Taxpayer Advocate Says Prop 13 Reform Gaining Momentum

In Lenny Goldberg's 30-year lobbying crusade to change Proposition 13, the 1978 initiative that rolled back property taxes in California, he's watched a sad dance of one-step-forward, two-steps-back.

Time and time again efforts at reform in the legislature have been trampled and tripped up by the two-thirds majority requirement that law put into place. But Goldberg is hopeful he can rally support to pass a ballot initiative in 2012 that would split the tax rolls for residential and commercial properties and allow more frequent reassessments of commercial property.

"Substantively there is a pretty unanimous understanding that assessment of commercial property is nonsensical, absurd, loophole-ridden," said Goldberg, the Executive Director of the California Tax Reform Association. "There's been a lot of progress I think in terms of the broad-based understanding."

Proposition 13 passed with overwhelming voter support, part of an anti-tax wave that swept the country and ushered in the Reagan years. It instituted a cap of 1 percent on property taxes in California, stipulating that property value reassessment would only be triggered by a change of ownership of more than 50 percent. It also instituted the two-thirds majority requirement for the passage of any new tax.

Many progressives point to the radical changes of Proposition 13 as the turning point in California from the golden land of opportunity in the 50s and 60s to the land of permanent crisis that it seems to have become.

State legislators have made six attempts since 1991 to reform parts of Proposition 13, but Republicans have almost unanimously opposed such legislation, keeping the required two-thirds majority vote to pass the accompanying tax increase out of reach.

So Goldberg wants to take the issue directly to the voters of California. He said there has been a mounting movement, particularly as the state has fallen into financial ruin, to address the fundamental revenue problem by looking at the legacy of Proposition 13.

"The last polling on the issue of commercial property being reassessed at market value [done by the Public Policy Institute of California] has been very consistently in the range of 58 to 60 percent 'Yes,' 34 percent 'No,'" said Goldberg. He hopes to get the support closer to 70 percent because of the historic bias towards "No" votes on any ballot initiative.

It wouldn't be the first time reformers tried presenting the issue to the public. CTRA sponsored an initiative in 1992, but Proposition 167, as it was known, was voted down 42 to 58 percent. In 2004 the California Teachers Association and filmmaker Rob Reiner collected signatures to get a similar initiative on the ballot but dropped it before the election. In 2005 several attempts to pursue such an initiative were dropped in the petition stage.

Goldberg pointed out that this time is different because of the unprecedented budget crisis. He's preparing an arsenal of information and research that he says will "bring home" the discrepancies of the current tax system by showing people exactly what it means in their district.

"We have a research project going right now that has all the data on commercial property in the state of California and change of ownership, and we're estimating how much money this would mean for every city, county, and school district."

He's also working on showing the shift in the tax burden from majority commercial property dollars to majority residential property in each county. This is especially dramatic in counties that both support large industries and have had thriving residential real estate markets recently, such as Los Angeles and Santa Clara. In Los Angeles County the share of residential property taxes has shifted from 39 percent of the total in 1975 to 56 percent today. In Santa Clara County, the home of Silicon Valley, the share has gone from 50 percent to almost 70 percent.

LAcounty_proptax.jpg
Sources: California Tax Reform Association, and the Alliance for Californians for Community Empowerment

Goldberg said making clear to homeowners that their property taxes will remain the same is essential to selling voters on the split roll.

"I don't even like to call it Prop 13. You've got to take the specific issue," he said. "They're going to say 'They're hurting Prop 13.' No. We're solving this totally loophole-ridden, unfair problem and it will actually benefit homeowners because it will help their communities."

Goldberg anticipates voter concern over driving business out of California, but he said annual reassessment would actually help because it would allow new businesses to compete.

"IBM is paying one hundredth of what their competitors are paying in Silicon Valley because they had their land back in 1975. There are all kinds of businesses that get reassessed on change of ownership that are paying full market value and they're not going anywhere," Goldberg said.

Goldberg said it would also lower development costs because the increase in commercial property tax revenue would be put back into local services and infrastructure.
 
"In fact, major business owners years ago were saying we ought to do split roll and use the money for infrastructure because that's why we have such bad infrastructure problems," he said.

Ultimately Goldberg plans to put together a grassroots community-based campaign over the next year and convince people one library and one PTA meeting at a time.

"One of the advantages of split roll is that the money goes to cities, counties, and schools," he said. "It does not go to the politicians in Sacramento, so it's about police and fire, parks, libraries, and schools. The idea that this will actually help your community is huge."

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I am so glad to know about Lenny Goldberg's crusade. I wasn't aware how much the property tax burden between residential and commercial property has changed in the years since Proposition 13. There would be HUGE benefits to communities to changing to a split roll .