California Property Taxes Might be Going Up

Taxes might be going up – Many California homeowners and owners of real estate are facing a possible increase in their property taxes with the passage of ACA 8 (Assembly Constitutional Amendment No. 8) which is the most serious assault on the safeguards put in place by Proposition 13 back in 1978.  The lead sponsor of the bill is Assemblyman Bob Blumenfield, he along with several other legislators was able to get the legislation passed by the California State Assembly on Saturday June 15, 2013. The desired outcome of the law by the legislators backing the proposed constitutional amendment would be to amend the following sections of the California Constitution:

• Section 4 of Article XIII
• Section 2 of Article XIII C
• Section 3 of Article XIII D

The effects of the passage of ACA 8 would be that in the near future Special Taxes, taxes intended for designated purposes that currently require a 2/3 vote of the voting public for passage could be reduced down to a passing vote of only 55%.  Just a little more than half the voting public would have the power to impose taxes on property owners only.  The general public would not be expected or even required to participate in paying the interest and debt to finance local defined bonded indebtedness.

Currently the California Constitutional prohibits an ad valorem (Latin for at value) tax rate on real estate exceeding 1% of the full cash value of the property.  The only exception is from the passage of bonds by a 2/3 vote of the voting public for bonded indebtedness.  Property taxes are collected by counties throughout California and apportioned by law to each individual city and special districts within each county.

There have been propositions in the past that amended Proposition 13’s requirement of needing a 2/3 voting majority to raise taxes.  In the past there have been propositions approved by the voters allowing for a lower majority vote necessary to pass bonds for special defined purposes.  Those purposes are for school districts, community college districts and other educational entities.  Basically bonds for educational purposes.

The sponsors of ACA 8 have advertised the legislation as simply lowering the required voting majority necessary to pass other types of bonds to fund special public improvement and facilities. The 55% passing vote would match the 55% passing requirement that is already in place to pass educational type bond obligations.

The new designated uses that would be subject to only a 55% vote of the public are:  

•        Police facilities
•        Sheriff Facilities
•        Fire Facilities
•        Public Buildings

 Some other intended uses of the bonds would be the construction or improvement of facilities, buildings, roads, bridges or a number of other uses as determined by governmental authorities.  While the law appears to be specific in what future intended uses can be but there is a section in the proposed amendment that is vague enough to possibly allow for any desired use.

The designated governmental entities that the law would benefit are:  

•         City
•         County
•         City/County
•         Special Districts

The argument is that it would be easier to raise money for local infrastructure and necessary maintenance through bonded indebtedness.  The funding sources to raise money for Special Taxes are not like statewide bonds issued by the state of California for general funding purposes.  The costs and expenses for California general obligation bonds are repaid out of state general funds.  The sources of state general funds come from contributions from income taxes, sales taxes and other tax sources.  The effect is that all California residents share in the pain of paying the interest and the repayment of principal associated with General Obligation bonds.

The difference between General Obligation bonds and Special Obligation bonds is that only property owners are looked to for payment of interest and principal relating to Special Obligation bonds.

The entire voting public has the right to vote to pass Special Obligation ballot measures.  People who do not own real estate have the right to vote to raise the taxes on those who own real estate.

Allowing a lower passing voting majority will only lead to higher debt owed.  Since people who will not be expected to participate or pay will have no reservations in voting to have someone else pay.  We have seen this in election after election.

The California Public Policy Center has done a study of California’s debt and has calculated that currently California has a combined debt of $1.1 trillion. 

The good news is that currently the legislation has only passed in the State Assembly and still must be passed by the State Senate and later put before the voters of California. Taxes might be going up

The State Senate designation of the proposed bill is SCA 11 (Senate Constitutional Amendment 11) and the lead sponsor is State Senator Lori Hancock.  If passed by the State Senate the proposal could be put before the voting public to approve to amend the California Constitution.

If the 2/3 majority vote is lowed by the voters then in the future if cities, counties or special districts are interested in raising more money they simply need to put a ballot measure before the voting public and with 55% voting to approve the proposal the law would be considered passed. 

This proposed change in the California Constitution is a direct assault on the rights of property owner in California.  We encourage everyone who owns real estate in California or just believes in fairness and is truly concerned about the out of control debt crisis affecting our state to contact their State Senator.  When speaking with their office encourage them to put the best interests of California above political interests and vote no to the passage of SCA 11.

We will report back the progress of the pending proposed ballot measure following the State Senate vote.