Proposition 5, on California’s November ballot, lowers the threshold for municipal bond measures to fund affordable housing and public infrastructure from two-thirds of voters to 55 percent.
Jessica Christian/The Chronicle
California cities are struggling to finance large infrastructure and housing projects. A proposal on the ballot this fall could change that, but opponents say it would come at the expense of rising property taxes, which Prop. 13 has suppressed for nearly half a century.
Polls show most people think the state’s landmark 1978 property tax law is a good thing. It stabilizes property taxes for homeowners. But it would make it harder to issue bonds and disrupt the way local governments finance projects.
Currently, if your city council wants to use bonds to fund affordable housing or new roads or fire stations, a simple majority of voters must say yes. Two-thirds of voters, or 66.67%, must vote “yes” for it to pass.
Article continues below this ad
This number is a difficult threshold that is virtually impossible to achieve. Mark Baldassare, who directs the statewide survey for the Public Policy Institute of California, said achieving this will require building a “very broad coalition of support.”
Proposition 5 would change that. The measure would lower the threshold for municipal bond measures to fund affordable housing and public infrastructure from two-thirds of voters in favor to 55%.
Proposition 5 does not directly increase anyone’s taxes. But its opponents, some of whom were instrumental in passing Prop. 13 in the 1970s, argue that it would “water down” Prop. 13.
Here’s what you need to know:
How Prop. 13 Made Road Construction Difficult
Fueled by anger over rising property taxes and legislative inaction, Proposition 13 was approved by 64.79% of California voters in 1978. This law changed the state constitution and capped the property tax rate at 1% of the home’s assessed value at the time. I bought it. No matter how much your property increases in value, your annual increase in property taxes is limited to the lower of 2% or the rate of inflation.
Article continues below this ad
Proposition 13 also requires local governments to obtain approval from 66.67% of voters for “special taxes,” including bonds that raise money for specific purposes. If Prop. 13 itself had imposed a higher standard, the measure would have failed.
Limiting property tax increases would help people on fixed incomes stay in their homes, which was the rallying cry for proponents of Proposition 13. However, this measure would also deplete local governments’ main financial resources. Its dramatic impact on California school funding has been widely documented. When local property taxes, once the main source of funding for schools, plummeted, responsibility shifted to the state, and school budgets were subsequently hollowed out.
Critics also say Proposition 13 benefits a group that is statistically wealthier and better educated than the rest of California: homeowners, at the expense of others.
Genevieve Giuliano, interim dean and distinguished professor at the USC Price School of Public Policy, said it is difficult for local governments to fund things like new roads and water safety facilities because they are very expensive. . He said estimates for repairing Los Angeles’ crumbling sidewalks are in the “billions of dollars” and that affordable housing projects could cost $500,000 per unit. Local governments use bonds to spread large purchases over time, much like property owners use mortgages.
To make up for the difference in the tax base under Prop. 13, Californians pay more taxes elsewhere. The United States has some of the highest state-level sales and gas taxes, and many localities add even more on top of those taxes. But unlike property taxes, revenue from sales and gasoline taxes fluctuates with the economy, making it difficult to fund long-term projects. U.S. News & World Report ranks California 37th in the nation for K-12 preschool, 42nd in public safety, and 32nd in infrastructure, with nearly a quarter of its roads It is rated as being in “poor condition”.
Article continues below this ad
In 2000, voters approved Proposition 39. The proposal changed the voting standard for bonds for school construction and renovation to 55% instead of two-thirds. Initially, a flood of new bonds would be issued to address long-overdue upkeep of aging schools. But in the years since, the number of school bonds approved by voters has declined, with 40% of proposed school bonds rejected on local ballots in March of this year.
The most expensive measure to finance school infrastructure is an annual property tax increase of up to $60 per $100,000 of home assessed value, according to an analysis by California City Finance, a local government financial consulting firm. It is something that has been recognized. In other words, if you own a home valued at $600,000 and the city issues a bond up to the allowable limit to build a new school, your property taxes will increase by $360 per year until the bond is paid off. You will have to do so.
What Proposition 5 does and doesn’t do
Proposition 5 does not directly increase property taxes. It simply changes the percentage of voter approval needed to pass municipal bond measures for certain types of projects. The bill would amend the state constitution to require approval from only 55% of voters, rather than the current 66.67% requirement.
Proposition 5 would not require local governments to repay the bonds through increased property taxes. City councils can choose other forms of revenue, such as sales taxes or hotel occupancy taxes. However, it is common for local governments to raise property taxes to pay for bonds, and Proposition 5 would allow them to do so for certain types of projects specified in the bill. .
Article continues below this ad
In exchange for lowering standards for voters, the bill includes new accountability requirements for bond spending, including audits and a public oversight board that would have to oversee how money is spent.
The text of Proposition 5 says it applies only to bonds for “low- and moderate-income California affordable housing or public infrastructure, including roads, water, and fire protection.”
Therefore, if your local government proposes a project of this type, and at least 55% of the public decides to vote in favor of it, and your local government decides to fund it as such, Proposition 5 could lead to an increase in property taxes. When a bond is repaid with interest, the increase disappears.
Prop. 5 can generally lead to increased property values as better sidewalks, new roads, more libraries, hospitals, fire stations, etc. make the area a more attractive place to live.
Who supports Proposition 5 and who opposes it?
Many city, county, and special district governments want Proposition 5 to pass to make it easier to fund projects within their jurisdictions. It is supported by the California Democratic Party, California Association of Counties, AIDS Healthcare Foundation, League of Women Voters, California Federation of Labor, California Professional Firefighters, California YIMBY, ACLU, and many other housing and labor organizations. . Supporters point to California’s extreme housing shortage and infrastructure problems as justification for passage.
Article continues below this ad
Many groups broadly oppose tax increases and government spending. Groups campaigning against the bill include the California Republican Party, the California Taxpayers Association, the California Chamber of Commerce and Industry, and the Howard Jarvis Taxpayers Association. Opponents say the bill doesn’t define “infrastructure” narrowly enough and would lead to wasted government spending funded by higher property taxes.
The San Francisco Chronicle’s editorial board objects to the way Prop. 5 limits where affordable housing can be built and recommends a “no” vote. The Los Angeles Times Editorial Board said it recommended “yes,” saying the current two-thirds standard would make it extremely difficult to fund critical infrastructure.
The latest poll of likely voters by the Public Policy Institute shows divided opinion on Prop. 5, with 49% saying they would vote yes and 50% saying they would vote yes. % said they would vote against it.
Contact Jessica Roy: Jessica.Roy@sfchronicle.com
