A new report from University of Southern California researchers breaks down estimated local benefits of an upcoming ballot measure to reform Proposition 13, including $1.2 billion in Santa Clara County — assuming county assessors can handle the momentous task of implementing the changes.
Overall, an estimated $12 billion could potentially be reclaimed by communities across the Golden State, if currently proposed changes are made to the state’s property tax system, according to the USC Dornsife Program for Environmental and Regional Equity’s February report.
Santa Clara County could generate about 10 percent of those revenues at $1.2 billion, the report said, from reassessed commercial property in Santa Clara County by 2021 to 2022. Though that amount would be generated by Silicon Valley, and would go to schools and city services, the report also notes that the dollars “do not represent the amount that would be allocated to the county governments alone.”
According to Santa Clara County Deputy Assessor David Ginsborg, some of that money would remain in the county where it is generated, but some may be redistributed to other areas around the state that have greater need for school funding. The final allocations of the property tax gains across the state are still being hammered out, he said.
To put the amount of additional property taxes generated by tech-rich Santa Clara County into context, the additional taxes sit at around $636 per person. Santa Clara’s overall property tax increases are the second-highest in the state, behind Los Angeles County, which could generate $3.4 billion, or around $336 per resident.
The USC research focused on “true” commercial properties, excluding all residential and agricultural uses, such as multi-family apartments and orchards, which amounts to about 1.27 million parcels. These estimated revenues, however, didn’t take into account the proposed changes’ exemptions or phase-in period, which may mean the full property tax increases could happen slower than anticipated in the report.
Currently, Prop. 13, passed in 1978, caps rises in assessed property values, essentially freezing rates until they can be reassessed when properties are sold or new construction happens. However, reports have shown the “keep grandma in her house” bill has actually unloaded most of a community’s property taxes on new and younger homeowners.
Now, voters will decide whether to reform Prop. 13 during the November election through the Schools and Communities First initiative, which would create a “split-roll tax.” Basically the measure would leave residential properties as they are today, but tax commercial and industrial properties based on their assessed market value. The USC report claims most of the new tax would come from property valued at more than $5 million.
But no amount of estimated revenue is enough to convince Santa Clara County Assessor Larry Stone and his staff that this measure is practical, though he has long been an advocate for reform of the law.
“No matter what the revenue projections are, it really doesn’t matter if they can’t be achieved,” Stone said. “This is a very well intended initiative, it just would be impossible to implement.”
Stone said he supports addressing property tax inequities created by Prop. 13 and funding for schools and communities. But he estimates that he’d need to double his staff to complete the thousands of reassessments (and reassessment appeals) needed by the start of 2022, though it takes years of training new staff to accurately assess Silicon Valley’s complex real estate, such as Apple Park’s “spaceship” campus.
“All these people are hoping, dreaming of all this revenue,” he said. “Don’t budget as if it’s gonna come in, because it’s not; it’s a pipe dream.”
Instead of this split-roll concept, Stone suggests lawmakers consider a split-rate approach. He said increasing the current tax rate – from 1 percent to 1.2 percent to 1.5 percent – across the board for all commercial properties would end up bringing in more funding for schools and public services slowly over time, without high implementation costs up front.
But some local lawmakers, including San Jose Councilmember Maya Esparza, think that the Prop 13 initiative as written would benefit the community as a whole and is a needed step to combat inequality created by the existing state law.
“When massive corporations exploit tax loopholes, they shortchange local governments of the funds we need to reduce homelessness, pave our streets, and keep libraries and community centers open,” Esparza said in a statement Friday. “This initiative represents an invaluable opportunity to expand crucial funding for our schools and other vital community services by closing corporate property tax loopholes, while ensuring that our hardworking homeowners and small businesses will not pay more in taxes.”
Other proponents of the initiative include Santa Clara County Board of Supervisors President Cindy Chavez, Working Partnerships USA, SEIU Local 521, SOMOS Mayfair, San Jose Teachers Association, SIREN and the League of Women Voters. Opponents include the California Business Roundtable, California Chamber of Commerce, California Taxpayers Association and the Howard Jarvis Taxpayers Association, named after the Orange County businessman that spearheaded Prop. 13’s 1978 approval.