20 Years Later, Prop. 13 Still Marks California Life

Does your car bump from pothole to pothole on ragged city streets? Blame it on Proposition 13.

Is your neighborhood stable, full of old-timers enjoying low property taxes? Credit Proposition 13.

The San Fernando Valley secession movement. O.J. Simpson’s acquittal. The outlet malls gulping up strawberry fields on the Oxnard Plain. The fee for running a red light. The Wal-Mart by the freeway. The waiting list for John Grisham’s latest at your local library.

Proposition 13, according to the experts, has had a hand in it all.

Which is no doubt why Howard Jarvis’ famous tax-hacking initiative provokes such passion still, 20 years after it won at the polls and began to transform California’s economic, political and social landscape.

“Prop. 13 was the beginning, not the end,� said Rick Cole, regional director of the Local Government Commission, a nonprofit research firm. “It has affected our roads. It’s affected our jobs. It’s affected our schools. It’s affected our neighborhoods. It’s affected our democracy itself.�

Or, as urban planner William Fulton put it: “Prop. 13 was supposed to change the relationship between people and their government. That was the goal. And that goal was achieved. But it was achieved in all sorts of weird ways that were never anticipated.�

The initiative’s co-authors, Jarvis and Paul Gann, expected Proposition 13 to accomplish two goals: It would slash out-of-control property tax bills. And it would force gluttonous government bureaucracy onto a no-fat diet.

In the end, the initiative--which passed on June 6, 1978--did both more and less than anticipated. And it’s not done doing, not by a long shot. It continues to reverberate in many key areas:

* Property taxes. It’s the most basic, and most widely praised, effect of the Jarvis-Gann revolution: Thanks to Proposition 13, property taxes have for the past two decades been capped at 1% of a home’s assessed value. Property can be reassessed only when it changes hands. And no matter how much inflation may soar, property taxes cannot increase more than 2% a year. Plus, politicians must win two-thirds approval from voters before imposing most other taxes.

Analysts from all camps agree that California homeowners have saved billions of dollars since 1978, when taxes in some jurisdictions were running at 3% of a home’s assessed value. But no one can say exactly how much.

* Proliferating fees. After Proposition 13, politicians became creative in their hunt for new sources of revenue to keep government running. They added parking meters and began charging soccer leagues for use of public parks. They raised utility taxes or slapped fees on tourists staying in local hotels. Above all, they created hundreds of new special districts to tax property owners in exchange for providing services from lighting streets to fighting fires.

Though some of these fees had existed before, many were new--and most did not require voter approval.

* Public services. Jean Ross, executive director of the nonprofit California Budget Project, a liberal research group, sums up Proposition 13’s impact this way: “It has fundamentally weakened the whole public infrastructure of the state, from education to roads and everything in between.�

Conservatives disagree--loudly. Yes, public schools have slipped badly. (California, which ranked 22nd in the nation in per-pupil spending before the Jarvis-Gann initiative, had dropped to 37th by this school year.) And yes, other public services, from street maintenance to local libraries, may well be on the skids. But for that, they blame government waste--not the Proposition 13 guarantee of lower taxes.

“People talk about ‘How do we replace the revenue?’ Well, what about doing business another way?� asked Joel Fox, president of the Howard Jarvis Taxpayers Assn., citing ideas such as privatization and vouchers. “Why couldn’t [Proposition] 13 have been the catalyst to rethink the way we do government?�

* Local development. Barred from raising property taxes, politicians have turned to sales tax as the best way to pad city coffers. Dangling incentives from cheap land to new roads, they woo big retailers to town. Many see nothing wrong with the sales tax rush. That’s capitalism, they say.

But critics fret that in their lust for Targets and auto malls, local pols are promoting suburban sprawl. They fear, too, that cities are overloading their economies with dead-end, minimum-wage jobs instead of bringing in factories or building affordable housing.

* Voter clout. Proposition 13 gave the state the power to allocate property tax. The Legislature divides the revenue among cities, counties and special districts according to a convoluted formula established in 1978. The formula, which runs on for pages and pages, has been modified over the years to accommodate cities and special districts that have incorporated since Proposition 13. But the basic structure remains the same: Each jurisdiction’s share of the property tax is based on how much it got before Proposition 13 passed.

Thus, if the local cemetery district got a dime out of every property tax dollar in 1978, it gets a dime today, too. Voters might prefer to give the cemetery a nickel and spend the other nickel on libraries or parks, but they can’t. And though there’s been plenty of high-level grumbling about the formula, it’s so complex and involves so many special interests that reformers have never mustered the political will to change it.

