by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
I’ve been critical of California’s Proposition 13 because of its progressive nature. It penalizes immigrants and younger families to favor older, wealthier nativists. Howard Jarvis’ intent was to stop the California’s Legislature from its runaway spending; the Legislature did no such thing. In fact, the California Legislature has increased spending, over the past 31 years, in spite of the intended purpose of Proposition 13.
As much as I think Proposition 13 is bad public policy, I’m glad it’s on the books. The inevitable bankruptcy of California will cause its citizenry to take a hard look at the cost of the Great Social Experiment its Legislature pursued. Jeff Brown and Sean Purcell are subject to my cautionary warnings that the wealth-eating zombies in Sacramento won’t stand for their citizens’ impudence; I believed that one of those ghouls would try to repeal Proposition 13, citing its’ progressive nature. I was wrong; they hired a henchman.
Meet San Francisco Recorder-Assessor Phil Ting; he wants to change Proposition 13. Phil Ting is spinning his attack on Proposition 13 as corporate welfare. Ting claims that Proposition 13 unfairly benefits commercial property owners at the expense of residential property owners:
Paradoxical to the law’s initial intent, the commercial property loopholes in Proposition 13 have actually shifted the tax burden away from corporations and onto the backs of residential property owners.
For example, look at San Francisco, where I currently serve as assessor- recorder. Thirty years ago, commercial property owners contributed 59 percent of property tax revenues and residential property owners contributed 41 percent. Today, we see a virtual flip: commercial property owners contributed just 43 percent of property taxes in 2008, while residential property owners contributed 57 percent.
Sounds reasonable, right? Bear in mind that Ting called the Catholic Church a tax deadbeat for reapportioning its parish properties to local control, a measure all California Catholic Dioceses are enacting. This politically-motivated measure was payback for the Church’s involvement in a ballot initiative this past November. Ting’s the perfect hired gunslinger for the California Left.
Liberal, spend and try-to-tax legislators are trying desperately to figure out how to circumvent the will of California voters so that they can maintain The Great Social Experiment; Phil Ting’s their cowboy.
California is so broke its issuing its own currency . We have two options in the Golden State: cut expenses or raise revenues. Look for more politicians to jump on Ting’s bandwagon and try to repeal Proposition 13 to fill up the coffers.
” Repeal Prop 13 or file Chapter 13 ! ” will be their rallying cry. I’m voting for the latter.
Robert Kerr says:
re: California is so broke …
“How broke is it?!” 😉
I see that CA needs another $24B by Tuesday. Another month, another budget crisis. What a mess.
June 28, 2009 — 9:35 pm
Brian Brady says:
“How broke is it?!”
We’re so broke, we can’t even pay attention.
(they’re hoping that’s true). Good to see you back here, RK
June 28, 2009 — 9:46 pm
Joe says:
Perhaps a third option, leave! That’s what Colleen and I did 6 years ago. We left San Diego North County after we built our last home there. I had no idea Prop 13 was having the effect you’ve mentioned. However, we saw the runaway spending, or at least the misappropriated funds, in the public school system. We had $20,000+ worth of school fees for the home we built as California (at least San Diego North County) did not factor in growth into the budget to sustain the public school system! Similar to Prop 13, the new home owner was disproportionately paying the bills for the public school system.
June 29, 2009 — 5:57 am
Don Reedy says:
Joe and Colleen,
Thanks. I’m moving into your spare bedroom. One wife, two dogs, guitar, RE license,and Web 2.0 connection to BHB.
Oh, and since California has sucked most of our finances down, I won’t be paying rent.
I do sing the “Marine Corps Hymn” pretty well, though.
June 29, 2009 — 10:07 am
Jeff Brown says:
Prop 13 is about as fair as it gets. Everyone in any particular neighborhood pays, based upon the same simple formula. It can’t be manipulated, eliminated, or deformed without tremendous political success, which is highly unlikely. It’s part of the state constitution because Jarvis & Gann, bless their suspicious souls, knew politicians would eventually rebel against it — a source of citizen gold made, God forbid, virtually untouchable.
