Tax and real estate experts on Wednesday debated possible reforms to California’s landmark Proposition 13, with views that ranged from no change to the desirability of opening a discussion.
The panel of three experts considered whether it is time to reform Proposition 13 at a breakfast meeting at the Wyndham San Diego Bayside sponsored by the San Diego County Taxpayer’s Association, a non-profit taxpayer advocacy organization founded in 1945.
Proposition 13, approved by California voters in 1978, was the brainchild of low-tax crusader Howard Jarvis. This amendment to the state constitution freezes the tax-assessed value of properties at the time of purchase and limits annual assessment increases to 2 percent. The amendment passed during a period of rapidly rising property taxes that forced some long-time homeowners to sell.
“Proposition 13 had as one of its prime objectives keeping people in their homes,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. He said the amendment kept property taxes under control but was an “abject failure” in limiting other tax increases.
Lenny Goldberg, executive director of the California Tax Reform Association, argued that Proposition 13 was ultimately bad for the state’s schools, infrastructure and commercial development, and it is time for a “data-driven discussion” of possible reforms.
“You can’t find any economist — left, right or center — who will endorse the current system as it affects commercial property,” Goldberg said. “We have a system that is dysfunctional with regards to new development.”
Lou Lollio, a commercial property broker based in Carlsbad, opposed any changes to Proposition 13 and said he worried that opponents were seeking small changes now in order to “divide and conquer,” adding, “I’m concerned as a taxpayer.”
A current issue is an Assembly bill that would change what some see as a loophole that allows commercial properties with complex ownership to escape reassessment after a sale. This happens when a property is sold to multiple legal entities, none of which owns more than 50 percent. The Howard Jarvis group is neutral on the bill, saying it addresses a technical tax issue, but Lollio said he opposed any change.
“Howard Jarvis himself said, when any property changes hands, it should be reassessed at market value,” Coupal said, explaining his organization’s neutral position.
Another possible reform is a “split-roll” system in which commercial property is assessed at market value, but residential property is not. The San Diego County Taxpayer’s Association released a report Wednesday arguing that such a change to Proposition 13 would cost the San Diego region 2,240 jobs.