Split-roll tax bill strikes at Prop. 13

Split-roll tax bill strikes at Prop. 13


Howard JarvisAlmost every year in the California Legislature Proposition 13 becomes a target for those seeking higher taxes. The 1978 tax-limitation measure, among other things, requires a two-thirds vote for local tax increases.

As budget maneuvers heat up in the Legislature, state Sen. Lois Wolk, D-Davis, last week pushed Senate Bill 1021 through her State Governance and Finance Committee on a 5 to 2 vote. It was a strict party-line tally, with Democrats in favor and Republicans against.

It would allow “split-roll” parcel taxes to fund schools. The bill is complicated, as even the Senate analysis pointed out. But the analysis gets the gist of the bill:

“According to the opposition, this bill overturns the Borikas decision on a prospective basis by allowing more than 1,000 school districts to impose nonuniform parcel taxes. In other words, this bill allows school districts to use property classifications commercial, industrial, single-family residential and multifamily residential to impose different tax rates.”

In the 2012 decision Borikas vs. Alameda Unified School District, the California Courts of Appeal cited Government Code Section 50079, which reads that the code allows only “taxes that apply uniformly to all taxpayers or all real property within the school district.” In the court’s words, the code prohibits “differential tax burdens,” which sometimes are called split-roll taxes.

SB1021 would change the state code to get around Section 50079.

Prop. 13

This is where Prop. 13 comes in. It already authorized school districts to impose a flat tax on each parcel of land in their district with 2/3-voter approval.  What SB1021 does is authorize school districts to apply the tax on the basis of the square foot of the land or the building to a combined category of commercial, industrial and multifamily residential properties, and at a lower rate for unimproved land.

In testimony against the bill before the committee, CalTax Vice President of State Tax Policy Gina Rodriquez said:

“The bill … allows school districts to impose layered parcel taxes. A school district could impose a parcel tax based upon square footage, and based upon the classification – for the same parcel. Of critical importance, however, is that if parcel taxes are split, homeowners would lose their parcel tax deduction, and face higher state and federal income taxes. To be deductible, real property taxes must be levied for the general public welfare ‘at a like rate against all property’ in the taxing authority’s jurisdiction.”

For example, someone with a home business could have the home declared a “commercial” property,  thus eliminating the federal and other tax deductions.


The written opposition to the bill was massive, with opponents including the California Chamber of Commerce, the California Apartment Association and the California Association of Realtors. (Full list at the bottom of the bill wording here). 

Chartered property appraiser Charles Warren of Pleasant Hill told CalWatchdog.com that a split-roll parcel tax could end up encouraging property demolition for marginal properties. He asked, “How much property value will be raised if a lot of buildings gets bulldozed? Or will it be a land tax?  If a land tax, it will encourage higher density development that could be blocked by growth controls in local communities.”

Thus, small commercial building owners could be hit by a school parcel tax with no way to develop their properties to a higher use to offset the higher taxation.  Warren warned, “Given 5 percent capitalization rates, for every $1 per square foot of tax a property would take a $20 per square foot hit on property value.”

In general, the number of business establishments in a community only comprises about 5 percent of all the residential households. Moreover, 97 percent of commercial property owners are comprised of small businesses, residential duplexes, Mom and Pop restaurants, and even some elderly homeowners with old houses on land that has been upzoned for commercial use.

There are no special waivers in SB1021 for any of these commercial property categories because they comprise the bulk of properties on which the tax would be imposed. And small, older commercial building stock is likely to be mostly found in Hispanic-populated areas of Southern California such as Huntington Park.

Large investment-grade commercial and multi-family properties would probably feel the pain of a new parcel tax less because the tax can be passed through to wealthier tenants.

By contrast, small businesses, residential duplex properties, and homeowners on commercial-zoned land have no one to whom they can pass along the tax.


The real problem for the bill could come from Gov. Jerry Brown. Running for re-election this year, so far he has come out against any new taxes.

Brown well remembers the strong support for Prop. 13, which was passed in 1978 during his first term as governor. His Proposition 30 tax increase of 2012 was not passed by the Legislature, but by voters, giving Brown the cover of voter support.

Brown also just called for a special session of the Legislature to change the wording of an initiative on the fall ballot to strengthen the state’s “rainy day” fund by putting wording in the California Constitution.

But whatever happens with SB1021, it will not be the last attack on the redoubts of Prop. 13.

Tags assigned to this article:
Wayne LusvardiSB 1021Lois WolkProp. 13

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