When California voters overwhelmingly approved Proposition 13 in 1978, they were responding to a populist outcry over steeply rising property taxes, which especially hurt older homeowners living on fixed incomes. Proposition 13 dictated that property could be taxed at a maximum rate of 1% of its assessed value, and that assessments would be rolled back to their 1975 levels. Increases in those assessments would be capped at 2% a year until a property was sold, at which time the sale price would become its new assessed value.
The result has been stable and predictable property taxes for longtime homeowners, exactly as proponents suggested. But that's not the whole story. In fact, among those who have most benefited from the populist energy behind Proposition 13 are elite social and country clubs.
Take the Wilshire Country Club in Hancock Park. It sits on 110 acres of staggeringly valuable real estate, and has a handsome clubhouse. And because the club hasn't changed hands since 1978, it still enjoys its 1975 assessed value (plus the 2% annual increases). The result is that on the tax rolls, it's assessed at a little less than $10 million. Its property tax bill last year was about $146,000, according to county records, including various fees and assessments.
Just down the block, records show, a condominium complex with 65 units sold in 2012 for $29.5 million, so its owners pay north of $295,000 in property taxes — more than twice as much as the sprawling club.
Similar disparities abound. In Santa Monica, the Jonathan Club's beach property is valued at roughly $3.5 million, even though it sits on one of the most desirable stretches of oceanfront in the world. The club pays less than $47,000 a year in property taxes, according to records from the
Los Angeles County assessor's office. Less than 500 feet away, a senior citizens' center last year went for $7.1 million, so its owners pay twice what the club pays.
Downtown, the California Club is valued at not quite $13 million, records show; around the corner, a 99-unit apartment building sold in 2012 for $35.5 million, and a nearby office building went for $80 million this year.
No one is suggesting that there's anything illegal or even improper with any of this. The clubs historically have been reluctant to discuss their business publicly, and phone calls to each of the clubs were not returned Friday. But were voters trying to protect country clubs when they approved Proposition 13?
"Are you kidding me?" laughed Raphael Sonenshein, executive director of the Pat Brown Institute for Public Affairs at Cal State L.A. He called the benefit a classic example of the "unanticipated consequences of certain decisions."
The tax break enjoyed by country clubs also undermines an essential aspect of Proposition 13's fairness — the notion that the rich, who can afford it, bear the larger share of the property tax burden because they tend to own more valuable homes. In this case, wealthy club members enjoy lower dues because the clubs pay lower taxes than their neighbors.
Joel Fox, former head of the Howard Jarvis Taxpayers Assn., acknowledged the disparity, but he warned against trying to undo it. Classifying different types of property, he said, would invite lobbyists to carve out exceptions for their clients, a kind of free-for-all that Proposition 13 supporters have always feared. Moreover, sharply increasing taxes on clubs might cause members to quit and employees to lose jobs.
Fox has been defending Proposition 13 for a couple of generations now, and he knows it remains a pillar of California civic life — polling typically reveals that 60% or more of Californians believe the measure has helped the state overall. And he's brought me around over the years. Even if it were remotely feasible politically to eliminate Proposition 13 — and it's not — it would be a mistake, in my view, to do so.
But although scrapping it may not be in order, amending it surely is. Perversely, California homeowners today actually bear a larger percentage of the property tax burden compared to businesses than before Proposition 13 was enacted. That's because businesses change hands less frequently than homes, and often structure deals to avoid a reassessment. The result: In 1975, commercial industrial property represented 46.6% of the value of California property; as of last year, that percentage was 30.2%. Before Proposition 13, homeowners carried about 40% of the tax burden; today, it's nearly 60%. That's hardly homeowner protection.
And as for protecting country clubs: Are you kidding me?