. For these businesses, such taxes are entirely eliminated—benefiting many small farms.  

Prop. 15 protects small businesses by excluding properties under $3 million in market value and eliminates the business personal property tax for all businesses with 50 or fewer employees.  When sold, they would be assessed at their current value.

School revenue will be pooled statewide, protected for use solely by K-12 schools and community colleges, and county assessors will be reimbursed for the cost of implementation.

That is a lot for one proposition to cover. What would passing it mean for California and Marin County?

First, schools and local governments in Marin would receive an estimated $72 million once the changes are implemented. Sixty percent would go to county and city governments and special districts; 40 percent would go to K-12 schools and the College of Marin. Marin County would get about $25 million; cities would receive an amount dependent on the value of their commercial and industrial properties. For example, Fairfax would receive $178,000; San Rafael, over $5 million. These are local funds to be spent at local discretion, not the state’s. The county’s 32 special districts would receive new revenue as well.

The 40 percent designated for school districts would be pooled statewide and distributed equitably based on the state’s Local Control Funding Formula. Larkspur-Corte Madera would receive $826,861; Shoreline Unified, $38,263.

I want to address two arguments from the opponents of Prop. 15. The first is that this is not the right time to increases taxes on businesses, not when we are pummeled with wildfires and Covid-19. But the changes in assessing commercial and industrial properties will not take place until July 2022, and could be delayed longer. By then, the economy should be recovering from our current disasters.

Second, opponents argue that Prop. 15 would negatively impact small business. But a comprehensive economic report concluded that as much as 84 percent of small businesses would actually see a reduction in their property taxes as a result of Prop. 15. How can that be? 

Fifty-four percent of all small businesses are home-based, protected by Prop. 13’s assessment provisions. Further, small businesses, defined as having 50 or fewer employees and property valued at less than $3 million, would be exempt, and have a $500,000 exemption for business personal property tax. The remaining 16 percent of small businesses that own premises that would be reassessed under Prop. 15 might see an increase in costs, depending on their circumstances. For the 10 percent of small businesses that rent premises that would be reassessed, the precise impact would depend on the disparity between the assessed and market values of their property, and the extent to which market forces allow landlords to raise rents for those businesses.

Proposition 15’s biggest financial impact would be on very large corporate industrial and commercial enterprises: the Chevrons, Walmarts, Targets, Disneyland. An estimated 10 percent of these corporate entities would pay 80 percent of the total anticipated revenue.  These corporations have international standing and are governed by stockholders and investors around the world. They are the ones that have benefited most from our current system of property assessment, and they could finally be paying their fair share.

The League of Women Voters of California has been working with a broad coalition from education, labor, business, social justice and community sectors, first to place Prop. 15 on the ballot and now to encourage voter support.  

Our local communities and school districts have suffered reduced funding since the implementation of Prop 13. Schools throughout the state lack adequate and safe buildings and programs; classrooms are crowded and teachers often inadequately paid. Our League of Women Voters supports Proposition 15 for the benefit of our communities. It’s not the perfect answer to our tax and revenue problems in California, but it’s a vital step in the right direction.  

 

Julie Monson has been an active member of the League of Women Voters of Marin County since she moved to Point Reyes 22 years ago with her husband, Jim.