Prop 13 Split Roll Revenue Grab Inhibits Real Reform

LA WATCHDOG-Our Sacramento politicians and selected public labor unions such as the California Teachers Association and the SEIU want to amend Proposition 13 by placing on the ballot an initiative that will assess commercial and industrial properties at their “fair market value.”  Today, the assessed value is equal to the purchase price plus an inflation factor not to exceed 2% a year.  (Photo: Governor Brown and Howard Jarvis at 1978 news conference.) 

According to its proponents, the reassessment of commercial and industrial properties will generate in an additional $9 billion in revenue for local governments and school districts. 

Needless to say, our fiscally irresponsible Los Angeles City Council is licking its chops over the prospect of $270 million of additional revenue, especially since the Council Members will not have to ask the City’s skeptical voters to approve this hefty and controversial tax increase.     

Despite all the hot air from the political establishment, the “split roll” is bad public policy. 

As we all know, there is no such thing as a free lunch.  Owners of commercial and industrial properties will be forced to raise their rents and prices which will eventually flow through to the voters and taxpayers.  It will also make California businesses less competitive in the national and international markets, resulting in the loss of good paying jobs. 

The split roll also sends a clear message to employers and investors that California is not open for business, cementing California’s reputation among decision making Chief Executive Officers as the worst state to do business.  Unfortunately, our state has owned this dubious honor for the last 11 years. 

The issue of jobs is of particular importance to our City.  According to the LA 2020 Commission, we have the highest unemployment rate of any major city in the country.  Since 1980, the City has lost 165,000 jobs while its population has ballooned by a million residents.  At the same time, the number of Fortune 500 companies headquartered in the City has declined from 12 in 1980 to 4 today. 

The Herb Wesson led City Council and Mayor Eric Garcetti will argue that they need this additional revenue to eliminate the Structural Deficit, repair our streets and sidewalks, fund our short changed pension plans, build the Reserve Fund, reduce the Gross Receipts Business Tax, and restore vitally needed services.  More than likely, a huge chunk of this incremental revenue will be devoured by our poorly managed, inefficient City work force as the campaign funding union leaders will demand increased hiring levels and higher salaries and benefits for its “long suffering” members.    

But this windfall will actually inhibit budget, pension, infrastructure, personnel, and work place reform as the City Council will be able snub their noses at the voters since they will not have to ask us to approve an increase in our sales or property taxes.  Rather, it will continue its profligate ways until the next downturn in the economy forces the City to take even more drastic action. 

The proponents will claim that the split roll will shift the tax burden from homeowners to the owners of commercial and industrial property.  Of course, this proposed initiative does not include any reduction in the taxes on our houses.  

The proponents will also play “It’s for the Kids” card as the split role will generate billions for education.  However, these incremental funds will not go directly to the local school districts, but will be laundered through a dysfunctional Sacramento bureaucracy that controls the newly established Local School and Community College Property Tax Fund.  

The split roll is nothing but a crude revenue grab that the self-serving Sacramento and City Hall political establishments are trying to sell with half-truths and platitude laced rhetoric.  Yet, we are the highest taxed state west of the Mississippi River, and one of the highest taxed states in the country, right up there with the basket cases of New York, New Jersey, and Connecticut. 

Rather than placing the split roll on the ballot, Sacramento and City Hall need to clean up their acts and engage in real, long range reform that addresses their budgets and long term pension and deferred maintenance liabilities.  This means placing on the ballot a Live Within Its Means charter amendment that requires Sacramento and LA to each develop and adhere to a Five Year Financial Plan, to pass two year balanced budgets based on Generally Accepted Accounting Principles, and over the next twenty years, to fully fund their pension plans and to repair their crumbling infrastructure. 

It is very simple message to our all-knowing, self-serving Elected Elite: no reform, no new revenue. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  [email protected]) 
-cw

 

 

 

CityWatch

Vol 13 Issue 49

Pub: Jun 16, 2015