Cash of the Titans: Prop. 15's Big-Spending Opposition |
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The Great California Tax War

Cash of the Titans: Prop. 15’s Big-Spending Opposition

Donors to a campaign claiming to represent small shopkeepers and homeowners include North America’s largest freight railroad network, two New York real estate giants and one of Earth’s richest men.

Bobbi Murray

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Wall Street sign photo: Alex Proimos

Optics are everything in politics, and if you’re a big business interest with a stake in a ballot initiative fight in California, it’s always better to look like the Little Guy – i.e., the corner hardware store or a local homeowner. You definitely don’t want to look like the Big Guy—like, say, BNSF Railway, one of the largest freight lines in North America, or the Irvine Company, which is wholly owned by Donald Bren, whom Forbes deemed to be one of the world’s wealthiest people.

BNSF and Irvine Company are only two among the many corporate interests that own thousands of acres of land in California that are taxed at rates set in the 1970s. Not surprisingly, they are among the entities that have flooded serious money into the fight against Proposition 15, the Schools and Communities First initiative, a November ballot measure that could change their tax assessment structure and cost them millions more yearly.

 


Disney’s 1.8-million-square-foot Burbank HQ is assessed at 1975 rates and is taxed at roughly $5.60 per square foot. Comparable rates in the area range from $150 to $200 per square foot.


 

Prop. 15, the second of 12 initiatives to appear on California’s ballot, would establish a “split-roll” system to tax corporate and commercial property at presently assessed values instead of at rates based on purchase prices set by Proposition 13 in 1978. Chevron, for example, has saved over $100 million a year on taxes, as its property is assessed at 1975 rates.

At 1.8 million square feet, the sprawling Walt Disney Studios lot in Burbank, the headquarters of the Walt Disney Company media conglomerate, is also assessed at 1975 rates and gets taxed at roughly $5.60 per square foot.

Comparable rates in the area range from $150 to $200 per square foot—some older properties are still assessed at $10 to $30 a square foot.

Prop. 15 would reset the tax system in a way that could add billions to local California community coffers. A recent California Legislative Analyst’s Office assessment showed that, should Prop. 15 pass, “Overall, $6.5 billion to $11.5 billion per year in new property taxes would go to local governments. Sixty percent would go to cities, counties, and special districts. The other 40 percent would go to schools and community colleges.”

 


The public faces of No on Prop. 15’s messaging are homeowners and small business owners – all of whom tell us that landlord taxes will go up and so will their rents and costs,
which will be passed on to consumers.


 

Homeowner property tax rates are not affected by Prop. 15—there is no adjustment to the present homeowner tax structure.

The public faces of No on Prop. 15 direct mail and online messaging are homeowners and small business owners–the mail that lands in your mailbox argues that the present tax structure “provides certainty.”

Much of the messaging by the California Chamber of Commerce—a longtime foe of rearranging the tax system set in place by Prop. 13—is aimed California’s estimated 4 million small business owners and their 7 million employees. It claims that landlord taxes will go up and so will their rents and costs, which will be passed on to consumers.

In fact, small business owners with fewer than 50 employees wouldn’t see a tax hike, provided their combined commercial holdings in California are worth less than $3 million. The text of the initiative says a new tax structure would be phased in over several years—the earliest that most storefront shops would be reassessed is 2025.

 


The No campaign has been largely focused on stirring fears among homeowners that somehow passage of Prop. 15
will raise their property bills.


 

Small businesses would actually get a boost from a provision that eliminates an existing state tax on equipment investment. Under the current system, if you run a coffee shop and need to buy new stoves and refrigerators, you pay taxes based on the value of the expenditure. Prop. 15 would eliminate the tax for any expenditure under $500,000.

The No campaign has been largely focused on stirring fears among homeowners that somehow passage of Prop. 15 will raise their property bills. Groups like the Chamber present Prop. 15 as the first breach in the homeowner tax system cherished since Prop. 13 passed, claiming that: “As their first step in destroying Proposition 13, proponents are trying a ‘divide and conquer’ approach. By sticking together, homeowners and business property owners can continue to protect Proposition 13.”

*    *    *

The California Secretary of State website reveals many small businesses throwing in smallish contributions to defeat Prop. 15—$500 from the wine country’s Sonoma TrainTown Railroad, $1,000 from a farmer in Hollister funneled through committees such as Family Farmers Against Prop. 15—Stop Higher Food Taxes, established by the No on Prop. 15 campaign.

There are big names conspicuously missing among the official opposition, however. Disney, despite being one of the state’s largest commercial property owners, does not appear on the Secretary of State’s list of top donors against Prop. 15.

For years Disney has been steering tax and planning policy through business associations and other groups, while keeping out of the spotlight. The company did not respond to an email request for comment about its position on Prop. 15.

 


“Chevron’s going to be poison for [the No] campaign—if they kick in enough money to be identified on the ad, it will say, ‘Paid for by Chevron.’ Oil companies won’t give money through the front door—they’ll give money through the back door.”

— Jamie Court, Consumer Watchdog


 

One Big Oil titan is also absent from the front lines of No on Prop. 15 donations.

