By Sheryl Hamlin
The Ventura County Taxpayers Association hosted Rob Gutierrez from CalTax on Thursday October 3, 2019 to review the proposed Split Roll Proposal which has qualified for the 2020 ballot.
Note that there have been two versions of this proposition. Here is a link to the proposition and a comparison of the two versions: Ballot Measure Details
What’s in a Name?
With a proposition name like this, it is clear who the constituencies are:
California Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative (2020)
Will this name draw out voters who read only the name on the summary? The audience was unsure, nor is there polling.
Assessment Every Three Years
Proposition 13 brought stability to taxpayers and a predictable source of revenue to cities. With the Split Roll proposal, the predictability will disappear.
The current Split Roll proposal targets individual properties or owners with a combined commercial portfolio value of $3 million or greater. Housing and agriculture are excluded, but not vacant land.
Now how does the Assessor make the new assessment? There are two standard methods for commercial property: income potential and comparable sales. Businesses whose properties span multiple counties must coordinate the assessment across counties including protests. A protest triggers a manual assessment for which hundreds of new employees will be required in county assessor offices across the state. A protest will pause the distribution of the property taxes for the properties in question until resolution, which means cities will not see the revenue until resolution of the protest.
A computer can make the first cut, but when the bills are created, the protests will begin.
Financially secure chain stores who own their property will be able to pass on the costs to consumers and survive, but what about struggling retail malls? A single user retail tenant typically pays a Triple Net Lease (N-N-N) which means the taxes are paid by the tenant. In a mall, the mall owner passes on these costs based on square footage. One need only walk through Pacific View Mall in Ventura and see the vacancies.
The self-storage industry is very concerned about the effect on its business. Read that industry report here: Self-Storage Disastrous Tax
Another California industry which could see hikes in prices and closures is the retail gasoline industry. A quick review of these stations for sale show that many will fall into the $3,000,000 cutoff for the split roll: Loopnet Gas Stations for Sale
Assessors Asked for Staffing
The LAO (Legislative Analyst Office) collected estimates from assessors about staffing implications of the Split Roll. This information is shown as potential administrative costs on the ballot summary.
Larry Stone of Santa Clara said it is “impossible to implement” as written. Read that statement here: Larry Stone Statement
Tax Burden Shift 1979-2016
Mr. Gutierrez displayed a chart showing the property tax burden in 1979-80 versus 2015-2016. The shift was as follows, data for which was obtained from the BOE and the LAO:
Source:California Tax Foundation
The notion that there has been a huge shift is clearly not true.
Mr. Gutierrez reported that a week of television advertisement In California costs $8 million. Look at the supporters of the Split Roll and understand the funding impetus.
The Elephant in the Room: Demographics
It should not be a secret that California school districts are experiencing flat to declining enrollment. There are many reasons including out migration from the state, slowing birthrates, aging population and home schooling.
Declining enrollment plus increasing pension costs are cutting into school district budgets. The Split Roll tax is an attempt to counter these demographic forces. PPIC Declining Enrollment
Districts have successfully passed parcel taxes in recent years as an antidote to these demographic trends. Since 2010, six of seven years showed more parcel taxes passing than failing, according to a Proposition 13 phamplet.
Source:Califoria Tax Foundation
California Rated Low
While Sacramento is smiling over its current “surplus”, others see the state in a fiscal failure. See details here on page 112: Truth in Accounting
California’s debt burden is $275 billion which equates to $21,800 per taxpayer. So why would Californians want to increase the burden on the taxpayer and potentially maim or drive away business from the state?
The Split Roll has been proposed before but conditions have “improved” for a huge turnout in 2020. This initiative could be highly affected by turnout. Mr. Gutierrez indicated various polls with support increasing with turnout. Follow the PPIC polling here: PPIC Polling
Political Theatre California Style
This article sets the stage for a historic battle in November 2020 but not at the national level. It is Proposition 13 that will be at stake. Candidates including Elizabeth Warren have endorsed the Split Roll.
As always, all eyes are on California: Epic Battle
For more information about author: sherylhamlin dot com