At the ballot: the split roll, rent control & gig economy

Prop. 15 would require commercial and industrial properties to be taxed on market value. (MC)
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The November election will feature a dozen California ballot measures, of which a handful could affect the taxation of commercial properties based on their market value, how to classify the gig economy and other proposals that specifically affect the business community. 

Three out of the 12 measures could directly impact businesses and the workforce: propositions 15, 21 and 22. Here’s a glance at each one: 

Prop. 15

Ballot title chools and Local Communities Funding Act

This measure looks to require commercial and industrial properties to be taxed based on their market value rather than their purchase price, while residential properties continue to be assessed based on their purchase price, thus creating what’s known as a “split roll.” 

Besides residential properties, the proposal exempts those zoned as commercial agriculture and commercial owners with more than $3 million in holdings. Small businesses would also be exempt from personal property tax and exempt $500,000 worth of personal property for others. 

The current tax assessment formula is based on Prop. 13, which Californians approved in 1978 and requires that residential, commercial and industrial properties be taxed based on their purchase price to limit property taxes. Critics, however, have argued that it has enriched some and impoverished younger generations with overpriced rental housing, according to a 2016 report by the California Legislative Analyst’s Office. 

Prop. 15, largely financed by the California Teachers Association and other unions such as SEIU California and spearheaded by the Schools and Communities First campaign, would generate between $8 billion and $12.5 billion in revenue per year, according to state fiscal analyst estimates. Of that sum, 60% would go toward local governments and 40% to school districts (89% of the overall 40%) and community colleges (11%) via a new local school and community college property tax fund. 

A July report by Blue Sky Consulting Group in support of Prop. 15 found that “(a)bout 10% of top commercial properties would generate 92% of the revenue from the measure.” 

“This means that the responsibility for higher taxes from the measure is highly concentrated among a small percentage of properties,” read the report. 

Opponents of the proposal, such as the California Chamber of Commerce and the Howard Jarvis Taxpayers Association, argue that small business owners will still end up harmed and that homeowners will follow. 

Prop. 21

Ballot title he Rental Affordability Act 

With Prop. 15 on the ballot, voters could change the real estate market with Prop. 21 also in the mix. This measure would allow cities to establish rent-control laws on residential properties over 15 years old, ultimately tweaking the former rent-control measure that Californians rejected in 2018. 

The proposal, brought forth the AIDS Healthcare Foundation, which also introduced the 2018 measure, exempts single-family homeowners with up to two properties and permits limits on rent increases with new renters. 

Supporters Prop. 21 will protect families, veterans and older adults from rising rents in California, where many use 50% or more of their income just on rent. 

Opponents, such as the Santa Clarita Valley Chamber of Commerce, argue that its time to try different approaches to the housing crisis following the failed 2018 proposal. 

“The SCV Chamber just … took a formal position to oppose Proposition 21,” said Ivan Volschenk, managing partner at Evolve Business Strategies, which manages the SCV Chamber. “We witnessed in the last election: Rent control does not work. We must focus on policies that will help alleviate our housing crisis and not retry what has already failed in the past.”

Prop. 22 would classify rideshare and delivery drivers, such as for Uber and DoorDash, as independent contractors rather than employees. PHOTO BY Tammy Murga / The Signal

Prop. 22 

Ballot title rotect App-based drivers and Services Act

Without a doubt, Assembly Bill 5 was among the most controversial laws to come out of the Legislature last year. 

The bill codified the 2018 Dynamex state Supreme Court ruling, ultimately challenging employers over designating who is an employee or an independent contractor. In theory, AB 5 made gig businesses, such as rideshare and delivery companies, label their workers as full employees rather than contractors. This classification would qualify each one for health benefits, time off and overtime pay. 

While many workers declared victory, not all companies did the same. In August 2019, Uber, Left and DoorDash joined forces to launch Prop. 22 with $30 million each to fund the campaign. The proposal would not repeal AB 5, but rather avoid it by designating app-based drivers as independent contractors with some benefits as employees, such as an hourly wage for driving, medical benefits if injured while driving, vehicle insurance, safety training and sexual harassment policies.

“After AB 5 was signed into law, we worked to get an app-based driver’s exemption in the bill. The Chamber fully supports independent contractors,” said Volschenk. “We truly believe in the freedom to work flexible hours and have the ability to earn extra income on your own time.”

Opponents of Prop. 22, which include the Transport Workers Union of American and the California Labor Federation, argue that the measure only protects corporate wealth. 

“This action comes not a moment too soon as the COVID-19 crisis hits drivers hard and exposes the devastating consequences of  Uber and Lyft continuing to violate the law,” read a statement from the California Labor Federation. “Not only do the law-breaking actions of these multi-billion dollar companies hurt their own workers, they shift the burden onto taxpayers and put responsible businesses at a competitive disadvantage.”

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