Election 2020: Proposition 15 in 3 questions

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Proposition 15 would change how some commercial properties are taxed in California, bringing in more money for local governments and schools. Photo by Pixabay.

What would Prop 15 do?

To understand Proposition 15, you have to first look back at a much older measure: Proposition 13, which Californians passed in 1978 and which reduced property taxes in the state. One way it did that was by making it so taxes are based on a property’s purchase price, rather than its current market value. Only when a property changes hands does that valuation reset, making Prop 13 a boon for longtime owners. Prop 13 dramatically reduced local tax revenue and contributed to a major decline in school funding in the years that followed its passage. Prop 13 wasn’t the sole reason for that decline but was a major factor, according to education experts.

“I think there's very little doubt that Prop 13 has at least been a substantial cause in relatively low per-pupil funding in California” compared to other states, said Bill Koski, director of the Stanford Law School’s Youth and Education Law Project. “We had the … system that the world envied in the 1960s. And by the time the 1990s rolled around, California was rock bottom in terms of cost-adjusted, per-pupil spending, and we’re still way down low.”

Proposition 15 would amend the California State Constitution to require that some commercial and industrial properties be reassessed and taxed on their market value. In other words, it would raise property taxes for one segment of the real estate market in an attempt to bring more money to cities, counties and schools without completely undoing Prop 13.

Who would pay?

Prop 15 would apply to commercial and industrial properties and property portfolios worth more than $3 million, except those zoned as commercial agriculture. Apartment buildings, although generally categorized as commercial within the real estate industry, would also be exempt. Homeowners would not be affected. 

An analysis commissioned by proponents of Prop 15 found that more than 90% of the new tax revenue would come from the top 10% of highest value properties. High-profile examples include Walt Disney Studios in Burbank, which was last assessed in 1975 and would generate millions of additional tax dollars each year if taxed at market value. 

But opponents say smaller businesses would be affected too. Many landlords would likely pass the costs of higher property taxes down to their tenants, they argue, putting a financial burden on all kinds of shops at a time when many are already struggling amid the pandemic.

“It’s going to come out of somebody,” said Wally Marks, a Los Angeles real estate developer and owner, whose firm owns the Helms Bakery District in Culver City plus properties on Santa Monica’s Third Street Promenade and Miracle Mile, among other locations. “No matter what, it’s going to trickle down to the consumer, in which the turkey sandwich with a side of fries and a diet Coke is going to be that much more expensive, sadly.”

While the measure contains provisions to protect businesses with less than 50 employees from increased costs, including decreased taxes on business equipment, opponents say it’s not enough to counter the potential burdens.

Where would the money go?

It’s estimated that Prop 15 would eventually bring in between $8 billion and $12.5 billion per year in revenue. Sixty percent of the revenues would go to cities, counties and special districts to be used for any number of local projects, like infrastructure or affordable housing, while 40% would go to schools and community colleges. The school funding would be distributed based on the number of students in each school or community college as well as need.

Proponents argue that while Prop 15 will not completely fix California’s school funding woes, it will help address longstanding inequities that have only worsened during the pandemic, particularly in schools.

“Teachers are buying their own stuff because there’s not enough money for materials for children,” said Maria Ruiz, a Boyle Heights parent who raised three sons in local public schools and now works with various education organizations and teaches other parents to become school leaders. “And it’s getting worse, especially in the low-income communities. Before, having a computer was like a luxury. Right now, it is a necessity.” 

She points out that California on its own has one of the world’s largest economies, but also deep inequality. “You see how we’re doing in education?” She asked. “You see the homeless problems? Something’s wrong and we need to fix it.”

Credits

Host:
Steve Chiotakis

Producers:
Christian Bordal, Jenna Kagel

Reporter:
Anna Scott