Since both ways of modification or elimination of Prop 13 involve super majority votes (voters or legislature), it’s my opinion it’s safe. Let liberals out themselves trying to raid this last Golden Goose. Frankly, I’m lickin’ my chops at the carnage they’ll cause themselves with this silly stance. Super majority? California politicians can’t get a super majority to agree the sun will set in the west today.
June 29, 2009 — 10:09 am
Brian Brady says:
I wish we agreed, Jeff. It starts with the little things. Look at Ting’s attack. It slowly cracks the shield:
Crack #1- The Church is trying to shield assets from legal judgment- let ’em pay. (Well, that’s reasonable because they did wrong).
Crack #2- Commercial property owners are gaming the system. Aren’t we sick of corporate welfare? (Phil’s right- those rich guys are getting off scot free)
FUTURE CHIPS:
Crack #3- It’s the churches and corporations that are making us sell off the Del Mar Fair (those greedy bastards are taking cotton candy out of the mouth of your babies.)
Crack #4- Point out the obvious progressive nature of the property taxes…at the right time. (The shield is shattered.)
@Joe- I choose to fight. California is too valuable to to become a feudal economy. SF Mayor Gavin Newsom once said “As goes California, so goes the nation”. This is a wake up call, folks.
June 29, 2009 — 11:00 am
Jeff Brown says:
Brian — Politically speaking, I see the tactical points you’re making. Here’s there problem — almost half those paying real estate taxes are homeowners. Are they really so stupid as to think politicians are only gonna go after ‘everyone’ else but them? Man, if they’re that dumb, I’ll help you shut off the lights as we leave. 🙂
June 29, 2009 — 11:24 am
Sean Purcell says:
Geez, Mr. Ting’s ability to make logical points is stunted even by “progressive movement” standards. According to his analysis, the state’s inability to raise taxes by reassessing commercial property equates to an inconsistent revenue stream that precludes investing in the future. What? The commercial tax revenue – because it is not being reassessed – is EXTREMELY consistent. What bothers Mr. Ting et al is their inability to increase it.
That bit of nonsense pales in comparison to this little gem of logical bubble gum quoted in your post:
So let me see if I understand this: residential property values in CA (and particularly in San Francisco) skyrocketed at easily 2-3 times the rate of appreciation seen in the commercial sector. At the same time, residential transactions set records in sheer number of turnover that the commercial market never dreamed of attaining. Property taxes are based on value (skyrocketing) as a function of transfer (record levels). Hmmm, and now the property taxes paid as a percentage of total property tax revenue between residential and commercial properties has swapped around the 50/50 pole. Well that’s very interesting… oh wait, no it’s not. That’s just grade school mathematics.
In a state where your party controls every aspect of spending and does nothing that’s not politically rewarding to the various unions and special interest groups who support you, it takes a man of uncommon hubris to lament “the uncertainty of a tax system in which taxes and fees are raised based on what is politically possible, rather than a logical tax system based on what is economically productive” and then use it as a basis for higher taxes! Uncommon hubris indeed… or a head so full of progressive crap he has to wipe his ass when he sneezes.
I’m with you Brian: Chapter 13 would be a God-send for this lost state. The one silver lining to all this? For decades California has been one big step ahead of the rest of the nation in most matters and we will most likely regain that particular honor. We should be finished with and recovering from our Chapter 13 just as the rest of the nation is plunged into theirs.
Those who do not study history (or in its stead the largest and most successful state in their union) are doomed to repeat it.
June 29, 2009 — 3:03 pm
Eric Blackwell says:
I am with Jeff…and Joe on this. I left California in ’96 and headed to Louisville because taxes, spending and regulation were confiscatory THEN….
Amazing…we have a California legislature that spends itself to prosperity **cough** and a Governator who claims to be an environmentalist whilst commuting back and forth to work in a jet from Southern California to Sacramento.
The thought that any other state would / should take it’s marching orders from California is pretty absurd. 😉 (Hopefully the notion that so goes Cali so goes the nation is just that…a notion)
Ssshhh…don’t tell anybody, but there are 49 other states ready to fight over the businesses that flee from California’s taxation (grin)
Best;
Eric
June 29, 2009 — 3:06 pm