Capitol Alert

Prop. 13 fight looming over how California taxes business properties

Under proposed changes to Proposition 13, commercial properties would be taxed based on their market value in any given year.
Under proposed changes to Proposition 13, commercial properties would be taxed based on their market value in any given year. The Sacramento Bee

It has been a liberal dream for decades to undo parts or all of Proposition 13, the seminal California initiative limiting the property tax rate.

Is that fight finally coming to the ballot box this fall? A coalition of civil rights and community organizations is expected to begin collecting signatures later this month for a measure to tax commercial properties at market value while leaving in place the Proposition 13 protections for homeowners, a concept known as “split roll.”

Under Proposition 13, approved by voters in 1978, state property taxes are assessed at 1 percent of the purchase price and can only increase annually by 2 percent or the rate of inflation, whichever is lower. Californians who hang onto their property for a long time can, as a result, end up paying far less in taxes than what new buyers would pay. Critics complain the state is losing out on billions of dollars per year in revenue.

The latest “split roll” proposal would instead set taxes for commercial and industrial properties, including vacant land, based on their market value. If approved by voters, it would take effect starting in 2020, and would exclude businesses whose California property holdings are worth less $2 million and companies with 50 or fewer full-time employees.

The Legislative Analyst’s Office estimated this week that the change could increase property tax revenues by about $6 billion to $10 billion annually, though it also warned that the switch would introduce far more volatility into the funding stream. About 60 percent of that money would go to local governments and the remaining 40 percent to schools and local community colleges.

Expect a vicious and expensive campaign if the measure qualifies. The Howard Jarvis Taxpayers Association, named for one of the original proponents of Proposition 13, has labeled it an “attack” on California’s economy, and there are deep-pocketed businesses groups lined up to fight it.

How does the coalition behind the proposal, which includes groups like the League of Women Voters California not generally known for heavy political spending, plan to cope with the opposition? Spokesman Mac Zilber said they are not yet announcing their supporters, but added, “We’re confident that we’re going to be able to raise the resources we need.”

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Alexei Koseff: 916-321-5236, @akoseff