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Proposition 13: The Birth Of California’s Taxpayer Revolt

Howard Jarvis and Paul Gann celebrate after Proposition 13 wins on June 6, 1978.
Photographer-Ken Papaleo, Herald-Examiner Collection / Los Angeles Public Library
Howard Jarvis and Paul Gann celebrate after Proposition 13 wins on June 6, 1978.
The Birth Of California’s Taxpayer Revolt
Prop 13 Winners And Losers GUEST: Matt Levin, data and housing reporter, CALMatters

I'm Maureen Cavanagh. Forty years ago California taxpayers revolted. Voters overwhelmingly the passed Proposition 13 the sweeping measure to slash the state's property taxes as part of the California dream project. Capital Public Radio's Chris Nichols looks at the history of Prop 13 and how the measure continues to shape the state. Back in the 1970s California home prices nearly tripled and property taxes soared. Right along with them what we found was that property values were going up every hour. That's Leslie Davis. She heads the California assessor's association. In 1978 she was an appraiser for Contra Costa County. Our phones were ringing off the hook were concerned about paying their taxes maybe missing a mortgage payment maybe not being able to pay their utilities. People were angry and Howard Jarvis who is a taxpayer advocate and fierce government critic pushed for revolt and the politicians are now in the public hall. He seized on a mistrust of government including corruption scandals involving local assessors to rally support for Prop 13. The measure tied property taxes to a home's purchase price instead of to its volatile market price. It also limited how fast a home's taxable value could go up each year. Here's Jarvis at a press conference days before the vote in 1978. This drew Ransdell numbers and philosophy is on the bank by the big goodbye and for the people not a government by elected officials for elected officials alike despite pleas to vote no by business and labor groups. In nearly every newspaper editorial board Prop 13 was supported by two thirds of voters. Nearly overnight homeowners saw property tax bills cut dramatically and government saw their revenue shrink by nearly half. John copal is president of the Howard Jarvis Taxpayers Association which continues to defend Prop 13 that helped to maintain the stability of neighborhoods. He says the measure's greatest success has been helping longtime owners on fixed incomes stay in their homes. People like Dorothy who lives in North Oakland. I'm still good when I look at the whole situation. I'm still very blessed Dorothy says she bought her modest single story home in 1956 for ten thousand dollars. Today it's worth more than half a million. She says she'd struggled to stay without Prop 13 likes my exemption that I'm getting. I think you're in as it is said Susan. The critics of Prop 13 say that stability for some has come at substantial costs for others. They also say it deprives cities of the revenue needed to adequately pay for schools parks and public safety. Less property tax money coming in also meant local governments had to find money somewhere else. Matt Taylor is California's nonpartisan legislative analyst. There have been local sales taxes. They raise what are called hotel taxes utility taxes. They turned to assessments they turn to fees to help backfill some of these costs. And that's not all. They also imposed on home owners and new homes lots of what are called impact fees. Where are you paid and is included in the price of your home. Those impact fees have pushed housing prices up for new buyers. New home owners pay significantly more in property taxes than the longtime owners next door. The clear losers are the Millennials. Daniel Meyers is a demographer and urban planning professor at USC. And so the new people come along and they have the highest expenses of house purchase which they can't really afford. There's settle with a student loan debts. They have two earners working both to try to pay the mortgage and they're paying super high taxes to make up for other people's low taxes. They're getting Kilbey Prop 13 Meyer says helped save the California dream for one generation but now it's making that same dream tougher for the next. In Sacramento I'm Chris Nichols joining me now from the California Dream collaborative. Is Cal matters reporter Matt Levin. Matt welcome to the program. Thanks for having me. Now obviously Proposition 13 is not to be confused with any of the propositions. Voters will say on this November's ballot it is as you point out 40 years old. Why have you decided to take such a deep dive into this issue now. Well the 40 year anniversary was kind of a good news peg for this. If you talked to. So I'm in Sacramento if you talk to kind of policy wonks no matter what the issue is really whether it's education or housing or even the environment people will point to Prop 13 as this thing fundamentally changed how state and local government works in California some for the better and then a lot of people argue some for the worse. And I think a lot of Californians they kind of know of Prop 13 right. It's like this vague thing in their head that's like Yeah that seems like something important that happened a while back but they don't really know the specifics of it and how it's impacted their lives. So that was the impetus for this story if you're going to tell the story of the California Dream and what's happened to the California dream. You have to talk about Prop 13 this story we just heard on the history of Prop 13 is part of a series from the California dream project. You select it one block in North Oakland to illustrate how a 40 year old law affects people who live on the same street in vastly different ways. What was special about this block. So a couple of things we're special about that block. We wanted to find a middle class neighborhood because Prop 13 kind of affects pretty much every block in California. So we didn't want to focus on incredibly wealthy areas which may be benefiting disproportionately from Prop 13. We didn't want to focus on very low income areas which maybe not which aren't benefiting so much. We wanted to look at a block that had you know kind of normal people on it right. And how Prop 13 has shaped their lives without them really knowing exactly how that happened. The other reason we chose this block is we actually had a reporter who lived on that block. So we kind of had an entree into that community which helped with the reporting according to your reporting Prop 13 has created clear winners and losers. Can you give us examples of who benefits and who suffers. Sure. So if you have owned your house for a very long time and if that house has appreciated a lot in value you are paying very little in property taxes proposed proportional to what your house is worth. So those are the neighborhoods that you're going to see the most benefit from Prop 13. So I've actually I've took a look at some of the neighborhoods in San Diego we mapped basically the entire state with the exception of some rural counties to find where Prop 13 was the most beneficial and where it wasn't helping so much. And in San Diego County the neighborhood around Torrey Pines saved about 23 million dollars just in one year because of Prop 13 and then Cardiff by the sea saved around 18 million. And that's because of how properties Locsin property taxes there and what you're talking about is an interactive section of your Web site regarding this series where people can actually type in their address and find out what their block saved and what their county lost from that block because of Prop 13. If I click on my address on the map I see the block that I lived in has saved more than 3 million dollars in property taxes because of Prop 13 but that also means local schools and services got 3 million dollars less isn't that right. That's correct so that's obviously the flip side of this which is you know people may be saving a lot on their property tax bill but that's obviously revenue that could have gone to local government coffers. That isn't going there. Now local governments have tried to make that up since the late 1970s and a variety of ways we can go through what those ways are in the series but that's obviously the flip side if you're saving money on taxes that means less money for local governments whereas the impact of that lost tax revenue most visible. You know a lot of people would argue California's struggling school districts those were disproportionately impacted by Prop 13. We have a really good story by Vanessa Wakana reporter at KQED looking at how Prop 13 impacted a couple schools in Oakland County. Tell us about some of the other people and issues we'll hear about in this series. Sure. So I did two stories for this series. The first looked at whether Prop 13 is kind of fundamentally fair for newer home owners on the block that we profiled a new homeowner was paying about eleven thousand dollars in property taxes on a house that was worth you know almost a million dollars about nine hundred thousand dollars right down the street. There was a house that was worth about nine hundred thousand dollars. So same as that other house and was paying about a thousand dollars in property taxes and that's only because that homeowner had been there a longer time. So again two houses that were worth the same. On the market but paying widely different property tax rates. A few of the other issues we looked at was whether Prop 13 could be to blame for the state's severe housing shortage. Whether it's had a role in either preventing or accelerating gentrification and whether it's actually kept older homeowners in their homes which was the rationale for passing Prop 13 in the first place back in 1978. Tomorrow we'll begin the California Dream collaborative series of reports focusing on Prop 13. Impacts on one block in North Oakland and I've been speaking with Cal matters reporter Matt Levin. Matt thank you very much. Thank you.

