We have an opportunity this election year to correct a problem that has been growing for the last 40 years. Voting yes for Proposition 15 will bring needed dollars to our schools and communities — dollars that large industries and corporations have kept for themselves, providing large executive salaries and avoiding straightforward sales of properties through these years.
Currently, our children do not have the resources in their schools to cope with the society they must live in. We do not have full-time counselors, nurses, or librarians in our schools to help our children with the issues around immigration, COVID-19, and poverty. In 1978 our schools were seventh in the nation in terms of funding. Now our state is 37th or even 41st, depending on the report one reads. Our classroom size is the largest in the nation — teachers are leaving.
When Prop. 13 of 1978 was initially passed, it provided revenue from both large corporations and from homeowners at about a 50:50 ratio. But over the years this ration has eroded and now corporations and industries provide only about 10 percent of the revenue compared to 90 percent from residential sources.
The League of Women Voters of California has sought appropriate ways to address the problems with the old 1978 Prop. 13 for several years because it does not meet the needs of our communities and our schools. The solution is to increase the contributions from big businesses while assuring that small businesses are protected from large tax increases. Prop. 15 meets that measure: It protects small businesses whose property is valued at less than $3 million and personal or business property exemptions have been increased to $500,000.
A recent study was released by Beacon Economics, commissioned by the Silicon Valley Community Foundation. It included 13 counties in the Silicon Valley area. “A random sample of about 22,000 commercial property transactions in California’s major population centers from 2018 to 2020 found that two-thirds sold for less than $3 million. The median price was $1.6 million.” Therefore, most properties in California would be exempt from the proposed Prop. 15. The study determined that there will be little effect on small businesses, even those with triple net leases.
Exemptions include the following:
• Small businesses that are home-based (nearly half of all those in CA are in homes)
• Residences and rental home properties, as well as congregate home dwellings, such as nursing homes and group homes
• Mobile home parks and the residential parts of mixed-use dwellings
• Land used for agriculture (growing annual crops like broccoli and tomatoes)
Currently large corporations and industries benefit from their old low property assessments and even effectively discourage new business and industry from coming into our state. We are then at a disadvantage in attracting new industries to California because their property would be assessed at current values.
Increased property tax revenue will also help cities and counties provide services needed in our communities. County supervisors will have discretion as to how the community funds are spent and accordingly the responsibility to report back to the state as to how those dollars were spent for transparency.
The revenue generated by only the top 10 percent of our large industries and corporations — oil companies and entertainment centers like Disneyland — will provide about 92 percent of the funds, which may be as much as $12 billion per year. These companies would start being reassessed in 2022-23.
The landlords serving small businesses will not be reassessed until 2025-26, several years from now. There is time to rebound from our current economic situation and the pandemic. And, nearly all of them will not be affected by Prop. 15 at all.
In summary, Prop. 15 only affects commercial property worth more than $3 million, requiring reassessment at market value once every three years instead of waiting for the property to change ownership. Because of corporate structuring it is often difficult to determine when a commercial property changes ownership with the result of properties never being assessed as a whole. This reduces the amount of property tax revenue available to schools and communities.
Prop. 15 does not affect home-based businesses, which account for nearly half of all small businesses. They will continue to be treated as residential property.
Further, Prop. 15 reduces the tax on tangible personal property (business equipment) up to $500,000 for all businesses, whether they own commercial property or not. This benefits small businesses. It is anticipated that 10 percent of the commercial properties will account for over 90 percent of the almost $12 billion raised by Prop. 15. The money stays within the counties and does not go into the State General Fund.
We think our communities and schools deserve equitable funding for a bright future. We strongly urge everyone to vote yes on Proposition 15.
Pam Flynt Tambo is vice president of the League of Women Voters of Santa Barbara.
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