May 15, 2020

Parallel efforts in the Legislature and the Board of Equalization would reduce some property taxes to compensate property owners for the indirect effects of state and local regulations, specifically including the eviction moratorium ordered in March. Senator Glazer amended his SB 1431 last week and the BOE began publicly discussing a similar effort, along with several other possible changes to property tax administration related to COVID-19, at a board meeting on Wednesday.

It is worth noting that Californians long ago divorced property tax calculations from the current value of a property, instead basing property taxes on its value when it was purchased. SB 1431 would not only rely on current events for property assessment, but also base property taxes on a property’s temporary ability to produce income for its owner.

This is both legally suspect and bad policy. It is legally suspect, among other reasons, because the statute proponents of this effort would change relies on the part of the California Constitution that specifically requires property to be “physically” damaged or destroyed to be reassessed after the lien date (Article XIII, Section 15). Proponents rely on arguments that boil down to the word “physically” not having any meaning.

However, although most of the debate at this week’s Board of Equalization meeting was about whether the change could be made, just as important is whether it should. Requiring government compensation, either through direct payment or targeted tax relief, to private businesses for the indirect effects of government regulations is a dangerous precedent that counties oppose.

In the current case, the regulation is protecting the public health and access to housing, but in future cases it could aim to protect public safety, the environment, access to education, or any other public good. Even worse, in this case, the proposal would require the compensation to come from counties and other local agencies, even if the regulation in question was made by the state.

As the Legislature contemplates ways it can continue to assist Californians and those who do business in the state, CSAC would urge state policymakers to focus on using the state’s own funds to do so and avoid responses like SB 1431, which would have negative, long-term impacts on the single most important funding source for counties, cities, special districts, and schools, as well as put a significant administrative burden on county assessors. We would also ask the Legislature to focus its limited resources for relief on those who reside in the state and who are least able to maintain their basic health and welfare during this emergency without such assistance, either directly or through continued partnership with counties, which already provide many state services to those individuals.

SB 1431 has not yet been set for hearing and the BOE delayed action on its proposals until its board meeting scheduled for May 27-28.