Hiltzik: California’s pro-business tax revolt
Big business can’t really be blamed for launching yet another anti-tax campaign.
After all, that’s what they do: constantly complain about the poor level of public services, while taking measures to make them even poorer.
They can, however, be criticized for having taken these measures in a misleading manner.
It would undermine voters’ rights and create major loopholes for companies to avoid paying their fair share.
— Nicolas Romo, League of California Cities
This brings us to the Taxpayer Protection and Government Accountability Act, a proposed initiative co-sponsored by the California Business Roundtable. The Roundtable is collecting signatures as we write to place the measure on the November ballot.
You might not be surprised to learn that the initiative wouldn’t do anything its title suggests. It wouldn’t protect taxpayers except the big corporations behind it, especially the big property developers. This would not make the government more “responsible”, but less.
The overall goal of the initiative is to make it harder for local governments to impose or increase taxes and fees.
It would prohibit advisory votes on local tax expenditures appearing on the same ballot as the tax measure. It’s a sneaky way to discourage the passage of sales and use tax increases: many municipalities provide such non-binding measures so that voters can have a say in how they want their money is used.
City officials say depriving voters of that voice makes them more likely to vote against taxes. Of course, this provision is the antithesis of the transparency that the Round Table says it attaches so much importance to.
Each tax would require an expiration date, which means more votes, more administrative burden, more expense. Local taxes, which under current law can be passed by a majority, would require a two-thirds vote.
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“It’s very, very simple and very direct,” says Robert C. Lapsley, president of the Roundtable.
He blows smoke. The truth is that it is hopelessly complex and so vague in many of its provisions that it is sure to foment legal challenges that will take municipalities to court, at the expense of the taxpayers the measure purports to protect.
“Our concern is about the ambiguity of the measurement,” says John Gillison, city manager of Rancho Cucamonga. “A lot of things are just not clear, which sets the stage for more legal challenges.”
Even penalties for wrongdoers — violators of housing codes and nuisance abatement orders, for example — could be subject to limitations and legal challenges.
Lapsley also assured me that the initiative would only apply to “future taxes” – presumably those collected after Election Day, November 8. , existing taxes.
A tax analysis done for the League of California Cities estimated that hundreds of millions of dollars in tax and bond measures previously passed by local voters could fall under the provision.
The League is lucid about the purpose of the initiative. “It would undermine voters’ rights and create major loopholes for companies to avoid paying their fair share,” Nicolas Romo, a revenue and tax expert at the League, told me.
Indeed, the measure goes beyond what people normally think of as “taxes” and would apply to fees and charges imposed by local governments for the use of municipal property or for contracted services by businesses. such as waste haulers, cable companies and utilities.
The measure would require these fees, which are usually set at market rates, to be “reasonable”. This standard is not defined by the text, which obviously makes it subject to legal attacks; in practice this will mean “minimal” – in effect a reduction in business expenses.
Before going deeper into the text, let’s look at who is funding this campaign. Superficially, it’s the Business Roundtable and the anti-tax Howard Jarvis Taxpayers Assn. They are the top sponsors listed by Californians for Taxpayer Protection and Government Accountability, the campaign committee, according to public records.
They are also the only contributors to date to the campaign, which operates primarily with $1.6 million from the Political Action Committee on Roundtable Issues, or PAC.
Where did the Round Table find the money for its contribution? This is where the story gets interesting.
The vast majority of PAC funding since last July has come from three major real estate companies: according to campaign finance documents with the Secretary of State, they are Los Angeles-based Kilroy Realty, Douglas Emmett Properties, based in Santa Monica, and Irvine. Western National Group (primarily through its Chairman and CEO Michael Hayde).
Kilroy Realty contributed $1 million to the Business Roundtable PAC in two installments of $500,000 each on December 29 and 30. Douglas Emmett Properties and its affiliated entities paid $1 million to the PAC in seven separate installments, all dated December 29. Hayde paid $1,109,100, almost all of which was dated June 28.
