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Olivia Allen-Price [00:00:43] We're going to kick off our deep dive into Proposition 19 by taking a trip with KQED's Scott Shafer.
Scott Shafer [00:00:49] So, let's start at the beginning. First of all, tell me your name and a little bit about yourself.
Kenneth Wilkins [00:00:54] Oh, God.
Scott Shafer [00:00:55] Kenneth Wilkins is a long time resident of North Oakland.
Scott Shafer clip [00:00:59] Just spell your name for me.
Kenneth Wilkins [00:01:01] Kenneth. K - E - N - N . . .
Scott Shafer [00:01:01] And he's been there – he was born, basically in the area.
Scott Shafer clip [00:01:06] So, you moved here, you say '86?
Kenneth Wilkins [00:01:10] 1976.
Scott Shafer [00:01:10] It's a beautiful neighborhood. It's a very quiet, tree lined streets, mostly single family homes, a few larger apartment buildings. There's a lot of construction going on.
Kenneth Wilkins [00:01:20] It seems like everyone who purchased a house, they're refurbishing it.
Scott Shafer [00:01:24] He was walking me down the street.
Kenneth Wilkins [00:01:26] This house, it was the Dixons, here. And they were here when I came in 1976. And this one here, Mr. Armstrong, he helped us with some plumbing.
Olivia Allen-Price [00:01:37] So he's been on the block for 40 some years. How much was that house when he first bought it?
Scott Shafer [00:01:42] Well, it's very funny, he pointed to a car, his car, that was parked in front of the house. And he said:
Kenneth Wilkins [00:01:48] Actually, it cost less than this car.
Scott Shafer clip [00:01:51] Is that right?
Kenneth Wilkins [00:01:51] This car cost $21,000, I think, and it was less than that.
Scott Shafer [00:01:56] It's like a Toyota, you know, not something he could find in his, you know, the cushions of his couch. But nonetheless, you get a sense of, you know, how much it's gone up. It's – those houses now sell for three quarters of a million or more.
Kenneth Wilkins [00:02:08] I never dreamed that a house would be sold for over a million in this neighborhood.
Scott Shafer clip [00:02:16] But they do.
Kenneth Wilkins [00:02:17] But they do.
Olivia Allen-Price [00:02:18] Because Kenneth has been the same house for so long, he's benefited from Proposition 13, the law that passed in 1978 that dramatically curtailed how much homeowners pay in property taxes.
Scott Shafer [00:02:32] And you remember if you voted for it?
Kenneth Wilkins [00:02:34] I think, I think I did.
Scott Shafer [00:02:35] His tax bill is, I don't know exactly what it is, but it's a lot less than somebody who lives next door and just bought the house and is paying taxes based on the market rate assessment.
Olivia Allen-Price [00:02:46] We explained the history of 1978's Prop 13 in an earlier episode of Prop Fest. But, here's what's important to remember; it based the property tax that homeowners pay on the purchase price of the home. So, as home values have gone up, like they have in Kenneth's neighborhood, the tax bills that homeowners like Kenneth pay, have stayed about the same.
Joe Fitzgerald Rodriguez [00:03:07] As a senior homeowner your taxes basically haven't gone up a lot since you first originally bought your home.
Olivia Allen-Price [00:03:14] This is KQED reporter Joe Fitzgerald Rodriguez. He's gonna help us out today. Now, in some ways, Prop 13 was a huge success. It stabilized property tax bills and has helped a lot of people stay in their homes. But it also brought about some problems, problems that proponents of Prop 19 say they're going to fix. For one, property taxes fund our schools. So, lower taxes has meant less money for education.
Joe Fitzgerald Rodriguez [00:03:39] We used to be, you know, one of the top per pupil spenders on schools, but now we're among the lowest.
Olivia Allen-Price [00:03:46] Another issue is low tax bills have effectively trapped some older folks in their homes.
