Well, maybe a seafood fork. A possible seafood fork. Size extra-small. In 2014. Maybe.
The third rail of real estate may be getting some modifications, thanks to the new obstruction-proof California Legislature. Now that both houses have 2/3 Democratic Party members, they could raise taxes without a single Republican vote of support. But to modify Proposition 13, only an initiative passed by California voters will do. The difference is that Legislators are now discussing these changes openly, sensing the era of tax cuts is also due for Fork Facetime.
By Steven Harmon, San Jose Mercury News
Posted: 12/29/2012 01:00:00 PM PST, Updated: 12/29/2012 05:41:17 PM PST
SACRAMENTO — The third rail of California politics may not be as deadly as once thought.
Three and a half decades after the passage of Proposition 13 shook the political landscape in California and sparked a taxpayer revolt across America, voters appear to be warming up to the idea of reforming the initiative as long as protections for homeowners stay intact.
And the apparent sea change in public attitudes, combined with the two-thirds majorities Democrats now hold in both chambers of the Legislature, has emboldened some politicians to take aim at the iconic measure.
“It is time for a fix, because Proposition 13 is broken,” said Assemblyman Tom Ammiano, D-San Francisco, who plans to introduce a bill next year aimed at forcing businesses to pay higher property taxes.
The landmark 1978 measure rolled back property taxes and capped yearly increases until a property is sold, but critics say one of its unintended consequences was shifting more of the Golden State’s property tax burden from businesses to homeowners.
Reforms being discussed include a “split roll” where commercial property is handled differently from residential, and lowering the threshhold for parcel taxes from 66 2/3 to 55 percent. 58 percent of Californians polled supported the split roll concept, where commercial property would be reassessed every 6 or 12 months. Residential property would continue with assessment at time of sale with a 2% maximum annual increase. However, 60 percent of those polled still “support” Prop 13.
In addition, Assemblyman Tom Ammiano wishes to address a loophole where corporate-owned property isn’t even reassessed when sold, because more than 50% of ownership must change hands. Corporations simply constructed shell entities to avoid the 50% trigger despite buying and selling their entire interest in real properties. For exaple, the E&J Gallo Company bought the 1765 acre Louis M Martini vineyards by having 12 family members buy individual shares, each under the 50 percent trigger. The property remains assessed at the original low value because of this maneuver.
Even Google, a relatively new corporation, benefits from the complex dance of real estate partnerships, trusts, holding companies, and leases. Some of their buildings sit on land owned by the pre-Prop 13 owner and his family trust, via a ground lease. The 13.7 acre tract was assessed at $789,635 in 2009 and would have been worth $41 million without a single structure on it. State law prevents land reassessment if a lease of over 35 years exists. The buildings on the land were assessed at $38 million.
Before Prop 13 passed, business and residential property produced about the same share of state revenues, but now residential property generates 70 percent of property taxes. California has also bid adieu to its excellent state colleges and universities, as well as its various public school systems, since property taxes helped fund the former and were primary support of the latter.
Feel free to grouse about money-grubbing state officials or the unfairness of our tax code.