As we approach the Nov. 3 election, a number of real estate-related state propositions on the ballot deserve your consideration.
My last column addressed Proposition 19 – the Property Tax Transfers, Exemptions, and Revenues for Wildfire Agencies and Counties Amendment – and how it will impact the housing market and tax revenues. Below, I discuss Proposition 15 and Proposition 21.
Q: What does Proposition 15 – the Tax on Commercial and Industrial Properties for Education and Local Government Initiative – do?
A: Proposition 15 changes the way commercial – as opposed to residential – properties are taxed under Proposition 13 of 1978, which is currently based on purchase price. The new system would base commercial property taxes on current market value.
Q: Why is Proposition 15 called a “split roll” initiative?
A: Because it creates a “split” in the way property taxes are calculated: one list for commercial properties (with some exceptions) and one list for residential properties.
Q: Where will the additional tax revenues go?
A: Proposition 15 would distribute the revenue to specific areas, rather than the General Fund. First, the revenue would be distributed to: (a) the state, to supplement decreases in revenue from the state’s personal income tax and corporation tax due to increased tax deductions, and (b) counties, to cover the costs of implementing the measure.
Second, 60% of the remaining funds would be distributed to local governments and special districts, and 40% would be distributed to school districts and community colleges, via a new Local School and Community College Property Tax Fund.
Revenue appropriated for education would be divided as such: 11% for community colleges and 89% for public schools, charter schools and county education offices. There would also be a requirement that schools and colleges receive an annual minimum of $100 (adjusted each year) per full-time student, according to Ballotpedia.org.
Q: Who will pay this increase in property taxes?
A: The owners of commercial and industrial properties. There are some exclusions for agriculture and small businesses, and the measure includes some offsetting exemptions for taxes on personal property.
There will be winners and losers with most any of these propositions, and the true effects may not be known for a few years if Proposition 15 passes. My personal opinion is that it will probably be a good change, as it more closely aligns taxes with reality rather than some arbitrary measure.
Q: What is Proposition 21 – the Local Rent Control Initiative?
A: Proposition 21 controls how and by whom rent control ordinances are enacted. A “yes” vote would enable local governments to enact rent control on housing that was first occupied more than 15 years ago, with an exception for landlords who own no more than two homes with distinct titles or subdivided interests.
A “no” vote would continue to prohibit rent control on housing that was first occupied after Feb. 1, 1995, and housing units with distinct titles, such as single-family homes.
Q: What impact will Proposition 21 have on the rental market and landlords?
A: There is quite a bit of disagreement on the true effects of this initiative, and it boils down to whether you are more supportive of landlord or tenant rights.
This is a controversial initiative that may have fairly dramatic effects on the landlord-tenant power balance. This balance has typically favored landlords, which may be one reason rents are so high in this area.
Ballotpedia.org is a good source of additional information, and there are a number of organizations that post their positions on the propositions. The League of Women Voters tends to be a fairly neutral place to start, but you should do your own research and come to your own conclusions. Go vote!