Initiative’s complexities will cost taxpayers more than $1 billion to implement, could reduce tax revenue for small and rural counties
SACRAMENTO, CA – Today, the campaign opposing the $12.5 billion-a-year property tax hike qualified for the November ballot announced another serious flaw in the measure that will result in massive administrative costs and complexities for local governments. Unless defeated by voters, the proposition will require county governments statewide to radically increase appraisal staffing, training, and technology at a cost of $1.01 billion. A recent independent analysis prepared for the California Assessors Association (CAA) highlights how this increased staffing and expanded workload will create an administrative nightmare for local governments. The same study also indicated that significant costs for other county agencies, including auditors, controllers, and county counsel are not included – meaning administrative costs will be much higher than $1 billion. Finally, the study concludes that the proposition will cause some rural counties to lose property tax revenue rather than experience the gains claimed by special interests promoting the initiative.
The CAA, which represents the nonpartisan local officials responsible for administering the initiative, recently announced its opposition to the measure in large part due to its analysis of the high costs and complexities.
“The measure was drafted so poorly that it will cost taxpayers millions for Assessors to administer and lead to thousands of lawsuits due to the badly written language,” said Ernie Dronenburg, Assessor for San Diego County. “If passed, this measure will cause instability in the funding of local government and schools, which in turn will cause them to look for other tax increases and services to cut in order to compensate for the measure’s elimination of Proposition 13 funding predictability.”
The initiative specifies that administrative costs – which the CAA study estimates to be more than $1 billion for the initial three-year phase-in period – must be repaid first before any new tax revenue goes toward the initiative’s funding targets. The state’s nonpartisan Legislative Analyst reiterated this point in its analysis of the measure. Despite the initiative’s name, education funding is given the lowest priority for any new tax revenue.
“This initiative will significantly raise taxes on business properties and will take our hard-earned tax dollars and send them to larger, wealthier coastal counties,” said Marysville City Council Member Stephanie McKenzie. “The measure will also prioritize funding for administrative costs that will be required to implement this complex property tax increase. Marysville businesses and consumers who will be hit with higher prices simply cannot afford this ill-conceived tax measure.”
The initiative adds more “red tape” to an already complex property tax assessment structure. According to CAA’s new analysis, county assessors could see up to a 12-fold increase in annual reassessments. The study states, “A change in the law of such magnitude poses significant administrative problems for assessors and their local government partners in property tax administration, in addition to enormous start-up expenditures. There will also be additional compliance costs for taxpayers.”
The study also found, “The funding of additional property tax administrators would actually result in a net loss for many small counties.” Any revenue loss – or cost increase – to local governments comes at a horrible time, as many face budget cuts due to the COVID-19 economic crisis.
An earlier CAA analysis estimated that county assessors would need to hire up to 900 new auditors and appraisers statewide. Those positions require a high level of expertise and are already difficult to fill with qualified workers.
The measure includes a provision for the state to cover any startup and administrative costs for local governments, but the initiative’s language leaves it up to the State Legislature to determine by statute what costs will be covered and the repayment terms. This provision means the state can leave local governments on the hook for portions of the initiative’s massive administrative costs at a time when counties and cities are struggling with budget deficits. The start-up costs will begin immediately while new revenue—for the counties that receive any—will not be in full effect until 2025 according to the Legislative Analyst’s Office.
Read more about the flaws in the $12.5 billion-a-year property tax hike here.
ABOUT CALIFORNIANS TO SAVE PROP 13 AND STOP HIGHER PROPERTY TAXES
Californians to Save Prop 13 and Stop Higher Property Taxes, a bipartisan coalition of homeowners, taxpayers, and businesses, has been fighting to protect Prop 13 and oppose a split-roll property tax for more than a decade. For more information, please visit www.StopHigherPropertyTaxes.org.