None of the companies responded to my requests for comment. But their funds made up about 91% of the $1.76 million in contributions PAC Issues received from July 1, 2021 through February 3. On that date, the PAC paid $1.6 million to the Tax Proposal Campaign Committee.
If you buy into the old investigator’s precept of “following the money,” it certainly seems like the money was sent to the initiative campaign by three major property developers, with a brief stopover at the Business Roundtable PAC.
A coalition of civil servants’ unions claims that this is a subterfuge intended to conceal who is really funding the initiative. In a complaint filed last month with the State’s Fair Political Practices Commission, they call it “the outright money laundering campaign.”
State law requires donors to an initiative campaign to be fully disclosed, a clearly confusing goal if campaign donors can hide behind another group.
This is not the first time the Business Roundtable has been accused of helping hide the big bucks behind an initiative campaign.
Proponents of Proposition 21, a 2020 rent control measure that was defeated after facing well-funded opposition from the Roundtable and other business interests, have alleged that Roundtable PAC issues will posed as a “general purpose” political action committee while raising millions to defeat specific ballot initiatives.
This constituted “a prima facie case of undisclosed assignment”, according to the plaintiffs. In an interim ruling issued Feb. 24, however, a Sacramento judge dismissed that claim.
One might wonder why real estate developers in particular have been so eager to contribute to the Roundtable’s PAC in recent months. Lapsley implied that real estate companies were simply showing their public spirit earlier than other contributors.
“It’s a long campaign ahead of us,” he told me. “You’ll see a lot of campaign contributors – we’re just getting started.” He added: “We are using our PACs appropriately.”
Still, a close look at the initiative can give some insight as to why it might be a priority for the real estate industry.
Amid all the ambiguity the measure would inject into the revenue collection process for local governments, one specific prohibition stands out: “No levy, charge or extortion regulating or relating to the kilometers traveled by vehicles may be imposed as a condition development or occupancy of the property.”
Vehicle miles traveled, or VMT for short, is a way of calculating the environmental impact of new developments that is gaining more and more attention from municipal planners.
The idea is to calculate the distance of a new residential development from urban centers or transit lines and impose fees to encourage more construction in already densely populated areas and less in the suburbs. Real estate companies hate VMT because it increases the cost of building new developments on the horizon.
The VMT provision is so specific, in fact, that it makes the proposed initiative look like primarily a device to ban VMT, with plenty of other anti-tax provisions thrown in for good measure.
Requiring a repeat vote on revenue-raising measures would make it far more difficult, if not impossible, to sell municipal bonds for building and improving infrastructure, which buyers expect to be insured a steady stream of income to pay principal and interest.
Rancho Cucamonga, for example, has begun making plans for its role as the Southern California terminus of a high-speed rail line to Las Vegas, slated to begin construction next year.
New parking structures, possible road expansions and other projects will be required, which the city hoped to fund through new appraisals on properties near the site.
“This measure calls all of that into question now,” says Gillison. “We don’t know if it’s going to be contested now.”
Some communities could be hard hit. Azusa officials calculate that the city could lose $15.8 million a year as a result of this initiative. “It represents 30% of our budget,” says city manager Sergio Gonzalez. “It would mean cuts to programs at all levels – no department would be immune.” This means impacts on local roads, police, fire and emergency services, and more.
Proponents of this initiative say they are simply trying to fill in the loopholes opened up in Proposition 13 by judges and politicians. Their rhetoric is based on the persistent assertion that voters have no say in how they are taxed, that somehow these levies are concocted by shadowy unelected bureaucrats.
This is and always has been a lie. Taxes and fees are imposed by voters, either directly at the ballot box or through the election of community leaders who can be removed from office.
It is the promoters of the new initiative who operate in the shadows. They don’t tell you who their scholarships are. They certainly don’t explain how the measure will benefit their major donors at the expense of residents, who expect decent local services and are vulnerable to the siren song that they can get all the services they want without paying for them.
The so-called Taxpayer Protection and Government Accountability Act is just one more example of how special interests like to pretend they are getting the government off the backs of the people, when their real goal is to saddle up.