This is a defining moment for California. It is our opportunity to affect positive change by putting schools and communities first and restoring more than $11 billion a year to our schools and vital community services without raising taxes on homeowners, renters, and small businesses. It is our opportunity to ensure that all can prosper in the Bay Area as we continue to guarantee protections for homeowners, residential renters, small businesses, or agricultural land.
Forty years ago, on June 6, 1978, Proposition 13 was passed — dramatically changing how property taxes are assessed in California and resulting in declining public investments, especially in education. Although Proposition 13 was framed to help homeowners, it applies to residential and commercial property. Commercial property owners have been the biggest beneficiaries. It is estimated that Chevron’s refinery in Richmond costs California at least $100 million a year in lost taxes. And the inequities in land taxes are also apparent among newer companies who are paying significantly more than older legacy companies. In Santa Clara, Yahoo pays $54,000 per acre for one of its properties compared to Intel, which pays $935 for a nearby property. Think about that. There’s no economic or policy reason for this difference. This means that newer firms, like Yahoo, are faced with an enormous and unfair competitive disadvantage. If all the land was assessed at Yahoo’s level, bringing it to current land values, then Intel, whose revenue was $62.8 billion in 2017, would pay about $4-5 million more annually in land taxes. This would add much-needed resources for schools and local services.
Our schools, cities, and counties are experiencing the detrimental effects of a commercial property tax system that is inequitable and loophole-ridden. But there is a solution: The California Schools and Local Communities Funding Act, a constitutional amendment to put before voters to improve Proposition 13 and restore $11 billion annually to our schools and critical community services. According to an independent analysis by USC Program for Environmental and Regional Equity, nearly $2.4 billion annually will be generated alone for the Bay Area counties of Alameda, Contra Costa, Marin, San Francisco, and San Mateo. Our Bay Area Policy Brief provides further key findings and impacts to these five Bay Area counties from reforming Proposition 13’s commercial property tax system.
Despite being the sixth largest economy in the world, California ranks number 47 among the 50 U.S. states in investment in public education after 40 years of disinvestment due to Proposition 13. Our roads and major infrastructure are deteriorating. And in the Bay Area, we are witnessing an affordable housing crisis that threatens the economic security of residents and the region’s long-term prosperity. For us, as stewards and civic leaders of the Bay Area, we are committed to help build a more prosperous Bay Area for all residents. The San Francisco Foundation has made a commitment to advancing racial equity and economic inclusion in the Bay Area. As such, we have joined with other foundations and community leaders to support the California Schools and Local Communities Funding Act. We see it as a fair and equitable way to:
- Restore more than $11 billion a year to our schools and vital community services without raising taxes on homeowners, renters, and small businesses.
- Create a level playing field for commercial property taxes while guaranteeing existing protection for residential property and agricultural land.
- Support small businesses by eliminating the burdensome business personal property tax while also leveling the playing field for new businesses, which have created net new jobs for the last 30 years.
- Mandate transparency and accountability for all revenue restored to California’s schools and local communities.
Closing the commercial property tax loopholes is important to our state and to our Bay Area region. Through the power of organizing, this effort is fueled by a diverse statewide coalition. It unites teachers, faith leaders, labor organizations, and more. It engages a broad base of community leaders and groups committed to creating a better future for all Californians. We, too, are united in wanting a more equitable future in which there are strong, sufficiently funded public schools, where there are needed health and other community services, where quality transportation is accessible for all, and where all people can live in safe and affordable homes.
If you are interested in learning more about the impacts of commercial property tax reform on the Bay Area and the opportunity to restore $11 billion back to schools and critical community services in California, we encourage you to read our Bay Area Policy Brief.