Voters Reject Proposition 15, The Property Tax 'Split Roll' Initiative

Proposition 15 — the statewide ballot measure that would have increased many businesses' property taxes — was rejected by California voters, according to the Associated Press.

In Tuesday's update to the vote count, the No on Prop 15 campaign has earned nearly 52% of the votes. Ballots are still being counted around the state, but opposition to the measure has remained constant since Election Day.

Since 1978, the landmark ballot measure Prop 13 has kept property tax bills low — and frustrated, in particular, school officials across the state, who believe the law has dried up what would otherwise be a huge source of revenue.

Proposition 15 sought to remove Prop 13 protections from many commercial and industrial properties, forcing many of their owners to pay more in taxes. Supporters said it could have raise billions for public schools, community colleges and other local governments.

Prop 15 would not have affected tax rates on residential or agricultural properties.

Tax hikes from Prop 15 would have been felt most strongly by businesses that have held onto their properties for decades. Companies that have purchased California real estate in recent years are already taxed at close to the current market value of those properties, and wouldn't immediately feel much of a difference.

But legacy businesses like IBM, Disney and Chevron are often paying property taxes based on assessments that took place before VHS tapes caught on. By triggering new assessments on those properties, Prop 15 could have raised taxes on these companies many times over.

USC sociology professor Manuel Pastor said Prop 13 succeeded in 1978 because -- with property values at the time skyrocketing -- many homeowners were frustrated by huge increases in their annual tax bills.

"The way Prop 13 was sold was with an image of long-time residential property owners being forced out of their homes," Pastor said. "It's not clear that what voters had in mind was also equally freezing assessments for commercial and industrial property owners."

Prop 15 proponents say the measure would have closed what they see as a loophole allowing large corporations to avoid paying their fair share in taxes. Opponents say the new tax burden will be shouldered by smaller businesses renting commercial space, not by larger property owners.

"Those cost increases on property taxes get passed down to tenants," said California Business Roundtable President Rob Lapsley. "And the tenants in turn either go out of business, reduce employees, or they end up passing on the cost to Californians."

Prop 13 defenders say the current rules give businesses certainty about how much their property taxes will rise every year. But tax experts say Prop 15 would have created a more equitable system by taxing similar properties at similar levels.

The coronavirus has upended the state's finances. Unless another federal COVID-19 aid package arrives, education officials fear a repeat of the Great Recession in California schools: state budget cuts that eliminate non-essential programs, increase class sizes and lead to thousands of layoffs.

Supporters say a win for Prop 15 would help soften the blow — even if the first revenues don't start trickling in until the 2022-23 school year.

"A vote for Prop 15 is a vote for recovery," said Steven Veres, a member of the L.A. Community College District's Board of Trustees, at a rally last week.

Education advocates hope Prop 15 will correct what they see as a decades-old problem: California has long lagged behind other states— particularly those with similarly large and diverse student populations — in K-12 education spending.

Even if Prop 15 passes, experts say the state will still be behind the public school funding curve.

In order to meet the state's lofty goals for student achievement, one academic estimate says California would need to increase annual education spending by 38% — that's more than $25 billion. Prop 15 would raise $2 billion to $5 billion annually for education.

"The biggest risk, if Prop 15 passes, is that California voters will think, 'Great! We've solved the school funding problem!'" said Heather Hough, executive director of the Policy Analysis for California Education, a non-partisan research center.

"It won't be enough," she added during a recent KPCC/LAist event. "Part of what has to be communicated is: what's the long term plan to make sure ... this isn't viewed as a last step but rather as a first step?"

The next steps worry Prop 15 opponents. They've claimed that if the measure passes, education advocates will next attempt to repeal Prop 13's limits on residential property taxes. (A vice president for the California Teachers Association, a big Prop. 15 supporter, says that's not true.)

Education unions, chiefly the California Teachers Association and Service Employees International Union, were the measure's biggest financial backers. But Prop 15 also had major Silicon Valley support, including from Mark Zuckerberg and the Chan Zuckerberg Initiative.

Among the business and real estate interests that hoped to defeat the measure, the California Business Roundtable stands out; that organization raised nearly $40 million to defeat Prop 15. Top contributors to the California Business Roundtable's political action committee include the private equity giant Blackstone, real estate investment trust Kilroy Realty, L.A. office landlord Douglas Emmett Properties and Beverly Hills developer and major Donald Trump donor Geoffrey Palmer.

Anti-tax groups like the Howard Jarvis Taxpayers Association have also gotten involved, but have raised more modest sums of money.

A Note On The Results

• The first results released included early voting, including mail-in ballots received before election day. In the past, local election officials have said all votes received and processed by the day before the election (in this case, Monday Nov. 2) are included in the first count. However, the high volume of mail-in ballots may mean that's not the case this election.
• Keep in mind that in tight races particularly, the outcome may not be determined for some time.
• In California, ballots postmarked on or before Nov. 3 may be counted toward the results as long as they arrive within 17 days of the election.
• Results are finalized by county election officials 30 days after election day.

YOUR BALLOT

You can track the status of your ballot:

• L.A. County
• Orange County
• Statewide

If your mail-in ballot is rejected for any reason (like a missing or mismatched signature), your county registrar must contact you to give you a chance to fix it. In Los Angeles County, the registrar will send you a notification by mail and you have until Nov. 28 to reply and "cure" your ballot.

HOW WE ARE COVERING THIS ELECTION

Kyle Stokes is following the effects on K-12 schools. David Wagner is following the effects on businesses.

The unprecedented number of early voters and mail-in ballots this election means it's going to take more time to get votes counted. Our priority will be sharing outcomes and election calls only when they have been thoroughly checked and vetted. To that end, we will rely on NPR and The Associated Press for race calls. We will not report the calls or projections of other news outlets. You can find more on NPR and The AP's process for counting votes and calling races here, here and here.