Even Proposition 13’s biggest boosters concede that shifting so much power to Sacramento was a mistake. An “unintended consequence,� Fox calls it. But reform has so far proved elusive. And no wonder.

In a Los Angeles Times poll of 1,409 Californians last month, two-thirds approved of Proposition 13 after they were reminded of its provisions. Conservatives, the elderly and the middle class liked the initiative’s impact even more.

During the 1978 campaign, politicians of every stripe--from Democrat Edmund G. “Jerry� Brown Jr., then governor, to Republican Pete Wilson, then mayor of San Diego--spoke out against Proposition 13. Ever since, however, few have dared oppose it because the property tax cap is so overwhelmingly popular. “People think it’s the word of God, some kind of coming from the Almighty, and they shouldn’t touch it,� former Los Angeles County Supervisor Ed Edelman said.

Now accepted as a fact of life in California politics, Proposition 13 was considered revolutionary in 1978. It sparked copycat taxpayer revolts across the nation. And in California, it revived voters’ enthusiasm for crafting policy by initiative, as they had for a time in the early part of the century.

Proposition 13 continues to make its mark everywhere, from a San Fernando Valley neighborhood to an Inland Empire park to a San Gabriel Valley senior center. Even institutions that didn’t exist when Jarvis and Gann began their campaign have been shaped by that vote 20 years ago.

Block Parties and Bridge Clubs

It might sound a bit farfetched to assert that Mike Grassi is chummy with his neighbors because of Proposition 13. But he absolutely believes it.

Sure, Proposition 13’s biggest winners--in raw dollar terms--were big corporations. Though many business leaders opposed the initiative out of fear the tax cuts would decimate public services, they cheerfully pocketed big gains when it passed. Southern California Edison Co., for instance, saved $54 million a year in property tax. And $130 million was scratched off the tax bill of Pacific Telephone & Telegraph, a precursor of Pacific Bell.

Yet while the big savings went to big business, little guys like Grassi felt they got a darn good deal as well. In Grassi’s Chatsworth neighborhood, bright with flowers and perky painted mailboxes, homeowners saw their tax bills drop by $2,000 a year or more.

Plus, as long as Grassi and his neighbors remained in their homes, their taxes would be based on their 1975 property values. That provision has proved a powerful incentive to stay put. Across Los Angeles County, for example, nearly 27% of single-family homes are still taxed on their 1975 value. (Not all of those homes have been in the same hands for two decades; owners can pass their low tax rate on to children or spouses.)

As most homeowners realize, this system has led to startling inequities throughout the state. Grassi and others who have lived in his neighborhood since the Jarvis-Gann revolt pay less than $1,000 a year in property taxes. But more recent arrivals face annual bills of $3,000 and up.

Newcomers may gripe, but Grassi maintains that the incentive not to sell creates more stable neighborhoods. In his own patch of cul-de-sacs, old-timers have bonded over the past 30 years, getting together for block parties, bridge clubs and Friday night dinners of pan-fried chicken at Skoby’s, a local restaurant.

“Leaving economics aside, Prop. 13 had a huge impact on our social structure,� Grassi, 71, said.

As for economics, Grassi and many others believe that without Proposition 13 they would have been taxed out of their homes. If the initiative had not passed, Grassi jokes, high taxes would have driven out so many seniors that kids in his neighborhood “wouldn’t have known what elderly people looked like.�

But under the measure, property tax increases have been moderate and predictable. A house valued at $50,000 in 1975, for example, would have generated a bill of $500 the year after Proposition 13 passed and no more than $730 this year, assuming it did not change hands.

For all his enthusiasm, Grassi is quick to add that Proposition 13 was not an absolute success.

It was supposed to teach politicians to make do with less. But consider the latest property tax bill his neighbors, Eunice and Bob McTyre, received.

The basic 1% levy on the Chatsworth home they’ve owned for three decades amounts to $938. Then there’s $115 for light maintenance. For flood control, $62. There are fees for schools and paramedics and a 911 fund. Even mosquitoes get their own line item: $2.10 a year to control them.

Calculating how much those fees have jumped since Proposition 13 can be tough. Should hikes in University of California fees--which increased from $671 in 1978 to more than $3,600 this year--be counted? What about the steep new $270 fine for running a red light? And how about fees for services rendered to a specific group, as when city planners charge developers to check their blueprints?

