PUBLISHED: August 24, 2024 at 7:53 p.m.
Proposition 5 makes it easier to raise property taxes.
The November ballot measure gets around Proposition 13’s limitations on property tax increases by making it easier for local governments to pass bonds, a method of borrowing money that is then paid back — with interest — by adding extra charges to property tax bills, sometimes for decades.
When property taxes rise, there’s little consideration of a homeowner’s ability to pay, or any hardship or disability. If people fall behind on their property taxes, their homes can be sold out from under them.
Currently, local bonds require a two-thirds vote of the electorate. This type of taxpayer protection predates the 1879 California Constitution and was first inscribed during the state’s inaugural constitutional convention three decades earlier.
The handwritten document from the Gold Rush era states, “It shall be the duty of the legislature to provide for the organization of cities and incorporated villages, and to restrict their power of taxation, assessment, borrowing money, contracting debts, and loaning their credit, so as to prevent abuses in assessments and in contracting debts by such municipal corporations.”
Today’s legislature thinks it knows better. Prop. 5 would slash the two-thirds vote requirement down to 55%, allowing cities and other local government entities to pile debt onto residents.
In 2000, voters were persuaded to pass Proposition 39 and cut the vote threshold for school bonds from two-thirds down to 55%. In the years since, that’s made it much easier for districts to pass parcel taxes to pay for school buildings. We can see the impact on our tax bills.
Prop. 5 would cut the vote requirement for nearly everything else. If the proposition passes, governments will be able to more easily borrow money for “public infrastructure,” which includes everything from facilities, parks and emergency services to transit improvements, libraries and ports. The lower vote threshold would also apply to new debt for utilities, disaster protections and home hardening.
It’s not just cities and counties that can take on debt, either. So can “a transit district, a regional transportation commission, and an association of governments.”
That’s not the end of it. There’s also the housing component — everything from affordable housing to homelessness facilities, including for people with mental illnesses.
The lower vote threshold similarly applies to new debt to pay for “down payment assistance programs” and “first-time homebuyer programs.”
Taken altogether, Prop. 5 is worse than a tax increase — it’s a turbo engine to try and raise property taxes whenever government agencies want.
In a sneaky maneuver, the Legislature wrote a provision into Prop. 5 that makes it apply retroactively to any infrastructure and housing bond measure that appears with it on the November ballot. Had Bay Area officials opted to stick with a proposed $20 billion housing bond instead of withdrawing it, it would have only needed 55% approval if Prop. 5 passed at the same time.
Higher property taxes generally raise the cost of housing, and not just for homeowners. Tenants will see higher rents as landlords deal with increases to the cost of providing rental housing. Even the smallest businesses will see rent increases as higher property tax bills are passed onto commercial tenants.
Ultimately, Prop. 5 creates a perverse incentive for local governments to misallocate public funds.
When it’s easier to borrow money, some elected officials are likely to spend existing tax revenues on everything except high-priority needs. In future years, municipal budgets could become increasingly strained as more and more revenue gets diverted to repay investors for old debt.
Early Californians had the right idea: The power to incur debt or liability must be tightly controlled to prevent abuses. The two-thirds vote requirement to pass local bonds is a crucial protection for California residents now and in the future.
Susan Shelley is vice president of communications for the Howard Jarvis Taxpayers Association. Distributed by CalMatters.org.
