A call for a “split-roll” measure to separate corporate and residential property tax rules has qualified for the November 2020 ballot, the California Secretary of State’s Office announced Monday.
The measure would revise state law that sets state property taxes at 1 percent of the purchase price and caps annual increases at 2 percent or the rate of inflation, whichever is lower.
The current state law, Proposition 13, helps property buyers estimate their future property taxes by fixing property tax rates according to their assessed value at the time of the purchase, said Santa Clarita Realtor Bob Khalsa.
The new split-roll initiative would tax commercial and industrial properties at market value, while leaving in place the Proposition 13 protections for homeowners.
The revisions would tax certain commercial and industrial property based on fair market value. Current law taxes the property based on the purchase price with limited inflation.
Commercial properties are not assessed the way residential properties are, Khalsa said, and would be at the mercy of individual appraisers’ perspectives.
“Our commercial properties in Santa Clarita are very active, and that would impact every property owner,” he said. “If taxes increased — which they would, because now they’re going to be dependent on an appraiser — then the cost to a tenant increases, and then small businesses would be negatively affected, and their customers. It concerns everyone because restaurants and shops would have to change their prices.”
Santa Clarita City Councilman Cameron Smyth was concerned a “yes” on the split-roll measure would lead to more businesses leaving California.
“I think that the Prop. 13 protections are one of the few benefits left to businesses here in California,” he said. “I’m concerned if that is eliminated, that many of the state’s large employers will start looking elsewhere, which includes Santa Clarita. They’ll look elsewhere where the cost of doing business is more reasonable.”
Representatives from the office of Sen. Henry Stern, D-Canoga Park, said Wednesday they have not begun to talk about an official stance on the new measure.
Stern said in July that he supports Prop. 13 in its current form but has not updated his statement.
“I support Prop. 13 wholeheartedly,” Stern said in July, “and see no reason to change it.”
The Santa Clarita Valley Chamber of Commerce also has not taken an official stance on the ballot measure, said executive committee member Hunt Braly.
“The Chamber has historically been opposed to any changes to Prop. 13, and we have consistently supported the protections it provides commercial property owners and their tenants,” said Braly, who is also co-chair of the Chamber’s Government Affairs Council. “The measure won’t be on a ballot until 2020, so we have not yet taken an official position on it. However, we will be certainly reviewing it and I would expect we would take an early position and communicate to our members the impact it would have on them. Many of our members are small businesses, tenants, and their taxes would go up significantly if they did a split-roll.”
The Santa Clarita Valley Economic Development Corporation has also not taken an official position on the split-roll, said SCVEDC President Holly Schroeder.
Assemblyman Dante Acosta, R-Santa Clarita, said the efforts to split Prop. 13 protections were result in eroding tax protections in the business community.
“We want to make sure we get the word out that that is going on, and this will adversely affect small businesses and job creators in our community,” Acosta said. “We want to make sure we protect Prop. 13.”
Acosta’s challenger in the upcoming election, 38th Assembly District candidate Christy Smith, declined to give a comment on the issue, stating that it had not been a topic yet for this election cycle.
“If there was a complete overhaul of the tax system in California and the split-roll was included in that, there might be a willingness for compromise,” Smyth said. “But at this point, when you just eliminate these protections, it just makes it difficult for businesses to want to stay or relocate in California.”
The money raised by the tax increase, estimated by the state at between $6 billion and $10 billion, would go to local governments and schools, according to its text.