Joe Fitzgerald Rodriguez [00:03:52] What it looks like now is that when you buy a new home, right, you all of a sudden are seeing your property tax rate go up by an incredible amount because yours has been frozen in time. And this, people contend, has scared some seniors from wanting to buy new homes, having a ripple effect throughout the home buying economy.
Olivia Allen-Price [00:04:20] Because the property tax value resets every time a house is sold, local governments and schools get more money when there's a higher turnover in our housing stock. And people are concerned that the way that laws are set up now discourages that kind of turnover. To address those issues – and at the urging of realtors who stand to gain a lot here – the California legislature put Proposition 19 on this year's ballot. It does three main things. Let's start with the big one.
Joe Fitzgerald Rodriguez [00:04:51] So what this would do, would allow you, as a senior, to basically take the amount of property tax you pay now and take that with you to the new home you're buying, assuming it's around the same price. When more seniors are moving out of their long term homes, there is a hope that younger folks will be able to purchase those homes and spur more buying across the market.
Olivia Allen-Price [00:05:18] If a senior, which this prop defines as 55 and older, wanted to move to a more expensive home, they'd pay a bit more.
Joe Fitzgerald Rodriguez [00:05:26] The formula is: The home that you are buying, that price, let's say it's 700,000 dollars, minus the home you're selling, let's say it's 500,000 dollars. The difference is 200,000 dollars, right. So that difference is then assessed at the market rate and that is added on to the property tax you've been paying as a senior with a reduced rate under Prop 1.
Olivia Allen-Price [00:05:51] If Prop 19 passes, seniors could move like this three times. Now, two other groups would also get these benefits as well. Those living with a severe disability, and people who are victims of a natural disaster like a wildfire or earthquake. But they could only move once.
Olivia Allen-Price [00:06:13] I should mention a limited form of property tax transfer is already available to seniors, but it comes with a lot of conditions about where you can move, and how much you can spend on a home, and how many times you can do it. Prop 19 allows eligible homeowners to move anywhere to any priced home and take their property tax assessment with them.
Olivia Allen-Price [00:06:40] Now onto the second thing that Prop 19 would do:
Joe Fitzgerald Rodriguez [00:06:43] The way that the inheritance works now is, is if you, Olivia, inherit property from your parents – whether you live in it or you don't live in it, you rent it out – you can keep their property tax levels. It doesn't get reassessed as if it were sold.
Olivia Allen-Price [00:07:01] The Los Angeles Times did this investigation a few years ago and found state and local governments were losing out on billions because of this.
Joe Fitzgerald Rodriguez [00:07:08] What they found is that, you know, there is a sizable portion of folks who are not living in the property and are renting it out and making a lot of money. And one of those people is actor Jeff Bridges, who played the titular character in The Big Lebowski.
Big Lebowski clip [00:07:25] I am not Mr. Lebowski. You're Mr Lebowski. I'm the Dude. So that's what you call me, you know?
Joe Fitzgerald Rodriguez [00:07:33] Then in the L.A. Times own reporting, they found that Jeff Bridges was renting it out monthly for far more than he was paying in property taxes annually, and just because he inherited it from his parents and he inherited their property tax rate.
Olivia Allen-Price [00:07:48] This has come to be known as "The Lebowski Loophole". Prop 19 tries to address it.
Joe Fitzgerald Rodriguez [00:07:54] Essentially, The Lebowski Loophole be somewhat winnowed. I don't want to say it's closed because essentially what it would do is for anyone who elects not to live in the property, if you decide to rent out the property, then it will be reassessed at the market rate. And your property taxes are going to go up. If you live in the property, then they're going to ease up on you. And you can continue paying the same property tax rate that your parents paid.
Olivia Allen-Price [00:08:21] All right. On to a final thing that Prop 19 would do. Now property taxes are a local government resource, but they still affect the state budget because of how we've set up some of our education funding. So, the state stands to save some money if local governments are taking in more revenue. If Prop 19 passes, the state must create two new funds using those savings. One would be for wildfire protection and response – something we definitely need more funding for. And the other would be to reimburse any counties that might end up losing money because of this measure.
