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ADOPT A RESOLUTION IN SUPPORT OF THE 2020 CALIFORNIA PROPOSITION 15 - CALIFORNIA SCHOOLS AND LOCAL COMMUNITIES FUNDING ACT OF 2020
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RECOMMENDATION
It is recommended by the Council Legislation/Environmental Committee that the City Council approve a resolution to support the 2020 California Proposition 15 - California Schools and Local Communities Funding Act.
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Summary
At the September 23, 2020 meeting, the Council Legislation/Environmental Committee approved a recommendation to forward the proposed resolution for consideration by the Council to support Proposition 15.
DISCUSSION
Background
The 2020 California Proposition 15, also known as the Schools and Communities First Initiative, is proposed to increase funding for public schools, community colleges, and local government services by changing tax assessment of commercial and industrial property. This is a citizen-initiated ballot proposition that would amend the California Constitution to adjust the 1978 Proposition 13, creating a split roll property tax assessment system and spending the revenue increase on public services.
The 1978 California Proposition 13 requires that residential, commercial, and industrial properties are taxed based on their purchase price. The tax is limited to no more than 1% of the purchase price and is also limited to an annual adjustment based on the rate of inflation or 2%, whichever is lower. It is estimated that industrial and commercial properties in California generally increase in value at a rate more than 2% per year, potentially leaving the taxable value of the property lower than the market value.
The 2020 California Proposition 15 would allow commercial properties to be taxed at their Fair Market Value rather than the price recorded at the time of purchase, beginning in fiscal year 2022-2023. This would apply only to industrial and commercial properties whose owners have more than $3 million in holdings, leaving small businesses exempt from the tax increase. For the purpose of this initiative, small businesses are defined as those that are independently owned and operated, own California property, and have 50 or fewer employees. Current language states that a reassessment of a properties Fair Market Value would occur no less than 3 years apart, and an appeal process for challenging reassessments would be established by the State Legislature.
State analysts estimate that, upon full implementation of the Prop 15 phased plan to shift to market value assessment, the initiative would generate between $8 billion and $12.5 billion in revenue per year. For local governments, this could mean an additional low of about $3.9 billion and a high of $6.9 billion per year.