December 30, 2012

Prop 13, Meet Fork?

121230-prop13-forkWell, 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.

California Democrats signal they want to reform Proposition 13

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

121230-prop13-chartsSACRAMENTO — 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.

121230-prop13-repealThis isn’t the first time we’ve noted the havoc wreaked by Prop 13, and we’re hardly the only ones doing so.

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.

121230-prop13-timeEven 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.

Comments (13) -- Posted by: madhaus @ 5:06 am

13 Responses to “Prop 13, Meet Fork?”

  1. madhaus Says:

    Aaaaaand…. it’s up. Only 13 (ha) hours late.

  2. nomadic Says:

    I figured you gave up on two posts for the weekend.

  3. nomadic Says:

    Pretty good article, but I don’t follow this:

    …voters approved it with nearly 65 percent of the vote in June 1978.
    A key finding in the PPIC poll that should give Democrats pause is that 60 percent of voters still support Proposition 13…
    “Proposition 13 is more popular today than when it passed,” Vosburgh said.

    Meh, it’s late.

  4. Real Estater Says:

    Judging by the lack of comments at Burbed these days, one can see that the site is dying. The site is simply no longer relevant. Real estate is clearly booming, and more boom is to come. I visited a couple of open houses in the East Bay during what is supposed to be a dead holiday season. Instead, what I found was that there were literally hundreds of people at each one. If you listened to the wrong advice by the well known characters here and rented through the housing downturn of the past, you not only lost the greatest opportunity of a life time, you are now faced with ever increasing rent and endless hours of work at a tech company just to afford the privilege of renting here.

  5. PK Says:

    #4 – if it turns into a nice frothy combined Tech/RE bubble Burbed can still be relevant showing the hilarious things people try to pass off as quality homes. Still, a lot of knowledge most useful to the site (that I used in my home search) is in the comments – if Burbed can get some of that advice in an easy to find form it would be great for people searching for bubble homes.

  6. Petsmart groomer Says:

    > Real estate is clearly booming, and more boom is to come.

    Good, that’s when we get the best material!

  7. Facebook Investor Says:

    Looks like Real Estater is trying to compete with Harold Camping for failed doomsday predictions. One and half years back:

    As Burbed draws to an end,
    As I see it, the reason Burbed can cease to exist …….

  8. Facebook Investor Says:

    Good, that’s when we get the best material!

    Those are good old days, when we rather talk about doubling the value of pink houses than AAPL reaching $700 by year end.

  9. madhaus Says:

    #3, assuming the numbers are correct, then this readily demonstrates the person quoted doesn’t know what he’s talking about. I believe this is called “wishful thinking.” The sheer number of contemporary organized attempts to roll back or amend Prop 13 further demonstrates that it is not as popular as it was when it passed.

    There’s another delightful example of eppur si muove right below you.

  10. Real Estater Says:

    Freaky. Pralay is calling from 6 foot under… I was trying to save him some face by not being specific.

  11. SEA Says:

    Apple closed below $600 and below Google.

  12. Real Estater Says:

    If you get into Apple now, you have a very decent chance of making $100 per share on the stock.

    Of course, the catch is that renters can barely afford to keep up with rent increases, how can they afford to buy any stock, let alone Apple stock?

  13. SEA Says:

    Suggesting to buy Apple now? I would have never guessed.

Leave a Reply

Please be nice. No name calling, no personal attacks, no racist stuff, no baiting, etc. Let's be nice to each other in the true Bay Area spirit! (Comments may be edited/removed without notice.)