Since every academic study sets different parameters, their conclusions vary. But a general drift is clear: Government has made up much, though not all, of the revenue it lost to Proposition 13 by imposing a variety of fees. The Public Policy Institute of California estimates that state and local governments take in about 85% as much revenue today as they did in 1978, adjusted for inflation.

The California Taxpayers Assn., a Sacramento-based advocacy group, estimates that residents now pay almost as much in state and local taxes and fees as they did before Proposition 13. The typical burden is about 14% of personal income today, compared with about 15% in 1977, according to the group.

A third study concludes that spending by state and local government has actually swelled since the Jarvis-Gann revolt, when measured against the total personal income of Californians. Only school districts and community colleges have cut back, according to the analysis by the Rose Institute, a conservative think tank at Claremont McKenna College.

While such studies may cause a stir in academia, the folks in Grassi’s Chatsworth neighborhood don’t need statistics to shape their understanding. The way they see it, politicians are sucking money from them any way they can. The Jarvis-Gann revolt, Bob McTyre says grumpily, “didn’t teach them a thing.�

That anger helps explain why these old friends don’t blame Proposition 13 for the deterioration in public services they see around them. Instead, they blame politicians who failed to innovate, failed to cut fat, failed to find efficient ways for getting by with less money.

Californians seem to agree. In the Times poll, just one in three said the Jarvis-Gann initiative had a negative effect on schools, and the same number saw a negative effect on other public services. . Nearly as many--29%--viewed Proposition 13’s impact on public services as positive; 22% said the proposition’s impact on schools was positive.

Grassi’s explanation: “You know how a job expands to fit the time? Same thing with a budget. If we didn’t have Prop. 13, it would have given [bureaucrats] a license to be that much more inefficient.�

Paying to Play

Jarvis, a Los Angeles activist who died in 1986, used to grumble, “They’d blame the eruption of Mt. St. Helens on Proposition 13 if they could.�

No one’s gone quite that far. But Proposition 13 has been made a scapegoat for much that ails California.

Obese kids? Blame Proposition 13: Budget crunches forced cities to cancel after-school sports. The Orange County bankruptcy? Proposition 13, of course: Bare coffers make risky investments look good. O.J. Simpson’s acquittal? There, too, some analysts find a link: If it had not been for Proposition 13, they say, Los Angeles County would have had the money to put together a competent case.

It’s easy to dismiss such claims as preposterous, or at the very least, tenuous. But that doesn’t mean Proposition 13 gets off scot-free. The truth is, the initiative has caused real pain in some communities.

Consider the Inland Empire boomtown of Chino Hills.

Chino Hills looks plump and prosperous. One of the region’s fastest-growing cities, its homes are posh, its landscaping lush. Tracts sparkling with $300,000 homes seem to pop up every day. But the inscrutable formula Sacramento uses to divide property tax revenue has clouded the future for this ambitious bedroom community of 54,000.

The Chino Hills government gets just 4 cents from every property tax dollar collected locally, 7 cents below the state average, and much less than Los Angeles at 28 cents, Long Beach at 23, and Pasadena, which receives 18.

Chino Hills’ share is low because it was not incorporated as an independent city in 1978, so it could not claim a share when Sacramento lawmakers were writing the formula for allocating property tax. In theory, the 4 cents it receives should be enough, because Chino Hills provides fewer services to its residents than cities like Los Angeles and Long Beach. (Special districts and San Bernardino County pick up the slack.)

In practice, however, Chino Hills’ share is not enough to keep the streets clean and the city safe as the population booms, Mayor Gwenn Norton-Perry says. Though developers pay hefty fees for the right to build, Norton-Perry says the city still loses money on every new home.

So the city is testing a new approach: asking residents to pay for what they use.

When a new 45-acre park opens on Grand Avenue this winter, the pay-to-play philosophy will be very much apparent. The city designed the park to make money. Residents must pay to use the roller hockey rinks. Pay to use the lighted soccer fields at night. Pay for the tennis courts. Pay for the equestrian staging area.

“Everything right now, unfortunately, has to have a price tag on it,� Norton-Perry said.

Sure, there will be space to picnic and toss Frisbees for free. But because of Proposition 13 and one of its recent offspring, Proposition 218--which gave voters the right to reject special assessments--Chino Hills parks must emphasize money-raising facilities, the mayor said, “rather than leisurely Sunday afternoon activities for families.�

Sales Tax Seductions

Peek into the Duarte Senior Center for a moment.

