The City Council splintered on a largely symbolic vote to weigh in on Proposition 15, a statewide ballot initiative asking voters to decide whether the state should bump up property tax collections from certain commercial entities.
The proposition would require commercial and industrial properties to be taxed based on market values, as opposed to the value of the most recent sale price. (This excludes properties zoned as commercial agriculture.) Advocates of the proposition see it as a way of circumventing Proposition 13, which made all property taxes based on sale price when it was approved by voters in 1978.
Education and equity advocates view that moment as the beginning of decline for California school districts, for which funding has plummeted since then and now ranks 39th in the union, because taxable values typically are now not reassessed until a transaction occurs. Opponents counter that Proposition 15 would only worsen what they describe as the state’s hostile environment for business, especially small businesses that rent space from commercial property owners.
“I know there’s a lot of fear among small business owners,” said Councilman Dan Brotman, who supports the proposition. “There’s fear among homeowners that somehow this is going to touch them.”
Perhaps unsurprisingly, the proposition has attracted endorsements from school districts and teachers’ unions, including unanimous approval from the Glendale Unified School District board.
“You look at today and we’re scraping near the bottom of the barrel,” Councilman Ardy Kassakhian said of school district funding. “I think it’s the very least we can do to show our support for our schools.”
Councilman Ara Najarian, on the other hand, said he could not support levying higher taxes on California’s commercial enterprises, especially during the coronavirus pandemic, which abruptly contracted years of economic growth nationwide.
“I think it’s ill-advised to be placed at this time, during a severe economic recession,” Najarian said. “I think it’s going to put a lot of businesses under strain, if not out of business, and I think it’s going to put a lot of workers out of work.
“When a property owner is forced to pay higher taxes, that is going to be passed on in one way or another,” he added.
Christine Powers, a senior executive analyst with the city, added that the local chamber of commerce has shown opposition to the measure on similar grounds.
“Many chambers from the state to local levels have taken such a position, as has the California NAACP,” she added.
A presentation by Powers indicated that the proposition is projected to add around $15.5 million to city property tax coffers in 2022-23, the first fiscal year that reassessments would begin. GUSD reported that it expected an additional $15.2 million to its own revenues for that first year.
“Remember that the assessments will take place over many years,” Brotman, whose background is in economics, said. “It’s not expected that all properties will be reassessed until something like 2025 or 2026. Think about the trajectory as all properties get reassessed. This is significant revenue that we need to do the things that we want to do.”
Brotman said this revenue, which is not dedicated, could help fund local projects for affordable housing, new parks, improving power infrastructure and bolstering traffic enforcement.
“The community wants these things,” he said. “We have no way to pay for them unless we raise other taxes, which we don’t want to do.”
Najarian, by contrast, was critical that the new revenues would just flow into general funds and painted the proposition as a punt by the state Legislature that is eager to avoid pension reform.
“This is a flaw in the proposition,” he said. “It should be earmarked.”
More than a dozen callers gave public comment on Tuesday, also with split opinions. Numerous proponents called out mega-corporations like Chevron or Disney, which evidently pay relatively little in property taxes because they acquired their land decades ago or utilize other loopholes when changing ownership.
“I don’t know of a single economist who thinks that the current system we have in place makes any sense, so this is a great opportunity — maybe a once-in-a-lifetime opportunity — to fix something that is distorting markets,” Brotman said.
Councilwoman Paula Devine conceded that the proposition appears to have flaws but said she still had to support it.
“It may be our best shot to start the reform process,” she said.
The affirmative votes from Brotman, Devine and Kassakhian now formally include Glendale as the proposition’s supporters. Najarian dissented — adding, “I don’t think that anything that council does in the discussions will do anything but tick off people on the other side” — while Mayor Vrej Agajanian abstained from voting.