The November 2020 statewide election will bring the usual host of ballot measures. Given the high turnout expected in a Presidential year, this year’s ballot has attracted significant measures. In addition to the fight between app-based businesses and labor over AB 5’s new definition of “employees” entitled to wage and benefit protections and the bail industry’s referendum against a statute eliminating cash bail, three measures of interest to California local governments have qualified and will appear on the Fall ballot unless withdrawn by their proponents (perhaps via a legislative deal):
No. 17-0055 is the split-roll initiative to maintain Proposition 13’s cap on assessed valuation of residential and agricultural properties (at historic sales price adjusted for inflation, capped at 2%) but to provide for annual re-assessment of other properties. It is promoted by the California Teachers Association and an array of labor and progressive groups and would raise billions in new funding for schools and local government. CH&W’s newsletter coverage of that measure appears here and of previous split-roll proposals appears here.
No. 19-0001 is a further effort to repeal Costa-Hawkins’ limits on local rent control. The Secretary of State’s office summarizes it this way: “Amends state law to allow local governments to establish rent control on residential properties over 15 years old. Allows rent increases on rent-controlled properties of up to 15 percent over three years from previous tenant’s rent above any increase allowed by local ordinance. Exempts individuals who own no more than two homes from new rent-control policies. In accordance with California law, provides that rent-control policies may not violate landlords’ right to a fair financial return on their property. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local governments: Potential reduction in state and local revenues of tens of millions of dollars per year in the long term. Depending on actions by local communities, revenue losses could be less or more.”
No. 19-0003 is proposed by the California Association of Realtors to allow those over 65 and the disabled to sell residential property and transfer their Proposition 13-protected assessments to new property anywhere in California, instead of just those counties which have opted in, as is now the law. It also allows property owners to trade up to more expensive property and to use this device up to three times, not just once in a lifetime. To offset the revenue losses that would result, the measure also requires reassessment of property when control of certain business property-owning entities changes hands, events which do not now trigger reassessment. The Secretary of State summarizes this proposal this way: “Removes the following requirements to transfer property tax base to replacement residence for homeowners over 55 or severely disabled: that replacement property be of equal or lesser value; that replacement property be in eligible county; and that transfer occur only once. Allows three such transfers. Removes location and replacement-value requirements for transfers of contaminated or disaster-destroyed property. Adjusts replacement property’s tax base, based on market value. Limits tax benefits for certain transfers between family members. Expands circumstances requiring business property reassessment. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local governments: Local governments could gain tens of millions of dollars of property tax revenue per year, likely growing over time to a few hundred million dollars per year. Schools could receive similar property tax revenue gains. Other local and state revenues each could increase by tens of millions of dollars per year. County property tax administration costs likely would increase by tens of millions of dollars per year.” Although the Department of Finance and Legislative Analyst conclude local governments will be better off in toto, there will — no doubt — be distributional consequences as taxes fall (or grow more slowly) in places attractive to retirees (perhaps, given the pandemic, away from densely populated areas to less populous areas) and rise in places where more property is owned by business entities — perhaps those same densely populated places.
We will surely be hearing more about these in coming months, but they will have interesting impacts on local government — more funds, rent control in communities which support it, and changes in property tax revenues. There is opportunity between now and June 25th for proponents to cut deals in Sacramento to trade their proposals for legislation or other measures placed on the ballot by the Legislature.
You can track progress on these measures on the Secretary of State’s website here.