League of Cities Proposal: Split Roll for Property Rights

Two property rights initiatives are currently in the signature gathering process and are likely to appear on the June ’08 ballot. The first is the California Property Owners and Farmland Protection Act (CPOFPA) sponsored by the Howard Jarvis Taxpayer Association the California Farm Bureau and the California Alliance to Protect Private Property Rights. The second measure filed for no other reason than as a defensive tactic against the first is entitled the Homeowners and Private Property Protection Act. It is sponsored by the California League of Cities and the California Redevelopment Association organizations usually associated with eroding property rights not advancing them.

Although both deal generically with the power of eminent domain that is about the only similarity between the two. CPOFPA has a blanket prohibition against so-called "Kelo" takings the use of eminent domain for the purpose of economic development. While continuing to permit traditional exercises of eminent domain for actual public uses such as roads dams and public buildings the initiative protects all property from seizure by government for the purpose of simply handing it over to someone else. Thus churches farmland and businesses would all receive protection.

The "protections" offered by the League of Cities proposal are virtually non-existent. First it claims that it would protect only single family owner occupied residences leaving other properties wholly unprotected. But even with homes there are several caveats. For example if a homeowner has owned his or her home for less than a year they are out of luck. Moreover the League’s measure permits taking of homes for economic development if such a taking is for a use that is "incidental" to some public purpose.

In short the League’s measure does almost nothing offering but scant protection to a limited number of homeowners. Because of this the independent Office of the Legislative Analyst said the League’s measure "is not likely to significantly alter current government land acquisition practices."

Nonetheless because it does ostensibly offer a thread of protection to some homeowners another concern about this measure has been raised. Specifically many in the business community have historically worried about policy proposals emanating from the left that would treat business properties differently than residential properties.

This concern was eloquently expressed in a letter dated June 8 2007 from the California Taxpayers Association in opposition to Assembly Constitutional Amendment No. 8 the legislative precursor to the League’s initiative. Cal-Tax California’s leading representative of business interests in matters relating to taxation and fiscal affairs unequivocally stated that:

"Constitutional Rights Should Not Hinge Upon the Type of Property that is Taken by Eminent Domain. There is simply no justification for protecting owner-occupied properties but not rentals and investment properties and small businesses but not large businesses. The distinction is arbitrary and it sets up a system whereby constitutional rights are diminished depending on the use of the property. In addition it sets an unfavorable precedent for other types of government intrusion on individual rights most notably in the area of property taxation."

The disparate treatment of business properties in the area of taxation is usually accomplished through a "split roll." This literally refers to "splitting" the property tax roll according to the use of the property and applying differing tax rates depending on the use. The most common "split" — found in several states — is between residential and commercial property. Thus it is not uncommon to find in these other states higher property tax rates applied to businesses. Politically it is easier for the tax-and-spend lobby to raise taxes on business rather than

In California we have a uniform roll treating all property the same. It is a good policy which has served the state well. It has also resulted in property owners from all corners — homeowners and businesses — forging a strong political alliance to preserve the current system particularly as it relates to Proposition 13.

That is why the League’s proposal is so dangerous. It would provide a template for anti-business interests to do with taxation what the League of Cities is attempting to do with property rights. Organizations such as the union-financed California Tax Reform Association have long pushed for higher taxes on California business properties. That push will be even greater as California’s budget crisis grows.

If the League’s measure passes we can anticipate increased efforts to further drive a wedge between residential and commercial properties. Thus California’s business community has a unique opportunity to close the door now to split roll proposals whether those proposals address property rights or property taxation.

Jon Coupal is President of the Howard Jarvis Taxpayers Association — California’s largest taxpayer organization — which is dedicated to the protection of Proposition 13 and promoting taxpayers’ rights.