[Source: Sacramento Business Journal] A titanic battle on the November ballot awaits commercial real estate interests and investors, seeking to stop the most dramatic change to their property taxes in more than 40 years.
State officials announced Friday a measure known as split-roll had enough registered voter signatures to qualify for the Nov. 3 ballot in California, representing reform to 1978’s landmark Proposition 13.
The split-roll measure, backed by school teacher unions and the League of Women Voters, would change the property tax rate on most commercial properties to reflect their current value. Under Prop. 13, property taxes are based on a property’s last sales price, with annual increases of 2% or inflation, whichever is lower.
By changing that basis for commercial properties, proponents say millions in tax revenues would flow to the state. But opponents believe the measure would further stifle business investment in the state, taking away a remaining advantage over states like Texas with higher property rates but fewer other barriers to business. Opponents include the California Chamber of Commerce and California Business Properties Association.
Locally, such a measure could set off a selling spree of properties that haven’t changed hands in several years, but have likely seen their values soar. That would be especially likely in areas like Downtown Sacramento or Folsom, or commercial parts of neighborhoods like Oak Park in Sacramento or Fair Oaks in Sacramento County.
Alternatively, values on existing properties could decline, as potential investors would have to weigh higher ongoing tax increases against choosing to buy them, and in some cases invest further.
The change would not apply to residential or commercial agricultural properties. Owners who own less than $3 million worth of California properties, or independently owned businesses on a property with fewer than 50 employees, would also be exempt.
According to the state fiscal analyst, the measure would result in $8 billion to $12.5 billion in additional tax revenue for the state when fully implemented. If approved, the measure wouldn’t begin implementation until 2022.
Source: Sacramento Business Journal
May 29, 2020
