CA Proposition 15 could bring millions to Oakland Schools, new burdens to businesses, tax assessors
on October 12, 2020
Voters will decide next month whether to approve a ballot measure which could provide a windfall for schools and local governments, but a far greater burden on businesses and tax assessors.
The existing property tax law is governed by a 1978 ballot measure, Proposition 13, which significantly limited state property taxes. But the new measure, California Proposition 15, would modify this law to create a “split-roll,” where commercial businesses worth more than $3 million would be taxed based on their current market value, while all other building owners would pay the same property tax rates. Altogether this could generate up to $11.5 billion each year, according to estimates from the California Legislative Analyst’s Office.
Polling results released last month by the University of California-Berkeley’s Institute of Governmental Studies suggest that voters are split on the measure. Forty-nine percent of respondents told researchers they would vote for Prop 15, while 34 percent said they opposed it.
A “game-changer” for schools
Money generated by Prop 15 would be split 60-40 between local governments and schools, with eighty-nine percent of the education funding going to K12 school districts and the remaining 11 percent to community colleges. According to the California Teachers Association, Oakland Unified schools alone would receive more than $25 million a year from the additional revenue generated by Prop 15.
OUSD School Board Vice President Shanthi Gonzalez said that money would be “a game-changer” for local students.
“The big thing about this is it’s not one-time funding—it’s ongoing,” she said. “We get a lot of generous grants but the problem is that that’s not sustainable.”
Gonzalez said that although there have been no conversations yet between all the board members about how money from the Proposition might be spent, she hoped it would go toward teacher raises and gifted and talented programs.
“One of the big casualties of Prop 13 has been the loss of programs like gifted and talented education,” she said, referring to the existing California property tax law. “OUSD spends a lot of money on trying to get our highest need students up to grade level, making sure that they’re ready for college. But we have not invested at the other end of the spectrum.”
If Prop 15 passes it would only increase the school district’s more than half-billion-dollar budget by about 4.47 percent. Jody London, the president of the OUSD school board, said she and her constituents have long-supported changes to the property tax laws, but that they wouldn’t be a panacea for underfunded schools.
“It’s great to have that additional money— for us it would probably fund a couple of raises,” She said. “I mean, it’s definitely the right thing to do but it’s not going to get us to where our kids need to be.”
Hidden costs for businesses, assessors
Matt Klink, the spokesman for the No on 15 campaign, said Prop 15 puts education last not first.
“It is entirely misleading to say that schools are the primary beneficiary of this measure,” he said. “Nothing in Proposition 15 that guarantees that the money that does go towards education will find its way into the classroom.”
Opponents of Prop 15 also say that the measure could harm the state’s economic health. State and local business organizations including the Bay Area Council, California Taxpayers Association and Buildings Owners and Managers of Oakland-East Bay all oppose the measure.
Rex Hime, the President and CEO of the California Business Property Association, said that although the measure only targets large businesses it could do serious damage to small businesses as well.
“So many small businesses rent or lease their particular facilities, depending upon the kind of lease that they have, there might see an increase,” Hime said. “The costs of increased taxes… have already been built in to be passed directly along to the tenant.”
If Prop 15 passes, tax assessors will have three fiscal years, stretching from 2022 to 2025, to reassess the value of all commercial properties to see if they meet the new $3 million threshold. More than 1100 buildings in Oakland alone are currently valued at more than $3 million, according to the Alameda County Assessor’s Office, though this number includes both residential and commercial properties. Property owners would also have to pay the increased tax if the total value of all their combined commercial real estate exceeds $3 million.
Phong La, Alameda County’s assessor, said his 190-person staff currently assess about 10 percent of the commercial properties each year. If the measure passes, his staff would need to more than triple that output to meet the demands of the new law.
Under Prop 15 any additional costs incurred by assessor’s offices would be paid out of the additional tax revenue collected. But La remains uncertain whether the state resources would come in time.
“Just like anything else in this world, as long as you have enough time and enough money and enough resources, you can implement things,” La said. “It’s just ‘Are we going to be given enough time and money to help?’”
In addition to the reassessments themselves, Prop 15 would also likely bring in an influx of new appeals from property owners hoping for lower valuations. In a normal year, the county receives about 2000 of these appeals, La said. The county has already exceeded that number, and during a recession, these appeals could number over 12,000, he added.
These effects could be exacerbated by the current economic conditions caused by the coronavirus pandemic, Klink said.
“Now is not the time to raise property taxes in the midst of a COVID-19-inspired recession,” he said. “The proponents of this measure are fond of saying that only the richest will pay; Anybody who’s naive enough to think that you’re going to squeeze eleven and a half billion dollars a year and only super-wealthy are going to pay—I’ve got a bridge that I want to sell you.”
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