“Chevron’s going to be poison for [the No] campaign—if they kick in enough money to be identified on the ad, it will say, ‘Paid for by Chevron,’” said Jamie Court, president and chairman of the board of Consumer Watchdog. “Oil companies won’t give money through the front door—they’ll give money through the back door.”

If Chevron gives money to the California Chamber of Commerce and the California Business Roundtable (CBRT), which channel it into a political action committee (PAC), then Chevron’s name won’t show up as part of the corporate face of the No on Prop. 15 campaign. The California Business Roundtable Issues PAC has been a haven for such corporate donations — Chevron donated $500,000 to the CBRT Issues PAC in early September.

PACs are the smartest way for business interests to influence a policy debate, observes Bob Mulholland, a longtime California Democratic Party spokesman and veteran campaigner on an array of ballot measures. Rather than make a large campaign contribution, “If you’re an oil company you say, ‘Let’s not become the $10 million news story this week and a week later we’ll write out a $10,000 check to the California Business Roundtable Issues PAC.’”

Many corporate real estate interests have written that check to the CBRT Issues PAC in the past several months. Michael K. Hayde, of Irvine-based Western National Group, contributed $1.8 million in April and another $2.5 million in July. New York-based Blackstone Property Partners contributed $7 million in June.

Blackstone was a force in defeating 2018’s Prop. 10 ballot measure that supported local rent control initiatives. Prop. 10 “would have strengthened the role of city and county agencies rather than leaving everything up to the state to assume how people are affected and to what level,” said Susan Hunter of the Los Angeles Tenants Union, which is deeply embroiled in the effort to stop the spread of COVID-19 in rental housing.

Some $334,970 the CBRT collected against Prop. 10 was rolled over to the present fight against Prop. 15.

*    *    *

A recent tally by the Secretary of State’s office showed the on-the-books contributors to both sides. Schools and Communities First has raised $36,225,716, with top donors including not-so-little guys such as California Teachers Association Issues PAC; SEIU California State Council; and nonprofits like the Chan Zuckerberg Initiative.

 


The PAC for the California Business Roundtable, which is leading the charge against Prop. 15, received $7 million from New York-based Blackstone Property Partners and $4.3 million from
Irvine-based Western National Group.


 

Those are powerful forces—CTA and SEIU (both funders of Capital & Main) have marshaled war chests for years to create tax reform. The Chan Zuckerberg Initiative is based on Mark Zuckerberg’s Facebook fortune.

No on 15 has marshaled $21,990, 964 from money donated by organizations such as the Family Business Association of California and Family Farmers Against Prop 15, as well as Protect Prop 13, a Project of the Howard Jarvis Taxpayers Association.

However, while the No on Prop. 15 coalition does indeed receive small donations from small players, the bottom of the group’s homepage reveals a list of some of the major funders who are the real powers behind it.

Jeffrey M. Worthe, president of the Worthe Real Estate Group, is listed among the major funders whose developments include projects in pricey Southern California neighborhoods — the Reserve in Playa Vista, the Pointe in Burbank, the Post in Beverly Hills, the Bergamot mixed-use development site in Santa Monica.

Worthe has also aggregated contributions from related interests—which, explains Mulholland, means bunching contributions from different real estate entities “with the same people in charge with different corporate names, addresses and bank accounts.”

Meanwhile, on the public books, No on Prop. 15’s Californians to Stop Higher Property Taxes netted $1,932,690 from PG Op Partnership LP c/o Paramount Group, New York, which controls $1.1 billion in real estate assets. Paramount Group is listed along with CBRT and the California Taxpayers Association as one of three major underwriters on the No on Prop. 15 television spots. Other opponents listed on the Secretary of State website are the Western Manufactured Housing Communities Association Issues PAC and the California Taxpayers Association.

The PACs camouflage the cash behind mailers, online campaigns and TV ads with the “paid for” line on the bottom naming PACs, not the donating corporations that benefit from the present tax structure.

Proponents of another measure on this November’s California ballot, Proposition 21, which would strengthen local government’s ability to enact rent control, compiled a report of the corporate interests in the Business Roundtable. One was Geoffrey Palmer, the developer who created downtown Los Angeles apartment complexes such as the Medici, Da Vinci and Orsini, and hosted Donald Trump at his Beverly Hills home. His latest contribution was $2 million.

The most recent donation by Phoenix-based Macerich Management Company, the third-largest owner and operator of shopping centers in the United States, was $1 million.

Douglas Emmet Properties has donated north of $700,000 to the California Business Roundtable Issues PAC—a small investment for an outfit that sells and leases properties on some of the priciest real estate on the West Coast and in Hawaii.

The election is just weeks away, and there’s still time for money–such as the recent Chevron donation–to show up. According to a survey by the Public Policy Institute of California, approval of Prop. 15 among likely voters stands at 51 percent -– slightly down from an April poll, when the pandemic was taking off and mass layoffs began, and before more than 3 million acres of the state were scorched by wildfires. The Berkeley Institute of Governmental Studies released a poll this week that shows 49 percent of likely voters supporting, 34 percent saying no and 17 percent undecided.

It’s a given in ballot-measure politics that people will vote no before they vote yes. “People are more worried about raising taxes now,” says Jamie Court. “But on the other hand, people are worried about education.”


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