Proposition 13: Rethinking Sacred Cows

Plan Bay Area Housing Affordability Funding Gap.   

Plan Bay Area Housing Affordability Funding Gap.   

California Legislators have been trying to remove taxation limits for decades, especially limits imposed by Proposition 13, the 1978 voter initiative that placed a cap of 1% on property taxes and 2/3 supermajority vote for passage.  However, California seems determined to live in a state of perpetual crisis, which legislators say requires lots of money to cure.  Today’s crisis is housing.

The surprisingly candid Bay Area Council in its report, Closing the Bay Area’s Housing Gap, of December 2016, advises jurisdictions to,

 

Rethink sacred cows. Consider revisiting Proposition 13, CEQA, and local control over land use as part of a grand bargain on housing.

Win hearts and minds for housing. We need storytelling, not just data.  Building conviction for housing among major voting blocs—e.g., environmentalists and organized labor—is critical. ‘Never let a good crisis go to waste’. The state could reframe the conversation by declaring a housing crisis and the electorate would be receptive to action due to skyrocketing rents and home prices.

In spite of legislators’ Herculean efforts, so far, their only significant success has been Proposition 39, which amended Article XIII of the California Constitution called for by Proposition 13, by lowering the required supermajority vote necessary for voters to approve local school bonds, from 2/3 of the votes cast, 55% of the votes cast.  Voter-approved school bonds under Proposition 39 are paid off by raising property taxes above the 1% property tax rate limit established by Proposition 13 in 1978.  Unfortunately, Proposition 39 and the ensuring ability of school districts to spend more did not improve the overall quality of California public schools, as evidenced by the 2016 Wallethub list by state that gave California schools a rank of 40 out of 51.   But, that is viewed as a minor aside.

Now, California Assembly Member Cecilia Aguiar-Curry (D-Winters) has introduced Assembly Constitutional Amendment No. 4 (ACA-4), Local Government Financing:  Affordable Housing and Public infrastructure, which is pending referral and may be heard in committee on March 21, 2017.  ACA-4 would amend California Constitution Article XIIIA.  

Highlights of ACA-4:

*  At present the California Constitution prohibits the ad valorem tax rate on real property from exceeding 1% of the cash value of the property, subject to specific exceptions.  ACA-4 would create an additional exception to the 1% limit that “would authorize a city, county, or city and county to levy ad valorem taxes to bonded indebtedness incurred to fund construction, reconstruction, or replacement of public infrastructure or affordable housing, if the proposition proposing that tax is approved by 55% of the voters of the city, county, or city and county.”

*  At present the California Constitution “conditions the imposition of a special tax by a local government upon the approval of 2/3 of the voters of the local government voting on that tax, and prohibits these entities from imposing an ad valorem tax on real property or a transaction or sales tax on the sale of real property.”  ACA-4 “would authorize a local government to impose, extend, or increase a special tax for the purpose of funding the construction, rehabilitation or replacement of public infrastructure or affordable housing, if the proposition that the tax is proposing is approved by 55% of voters.”

*  At present the California Constitution prohibits local government agencies from incurring any indebtedness exceeding in any year the income and revenue provided in that year, without the assent of 2/3 of voters, with the exception of indebtedness to provide funds for school districts.  ACA-4 would lower the voter-approval threshold to 55%; if the indebtedness is for general obligation bonds issued to fund the construction, reconstruction, rehabilitation or replacement of public infrastructure or affordable housing projects.

*  For the purposes of this amendment, “affordable housing” is described as,

“Housing developments, or portions of housing developments, that provide workforce housing affordable to households earning up to 150 percent of countywide median income, and housing developments, or portions of housing developments, that provide housing affordable to lower, low, or very low income households, as those terms are defined in state law.”

*  For the purpose of this amendment, “public infrastructure” is described as:  water quality, sanitary sewer, treatment of wastewater, protection from sea level rise, open space and recreation facilities, improvements to transit and streets, and highways, flood control, broadband expansion in underserved areas, local hospital construction.

The Nine-County Coalition is not “anti-tax;” however, part of our mission is to encourage voters to be aware of legislation that will provide the funds for the implementation of central planning efforts which so many California residents oppose.  Awareness is especially recommended now that legislators have caught on to residents’ desire for “local control” of their cities and counties, and are introducing legislation that purports to support “local control,” while funds are directed toward further implementation of central planning. 

A report prepared by the Association of Bay Area Governments (ABAG), Affordable Housing Funding Gap Analysis, in April 2014, describes the funding shortfall of just one of the several elements of Plan Bay Area, subsidized housing. See the chart above illustrating the gap.

The Bay Area will need to produce 660,000 new housing units through 2040 to accommodate its projected population growth and future workforce. Over 371,000 or 56 percent of these housing units will need to be affordable to low and very low income Bay Area residents. Market rate development alone will not meet this demand; it must be complemented with affordable housing development. This requires subsidy.

Funding for Plan Bay Area’s projects would be greatly improved with passage of ACA-4.  However, as we have seen from the results of Proposition 39, more money does not necessarily translate into desired objectives.  Better outcomes might come from less grandiose central plans, specific city/county-centered proposals for basic services such as more frequent clean-fuel buses reaching even remote communities, and facilitation of local jobs that would not require residents to travel long distances.