Mapping California’s Prop. 13 Winners And Losers, Down To Your Neighborhood

California Dream Series

Because of Prop. 13, property taxes in California are based not on what your house is worth, but what you paid for it. That means the benefit of Prop. 13 is unevenly spread out around the state: some places get huge breaks on their property taxes, while others ... not so much.

With the help of the real estate data company Zillow, we’ve mapped as many neighborhoods as we could in California to estimate where Prop. 13 is most valuable to homeowners and costly to local governments. You can search for your neighborhood, and see how it compares.

CHECK OUT THE MAP

Led by a curmudgeonly tax fighter named Howard Jarvis—and the fear of being taxed out of their homes—California voters 40 years ago overwhelmingly passed Proposition 13.

The landmark measure slashed property taxes and limited how much they could go up. It also tied tax rates to the purchase price of a home rather than to the wild fluctuations of California’s housing market.

What motivated voters to pass Prop. 13 “was a combination of fear and anger,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. “Fear of losing their homes and anger over this attitude that governments could not reduce their spending.”

Prop. 13, officially called the People’s Initiative to Limit Property Taxation, remains popular four decades later. It is credited with preserving the California dream for a generation of homeowners. Supporters say it has allowed neighborhoods to stay intact, helping older residents on fixed incomes to remain in their homes rather than being forced out by high tax bills.

Critics say the measure has caused considerable harm. They argue it has cut too deeply into the foundation of tax revenue for local governments. And they say it has spurred fees on specific groups of taxpayers to pay for parks, schools, sewers and other services.

Prop. 13 means newer homeowners pay significantly higher property taxes as a result of the inflated home values in the state. Meanwhile, longtime homeowners are paying far less to the government, based on the purchase price of their home.

The initiative also limited the types of new taxes California governments could levy.

Prop. 13 requires statewide taxes be approved by two-thirds of both houses of the Legislature, and it mandates that special local taxes win the approval of two-thirds of voters.

A look at the history of Prop. 13 shows voters set in motion property tax rules that, for better or worse, continue to shape the Golden State.

Led by a tax fighter

The so-called “taxpayer’s revolt” was led by Jarvis, a Utah native born in 1903. By the age of 30, he owned several small newspapers and was active in Republican politics. He moved to California in the 1930s and ran several times unsuccessfully for mayor of Los Angeles on an anti-tax platform.

