The Legislature:
Tax Measures Introduced on First Day of New Legislative Session - Split-Roll Measure Waiting in the Wings

The California Legislature kicked off its 2013-14 session December 3, with a supermajority of Democrats in both houses – the first time in nearly eight decades that either party has had a two-thirds supermajority in both houses simultaneously (the Republicans had that distinction in 1933). Before the week was over, some legislators were discussing plans to pursue a split-roll property tax system that would lead to massive new costs for California businesses.

Assemblyman Tom Ammiano, who has said he would like to "nuke" Proposition 13, announced plans on December 6 to propose a split-roll bill designed to increase taxes on owners of commercial properties. He said he believes businesses are structuring property transactions specifically to avoid triggering change-in-ownership reassessments, and that he will introduce legislation to alter what constitutes a change in ownership of a commercial property.

Mr. Ammiano, who said he does not plan to pursue a constitutional amendment to change Proposition 13, has introduced change-in-ownership legislation in previous sessions, but the bills have been defeated (last year's AB 2014 had so little legislative support that Mr. Ammiano opted to drop it before its first committee hearing).

On the first day of session, Democratic lawmakers introduced several bills designed to increase local taxes, and Senate President Pro Tem Darrell Steinberg said he believes the state should examine all existing "tax expenditures" – the government's term for exemptions, exclusions, deductions and other policies that are intended to provide incentives or reduce inequities in the tax code – with an eye toward eliminating some.

Senator Steinberg said he doesn't believe Democrats should "burst out of the gate to raise more taxes," but added during a press conference: "I don't consider modifying a tax expenditure to be a tax increase."

Among the 96 bills, measures and resolutions introduced on the first day of session, three seek to pave the way for more local taxes by lowering the Proposition 13 vote threshold for local tax measures. Under Proposition 13, local parcel taxes and local special taxes must be approved by a two-thirds vote of the public. Senator Mark Leno's SCA 3 would lower the threshold to 55 percent for parcel taxes put on the ballot by school districts, community college districts and county offices of education. Senator Lois Wolk's SCA 7 would set the same 55 percent vote threshold for any local taxes that fund public libraries. Senator Carol Liu's SCA 4 would lower the vote threshold to 55 percent for special taxes that provide funding for local transportation projects.

If the proposed constitutional amendments are approved by the Legislature, they will be placed on the statewide ballot, where they can be adopted by a simple majority vote of the people. (The Legislature can place constitutional amendments on the ballot without the governor's signature.)

If the three measures had been effective before the November election, five more school parcel taxes would have passed; two failed taxes for library funding would have succeeded; and three rejected sales taxes related to transportation would have been approved.

Columnist Timm Herdt of the Ventura County Star wrote December 4 that there is a "booby trap" waiting for those who seek to weaken Proposition 13: the end of decline-in-value assessments when property values begin climbing back to their previous levels. "Beginning next year, millions of California homeowners will begin to see unexpected increases in their property taxes, well above the 2 percent per year cap set by Proposition 13," he wrote. "When that happens, those folks may not be in the mood to entertain ideas to tinker with property taxes."

Senator Steinberg, Assembly Speaker John Pérez, Assembly Republican Leader Connie Conway and Senate Republican Leader Bob Huff all were reelected to their leadership posts for the new session.

Speaker Pérez also announced committee chairs, including Assemblyman Raul Bocanegra, a Democrat who represents the 39th Assembly District, in the San Fernando Valley, California, as chair of the Assembly Revenue and Taxation Committee. The Senate has not yet announced its committee chairs, but will retain Senator Ellen Corbett as majority leader.

Under the state's recently modified term limits law, new lawmakers are eligible to serve up to 12 years in either the Senate or Assembly, or a combination of both houses. This likely will result in many of the new Assembly members staying in office much longer than they would have under the old term limits, which allowed a maximum of six years in the Assembly and eight in the Senate. These new term limits apply only to lawmakers first elected to the Legislature in or after the November 2012 elections.

One of the new members was somewhat a surprise to many Capitol observers. Assemblyman Steve Fox, a Democrat representing a district that includes parts of Los Angeles and Kern counties, was trailing after the initial vote counts, and Assembly staff already had begun preparing for Republican Ron Smith to take office. However, absentee and provisional ballots went Mr. Fox's way, and he ended up winning the election by 145 votes. This is viewed as a major upset, considering that in the June primary, Republican candidates received more than 67 percent of the vote, and Mr. Fox barely squeaked into the top-two runoff, edging out a Republican candidate by 0.9 percent of the vote.

(Sources: CalTax coverage of legislative sessions; The Sacramento Bee Capitol Alert, December 6; Los Angeles Times, December 4; Ventura County Star, December 4; Orange County Register, November 14.)

December 7, 2012
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