Measure EE was defeated, but celebration may be short-lived as other tax increases may be on the way.
Los Angeles voters went to the polls on Tuesday June 4th to weigh in on an attempt by the Los Angeles Unified School District to assess a hefty parcel tax on properties located within the district. Measure EE, which required a two-thirds majority to pass, was soundly defeated, receiving just 45% of the vote. This is a major victory for property owners thanks to opposition groups like the Howard Jarvis Taxpayers Association and the California Business Properties Association, who were among the measure’s most vocal opponents.
The measure would have imposed an additional tax of 16 cents per-square-foot of building area on all parcels within the district’s boundaries. That would have hit commercial properties owners disproportionately hard, but would have also imposed a significant burden on single-family homeowners. For the moment, properties owner can breathe a sigh of relief, while the school district, teacher’s union and Mayor Garcetti’s office conduct their forensic analysis of the defeat.
Many of those following the issue closely believe that the school district is to blame for improperly assessing the level of support for the measure. Superintendent Austin Beutner and his board were counting on riding the wave of support for education funding occasioned by last year’s strike by United Teachers Los Angeles. Recent polls and studies indicated greater than two-thirds support for the new parcel tax, but special elections like this one tend to skew the voter profile. The LA Times had this to say on the morning of June 5th:
“The slim ballot likely depressed turnout, especially following a May school board election. Low-turnout elections generally bring out a disproportionately older, more conservative, less tax-friendly electorate.”
To be sure, the finger-pointing will be vigorous, but Los Angeles Mayor Eric Garcetti has already vowed to keep the issue on the front burner. He had this to say on the night of the election:
“We’re not going anywhere. Pass or not, tomorrow we roll up our sleeves and continue that work.”
While the defeat of the measure is significant, it may only be the beginning of an even bigger battle over tapping property owners for more education funding. There are two other major initiatives to increase property taxes in California. We have been telling you about the California Schools and Local Community Funding Act, which will be on the 2020 General Election ballot. If it passes, commercial property owners will be stripped of the protections afforded them by Proposition 13, which has been the law statewide for the past 41 years. Click here to read our posts on this topic.
In the recently completed legislative session, the California State Senate approved SCA-5, a proposed amendment to California’s State Constitution that would lower the voting threshold from a two-thirds majority to a 55% majority to approve parcel taxes on real property at the behest of local school and community college districts. SCA-5 now moves to the State Assembly where it is expected to pass, as both chambers have a super majority of Democrats. Once it clears the Assembly, it needs only a simple majority in a general election that could come as early as 2020.
As a property owner, you may feel that you are under attack. If SCA-5 and the split tax roll initiative both become law, you could see your base tax levy be adjusted to 1% of full market value every year and also see multiple parcel taxes added to your tax bill by local school districts. We are doing our best to follow all these issues and will keep you informed as we learn more. In the meantime, you may want to include these potential changes into your investment strategy going forward. Stay tuned.