Jarvis gained a reputation as a harsh government critic. He worked for more than a decade to change the state’s property tax laws.

Prop. 13, as Jarvis described it in a 1978 press conference, was a way to push back against “the moochers and loafers” in government.

“They’re just destroying the country,” said Jarvis. “They’re just like a bunch of locusts going through a grain field and when they get through there, no grain is left.”

VIDEO: The Legacy Of Prop 13

Tax bills soar

Corruption scandals involving several California assessors fueled a mistrust of government and helped along the Prop. 13 campaign.

But the biggest fear, said Coupal, was that property tax bills would climb so high they’d drive owners out of their homes.

In the 1970s California home prices nearly tripled. Property tax bills soared along with them.

“What was happening,” Coupal said, “is you had some people, particularly in Southern California, who had long since paid off their homes and yet when they got an annual tax bill, it could have been double or triple from the previous year.”

The campaign for Prop. 13 didn’t spend much money on slick TV advertisements or other paid media, Coupal said. Instead, it relied on a grassroots movement and Jarvis’s persistent support for it nearly every night on Ray Briem’s radio talk show on KABC in Los Angeles.

“If you look at who was opposed to Prop. 13,” said Coupal, “it was virtually every [newspaper] editorial board in California, every business group—the California Chamber of Commerce was opposed to Prop. 13—every education, every labor group, every institution was opposed.”

Prop. 13 capped the property tax rate at 1 percent. Before, the statewide average rate was 2.67 percent. It also limited the amount a property’s taxable value could increase to 2 percent per year, or the rate of inflation, whichever is lower.

That formula remains the same for a home unless it is sold, in which case the property tax rate is assessed at the new purchase price.

Prop. 13 was sold to voters as a way to protect homeowners. At the time, the state was booming economically but it was also experiencing growing pains. The population had doubled to 20 million between 1950 and 1970. During much of the 1970s, there was rampant inflation, surpassing 10 percent in several years.

‘I cannot afford this’

By late 1977, more than 1.5 million Californians had signed petitions to qualify Prop. 13 for the next year’s June ballot.

Worry over ever-climbing property tax bills was growing, said Leslie Davis, who was ending her first year as an appraiser for Contra Costa County as the vote on the measure loomed.

“There was no limitation on how high an assessor could increase a [property] value in a year. The limitation was what the real estate market was doing,” Davis recalls.

Davis is now president-elect of the California Assessor’s Association and serves as the Calaveras County Assessor.

“I remember in May of 1978 when we had sent out assessed value notice cards, we were receiving phone calls from folks who were telling us, ‘I cannot afford this. If I have to pay my taxes, I’m gonna miss a mortgage payment.’ ”

On June 6, 1978, Prop. 13 passed with the support of nearly two-thirds of California voters.

Slashing a prime revenue source

Prop. 13 left cities and counties scrambling for new sources of revenue.

Before the measure passed, property tax accounted for 90 percent of all the tax income local governments used to pay for basic services, from public safety to road repairs. Municipalities also had the ability to adjust property tax rates as they saw fit.

Prop. 13 eliminated that power and slashed property tax revenue by 60 percent, said California Legislative Analyst Mac Taylor.

“It really had a dramatic effect on local governments,” he said. “Basically local governments could no longer adjust their property tax rates.”

Henry Gardner was assistant city manager for the city of Oakland in 1978. Prior to the June election, he had been advising community groups and city councilmembers on what would happen to city services should Prop. 13 pass.

“What I remember most is the day after the election,” said Gardner, who went on to become Oakland’s city manager a few years later. “I don’t think the actual effect of Prop. 13 really sank in for us until then, when we had to face the fact that those dire predictions had to be executed.”

Gardner recalls that within weeks, four Oakland fire stations and eight library branches were closed. A local museum was forced to scale back its hours. The city repaved its roads less frequently.

“For several years after Prop. 13, we had to keep reminding the city council, you can’t even retain what you have,” said Gardner.

Not every California city was forced to make the cutbacks Oakland did. In 1979, a state budget surplus helped cushion initial revenue losses by local government.

Eventually, Taylor said, local governments turned to other taxes—including local sales taxes, hotel taxes and utility taxes. Those helped fill local coffers, but also shifted the local tax burden.

“They also imposed on homeowners and new homes what are called impact fees where you pay it and it’s included in the price of your home,” said Taylor.

Over time, those impact fees have played a role in pushing housing prices up and housing supplies down.

“The clear losers are the millennials,” said Dowell Myers, a demography and urban planning professor at USC.

“The new people come along, and have the highest expenses for house purchase, which they can’t really afford,” said Myers, “they have two earners working both to pay the mortgage and they are paying super high taxes to make up for low taxes. They are getting killed.”

Prop. 13 helped save the California dream for one generation, said Myers, but now it is making that same dream tougher for the next.

RELATED PROJECT: The Block That Prop. 13 Built