In California, Schools & Communities First announced that it would file a new version of an initiative to require commercial and industrial properties, except those zoned as commercial agriculture, to be taxed based on their market value. Currently, Proposition 13 (1978) requires the taxable value of residential, commercial, and industrial properties to be based on the property’s purchase price, with an annual adjustment equal to the rate of inflation or 2 percent, whichever is lower. The change was estimated to provide $6.5 billion to $10.5 billion in additional revenue. Both the version of the initiative that has already qualified for the 2020 ballot and the refiled version would allocate revenue from the increased commercial and industrial property taxes to local community college and school districts and to local governments.
In 2018, proponents spent $3.5 million to qualify their initiative for the 2020 ballot after initially targeting the 2018 ballot. They filed a new version of the initiative on August 13, however, and announced they would be focusing on a new signature petition drive to put the revised version on the ballot.
Tyler Law, a spokesperson for Schools & Communities First, said that the campaign would not officially withdraw the currently qualified initiative from the ballot until the refiled initiative qualifies. Law also said of the new effort, “The committee’s got the money. We’re going to get it on the ballot.”
What’s different about the new initiative?
- The qualified initiative would provide an exception from reassessment under the new rules for businesses with property value up to $2 million. The revised version would increase that exception threshold to $3 million.
- Both versions provide a full property tax exemption for businesses with 50 or fewer full-time equivalent employees. The new initiative would add additional requirements for a business to qualify for the exemption:
- independently owned and operated;
- located in California;
- owned by California residents; and
- no major statewide influence on its industry.
- Both initiatives allocate a portion of revenue to a fund for community college and local school districts, with the fund distributed to schools based on state formulas. The new initiative, however, specifies that 11% of the school fund would go to community colleges, and 89% would go to public schools, charter schools, and county education offices. It would also require a minimum of $100 per full-time student (adjusted annually based on revenue) for each community college and school.
- The currently qualified initiative would go into effect on January 1, 2020. The new version would go into effect on January 1, 2022, and would phase in the reassessment rules over up to three years for property at least 50% occupied by small businesses.
Another difference between the two initiatives is the signature requirement for qualifying them for the ballot. Based on the low turnout of 2014, the currently qualified initiative required 585,407 valid signatures. Proponents spent $3.5 million to collect 855,623 signatures, with 661,306 of them deemed valid. The revised initiative will need to qualify for the ballot according to requirements determined by turnout at the 2018 election. This means they’ll need 997,139 valid signatures, which is the largest initiative signature requirement in California’s history.
Ballotpedia’s aggregation of polling on the initiative that has qualified for the ballot showed support for the measure ranging from 46% to 56%, with an average of 51% and the most recent poll showing 54% approval.
Law said, “For forty years, California’s novel approach to taxing commercial and industrial property has starved funding for schools and local communities, disadvantaged small and startup businesses, and exacerbated our housing crisis.” Explaining the revised initiative effort, he said, “[A] robust statewide signature gathering organization began prior to the 2018 election, but the ultimate submission and qualification process placed the initiative on the 2020 ballot. As a result, we are refiling the initiative to substantively strengthen the measure, including expansive new small business tax relief, and widen the path to victory in November 2020.”
In response to the new initiative, California Business Roundtable President Rob Lapsley said, “This is just another, equally flawed measure aimed at dismantling Proposition 13. Proponents should at least withdraw their existing measure, which they now acknowledge is fatally flawed. However, there are no tweaks or amendments that can be made to this split roll measure that will prevent it from being a major, multi-billion-dollar tax on all Californians in the form of higher prices on everything we buy – from groceries and gasoline to diapers and day care.” Lapsley is the co-chair of Californians to Stop Higher Property Taxes, the committee registered to oppose the qualified initiative.