Big change in California’s Proposition 13 could be headed to ballot

Under Prop. 13, all California property, residential and commercial, is reassessed only when it is sold. The proposed ballot measure would require commercial and industrial property — but not homes and small businesses — to be reassessed and taxed at the full value. less Under Prop. 13, all California property, residential and commercial, is reassessed only when it is sold. The proposed ballot measure would require commercial and industrial property — but not homes and small ... more Photo: Rich Pedroncelli / Associated Press Photo: Rich Pedroncelli / Associated Press Image 1 of / 3 Caption Close Big change in California’s Proposition 13 could be headed to ballot 1 / 3 Back to Gallery

California’s largest companies could find themselves paying an additional $11 billion a year in property taxes under a ballot measure that would dramatically revise the state’s tax-cutting Proposition 13.

Schools and Communities First, a wide-ranging group of community organizations, education advocates, unions and foundations, turned in 860,000 signatures Tuesday that could put that initiative on the November 2020 state ballot.

Under Prop. 13, all California property, residential and commercial, is reassessed only when it is sold. Houses and condominiums, however, can turn over every few years, while many large businesses occupy their land for decades — meaning some have not had property reassessed since Prop. 13 passed 40 years ago.

The proposed ballot measure calls for a split tax roll that would require commercial and industrial property — but not homes and small businesses — to be regularly reassessed and taxed at their full value.

“We’re excited by this reform because it’s a structural change,” Ben Grieff, campaign director for the community organizing group Evolve, told a crowd of supporters at the South Berkeley Senior Center on Tuesday. “It’s a bold reform, but it’s just common sense.”

The 80 or so people cheered every attack on some of the state’s biggest landholders, such as Disney and Wells Fargo, whose property taxes are pegged to assessments dating from Prop. 13’s passage. They waved signs with messages like “Taxing the Wealthy Keeps the Economy Healthy” and “Funds for Schools.”

“Chevron is getting the same deal as Grandma,” Grieff said. “That doesn’t make any sense.”

Prop. 13 passed with 63 percent of the vote in 1978 in the face of growing concern that senior citizens were being forced from their homes because they were unable to pay fast-rising local property taxes. The initiative rolled back property assessments to 1976 levels and capped tax increases at 2 percent a year, as long as the property is not sold.

The measure, which according to the nonpartisan state Legislative Analyst’s Office cut property tax revenue by about 60 percent, applied equally to all property in the state.

That unified roll has been the way property taxes have traditionally been treated in California since the 1800s, said Jon Coupal, president of the Howard Jarvis Taxpayers Association, named after the man who put Prop. 13 on the ballot.

While supporters of revising Prop. 13 say the changes will not cost most property owners anything, Coupal says his members, 95 percent of whom are homeowners, aren’t convinced it will stay that way.

“If the business community loses its Prop. 13 protection, we’re next on the menu,” he said.

There have been numerous attempts to revise Prop. 13 so that residential and commercial property are taxed differently, but this new effort would be the first to qualify for the state ballot. In an effort to drum up support, small businesses, defined as those with fewer than 50 employees, would be included with homeowners in the new split roll.

“Today, we’re making history,” said Pauline Brooks, vice president of the California Alliance of Retired Americans. “This is a historic milestone for equity justice and shared prosperity.”

The argument that split-roll supporters make is that it’s not fair that residential and commercial property are both taxed at the same rate. Since major developments like oil refineries, office buildings and amusement parks are rarely sold, their taxes fall further behind their actual value every year.

Those big companies and developers also have found various ways to transfer property to new owners without actually selling it and triggering a reassessment, said Grieff.

“We’ve been working on this for the past five years,” he said. “Now we have a strong coalition put together.”

Supporters include the California League of Women Voters, the American Federation of Teachers, the San Francisco Foundation, the Chan-Zuckerberg Initiative and the Parent Teachers Association of California. The proposed measure has been endorsed by the San Francisco Board of Supervisors, the San Francisco and Oakland school boards and city councils in Oakland, Berkeley and Albany.

What unites them all is the prospect of billions of dollars in new money flowing to local communities and schools.

“Closing the commercial property tax loophole is important to our state and to our Bay Area region,” Fred Blackwell, CEO of the San Francisco Foundation, said in a statement. “It is our opportunity to effect positive change by restoring more than $11 billion a year to our schools and vital community services without raising taxes on homeowners, renters and small businesses.”

Under the system for allocating property taxes, about $4.5 billion would go to schools if the measure passed, with the rest flowing to cities and counties. Supporters estimate that San Francisco could receive an additional $835 million a year, with Santa Clara County receiving more than $1 billion, Alameda County getting $553 million and San Mateo County $587 million.

Supporters emphasized what that money could do, along with what they said was the unfairness of Prop. 13 as the tax burden has evolved.

“All of us are already paying more than our fair share,” Grieff told the Berkeley crowd. “This is money we need to build affordable housing, find homeless solutions and ... fight wildfires.”

Information provided by the backers also suggested that “substantial amounts of the new tax revenue will be paid by out-of-state and foreign investors and the very wealthy,” rather than California residents.

But by bumping up taxes on those investors, California would be in danger of forcing out the type of development that has kept the state’s economy humming, said Coupal, whose taxpayer group will probably fight against the property tax changes.

“We don’t need more taxes in California,” he said. “Businesses already have a lot of reasons to move out of California, but one reason to stay is that Prop. 13 provides them with the same amount of predictability and stability that homeowners have.”

Backers of the ballot initiative need 585,407 valid signatures to qualify it for the ballot. The 860,000 signatures they collected will be will be turned in to each of the state’s counties for a raw count and verification and then reported to the secretary of state. It will be more than a month before the measure can officially qualify for the ballot.

By aiming the initiative for the November 2020 presidential ballot, supporters would guarantee a strong voter turnout.

“It’s going to be a long two-year campaign,” Grieff said. “We need all of that to educate people.”

John Wildermuth is a San Francisco Chronicle staff writer. Email: jwildermuth@sfchronicle.com Twitter: @jfwildermuth