The Fight to Save Proposition 13 Protections

LOS ANGELES-Proposition 13 was adopted by California voters in 1978 and set the property tax rate at 1% of the assessed value. It caps annual increases in a property's assessed value at no more than 2% a year, unless there's a change of ownership or new construction.

If there is an ownership change, the purchase price becomes the "base year" value, and the increase is again limited to no more than 2% a year. The tax itself is capped at a maximum of 1% of assessed value, with exceptions for servicing debt approved by two-thirds of the voters or servicing school bonds approved by 55% of the voters.

Today there are three basic threats to our industry and Proposition 13 which include:

1. Change the percentage rate for commercial property from 1.0 to something higher – either 1.55 or maybe even a doubling to 2.0. We have seen this in previous initiative drafts, and a proposal like this could bypass the legislature with signature gathering to qualify for the ballot. This would need a public vote of 50%-plus.

2. Change reassessment to annually or every three years. This would bring all commercial property to market value in one or three-year periods. One proposal (AB 188 – Ammiano) has been introduced in the legislature and is currently in Assembly Revenue and Tax. However, a proposal like this could bypass the Legislature with signature gathering to qualify for the ballot. We have several sources now suggesting that a group, California Calls, may actually file an initiative like this for the November 2014 ballot. The group's website suggests it is planning for a 2016 ballot measure. (www.cacalls.org) This group helped write and qualify Proposition 30 for the ballot in 2012.

3. Reduce the vote threshold for parcel taxes from 66.6% to 55%. There are several legislative proposals to reduce the vote threshold for some or all purposes (SCA 3, SCA 4, SCA 7, SCA 8, SCA 9, and SCA 11). There is also a proposal to allow different kinds of property to be taxed different parcel tax rates, for example a parcel tax might charge residential property $25 per parcel but commercial property $xx per square foot or apartment building $xx per door (AB 59 - Bonta). This would be a defacto split roll. This uniformity issue is statutory and could be changed by majority vote of the Legislature with the Governor's signature, but reducing the vote threshold from 66.6% to 55% is a constitutional amendment requiring a two-thirds vote of the Legislature and a public vote of 50%+.

Many of these proposals were stalled in the State Legislature this year, but we understand that certain legislators will initiate a major push to weaken Prop 13 when the Legislature reconvenes in January. The cost of these proposals is significant – ranging from a few billion dollars to as much as $10 billion annually.

The business and taxpayer communities are uniting to oppose these threats which would have a severe negative fiscal impact on our industry, our clients and their businesses and further push much needed jobs out of California.

Gilbert V. Gonzales is a senior director out of Charles Dunn Co.'s Downtown Los Angeles office. He specializes in office leasing/sales and real estate development within the downtown L.A. and Tri-Cities (Pasadena, Glendale, Burbank) marketplace. The views expressed in this column are the author's own.