Olivia Allen-Price [00:09:02] Joe, let's move on to who is supporting this prop. Who wants to see property tax transfers expanded?
Joe Fitzgerald Rodriguez [00:09:08] The list of supporters is as long as my arm, and its governor, Gavin Newsom, its Democratic clubs, it's the firefighters themselves they are coming out there in commercials for it. If anyone has goodwill in California right now, it's firefighters.
Olivia Allen-Price [00:09:24] So, what are the supporters arguing?
Joe Fitzgerald Rodriguez [00:09:26] Supporters are arguing that, you know, this, this loophole, this inhereter loophole has long needed to be addressed and that it could be very helpful to have seniors downgrading their homes and buying smaller homes to putter around in in their elder years. That, you know, this would actually help younger homebuyers who want to buy older stock that might be cheaper – especially useful during a housing crisis where we need to invigorate the purchasing of homes in California, but also that schools are going to benefit in a big way.
Olivia Allen-Price [00:09:56] And what about arguments against this one?
Joe Fitzgerald Rodriguez [00:09:59] Yeah, so the arguments against have been very limited and a little scattered. Like there's the Howard Jarvis [Taxpayers] Association is not for it. And then there's a few newspaper editorials against it, The Orange County Register, the San Jose Mercury News, their argument was basically, how dare you hurt inheritors who are one class of people that you shouldn't be knocking just to help another class of people.
Olivia Allen-Price [00:10:19] The L.A. Times, whose editorial board leans more liberal, has also come out against it.
Joe Fitzgerald Rodriguez [00:10:24] The argument was that this exacerbates inequality and helps an already-helped group, which is seniors – who have already benefited greatly from Prop 13 – and hurting those who are in a generation who have not been able to buy homes.
Olivia Allen-Price [00:10:38] They argue Prop 19 skews tax breaks further away from people who don't own a home or may be struggling to buy one.
Joe Fitzgerald Rodriguez [00:10:46] And a lot of their arguments in the editorials were we have a tax code problem – the tax code needs to be overhauled. Plug in one leak, while letting another one pour out, why aren't we just redoing the whole thing?
Olivia Allen-Price [00:10:58] Spending on this ballot measure has been very lopsided as of early October, with 36 million dollars coming from those who want to see property tax transfers expanded.
Joe Fitzgerald Rodriguez [00:11:09] A huge portion of that is the California Association of Realtors. And the realtors stand to benefit, incredibly, by seeing homes sold throughout California. The realtors have incredible political influence throughout the state of California, in the state legislature, which is part of how this got to the ballot, which was by the state legislature, but at the behest of the realtors.
Olivia Allen-Price [00:11:31] Spending to defeat this prop has been pretty modest: $45,000.
Joe Fitzgerald Rodriguez [00:11:36] There really is no organized no on Prop 19 that has any significant funding.
Olivia Allen-Price [00:11:43] KQED reporter Joe Fitzgerald Rodriguez, thanks for your help on this one.
Joe Fitzgerald Rodriguez [00:11:46] Thank you so much.
Olivia Allen-Price [00:11:50] A vote yes on Prop 19 says you want seniors, people with severe disabilities and victims of natural disasters to be able to move their property tax assessments to another property in the state. If they buy a more expensive home, they would pay an upward adjustment. And people who inherit property would have to live in the home to keep a low tax assessment. Otherwise, it would be adjusted to market rate. A vote no on Prop 19 would keep things as they currently are.
Olivia Allen-Price [00:12:23] That's it on Prop 19. Well done for sticking with it. Tomorrow, we'll look at Prop 20, a tough on crime measure that aims to rollback some criminal justice reforms from recent years. If you're finding Prop Fest helpful, let us know by leaving a rating or review for Bay Curious on Apple podcasts. It takes just a minute. And we'll help other people find our show.