The California Assessors’ Association (CAA) has taken an opposing position on Proposition 15, the newly qualified “split roll” ballot initiative that would change how commercial properties are assessed and revoke most Proposition 13 tax caps in place since 1978.
“It’s the first time that I know of that the association has taken an official opposed position on a statewide initiative,” Don Gaekle, Stanislaus County Assessor and president of the CAA, told the Northern California Record.
A CAA committee study, coupled with analysis by an outside consulting firm, found the estimated implementation costs over the first three years would be $430 million to $760 million, based largely on the need to expand assessors’ staff and technology operations across California’s 58 counties, Gaekle said.
The CAA’s policy briefing paper on the Split Roll Initiative details the group’s concerns, including a “Catch-22” for less populated areas.
“Many assessors in small and rural California counties are predicting that a split roll will trigger, paradoxically, a potential net decline in assessed added value,” the paper states. “They anticipate very few commercial properties will be subject to split roll valuation, negating the promised increase in property taxes.”
For Los Angeles County, the change would require putting roughly 500 more people on the payroll.
“We have a very difficult time now finding experienced appraisers,” Gaekle said. “It would be a huge problem getting staffed up to do this in the first place if this should pass.”
The change would also significantly increase the number of people filing challenges to the reappraisals.
“They will undoubtedly have to process a large number of appeals by taxpayers seeking to lower their assessments,” Marc Joffe, senior policy analyst with the Reason Foundation, told the Record by email. “I don’t think backers of the Prop 15 considered the argument made by these County Assessors. They probably believe that it will not be too difficult to reassess all the properties.”
The ballot initiative, “The California Schools and Local Communities Funding Act of 2020,” which is largely backed by teacher and labor unions, would go live Jan. 1, 2022. But with the need to build up staff, which in larger counties could take five years, the increased revenue the proponents project would be very slow in coming, Gaekle said.
“Especially with the COVID-19 emergency obviously causing economic issues, we anticipate it to cause a decline in the commercial and industrial market,” Gaekle said. “And if there is market decline, it’s going to make that revenue source very volatile. There are a lot of headwinds to getting the increased revenues they’re projecting.”
Moreover, Joffe noted, many commercial properties are struggling because tenants losing business due to the pandemic can’t pay rent.
“If this continues and owners also have to deal with a Prop. 15 tax increase, some will become unable to afford to manage their properties,” Joffe said. “You may see more bank foreclosures and tax sales if this proposition passes and is then implemented under weak economic conditions.”
The measure does not extend protections to small businesses that have a “triple net” lease with their landlords.
“For properties in a large office complex, for example, they’re usually leased out on a ‘triple net’ basis, so the property taxes are billed to the tenants. So the real burden is going to fall on the smaller businesses that lease from the owners of the property. That’s going to be the reality for a lot of properties,” Gaekle said.
Regardless of their own views, the CAA is devoted to the oaths of office they take, to support the state constitution, and dedicated to public service, Gaekle said.
“But we think especially in larger counties, it will be impossible to implement,” Gaekle said. “Our advice and position is, given the complication of the initiative, we recommend a no vote.”