Gabbing away, several dozen elderly women are swirling pink paint on cherub cheeks in their weekly ceramics class--brought to them by Wal-Mart.

In the next room, seniors are setting up chairs for an investment seminar--courtesy of Target. And there’s a yoga class in the gym downstairs, thanks to Performance Nissan.

Wal-Mart, Target and Nissan don’t directly sponsor the seniors’ activities. But the sales tax they generate helps Duarte keep the Senior Center running. It also buys police protection. It pays for the boxing club and computer lab at the Teen Center. In fact, sales tax revenue makes up more than half the city’s $6-million general fund.

And Duarte might never have gone after this pot of gold if it had not been for Proposition 13.

To Proposition 13’s foes, the rush for sales tax dollars is one of the initiative’s most distressing legacies. They worry that cities are perverting good planning principles to build what urban analyst William Fulton calls “sales tax canyons . . . bleak, relentless, lifeless [zones] designed not to encourage or facilitate community, but simply to empty passing wallets.�

In Duarte, however, City Manager Jesse Duff contends that the drive for sales tax has made his working-class San Gabriel Valley town of 22,000 a safer, more enjoyable place to live.

After attracting Wal-Mart, Target and several auto dealers in the past six years, Duarte was able to cancel a 3% tax on all utility bills. And it nearly doubled its contract with the Los Angeles County Sheriff’s Department, hiring additional deputies and building a local substation.

Proposition 13 “has helped us make some progress,� Duff said, sounding a bit surprised at his own conclusion. “We’ve actually done pretty well.�

To lure Wal-Mart to town last year, Duarte officials agreed to rebate $1.6 million from sales tax receipts over nearly two decades. Sales were so good, however, that Duarte cut a new deal: It gave Wal-Mart $1.1 million upfront and owes the company nothing more. If sales tax keeps pouring in at its current clip, Duff estimates that Duarte will recoup its investment within three years.

Pundits moan that it’s ridiculous for tiny, pinch-penny Duarte to hand cash rebates to a company like Wal-Mart, which boasts annual sales of $118 billion. But Clarence Jackson, a 30-year resident, disagrees: “You have to give something to get something,� he said.

Not every city, of course, can boast the same success as Duarte.

Competition for sales-tax dollars has been so intense in some regions that cities have been criticized for giving away huge concessions with only marginal returns. And it’s been hard to stop the giveaways.

A much-ballyhooed attempt to curb the competition between Lancaster and Palmdale by sharing sales tax on a regional basis flopped before it began. And an initiative banning tax breaks for developers in Ventura, which has engaged in nasty competition for retailers, lost overwhelmingly at the ballot.

The sales tax rush has other consequences, too, besides instigating battles between neighboring cities. Cole, a former mayor of Pasadena, blames the rise of freeway-friendly malls for decimating downtowns and wiping out the mom-and-pop shops that used to sponsor Little League teams, take out ads in school yearbooks and help build a sense of community.

As catalog and Internet sales eat into the traditional retail market, Cole said, it makes less and less sense for cities to depend on sales tax. Yet they do so, more and more. “Cities have become addicted to this drug of sales tax,� he said.

Purse Strings and Power

Zev Yaroslavsky is blunt and none too cheerful as he tells a forum of civic leaders about his job as a Los Angeles County supervisor.

It’s a powerful post. But only, he says, in theory.

“I’m not accountable for much of what I do,� he complains. Constituents call with requests, Yaroslavsky adds, and “I have to say to them, ‘You elected me to this $103,000-a-year job and I really don’t have much I can do about your road problem.’ �

He blames that impotence on Proposition 13.

Before the Jarvis-Gann revolt, supervisors could decide how to spend about 17% of the county’s general fund budget. (The rest of their spending was mandated by the state or federal government.) They could use the discretionary funds to fix more roads, hire more social workers, build a new library. And if they wanted to do something really big, they could always raise taxes to fund it.

Since Proposition 13, however, all property tax has been funneled through Sacramento. By law, the state can’t use the money for its own purposes. But it can dictate how local governments use it. So over the years, the state has added more and more mandates that the county must fund from property tax revenue, such as specific health care programs for the poor.

The mandates and other factors have squeezed the county budget to the point where supervisors control just over 3.3% of the general fund.

Supervisors opt to spend half that money on law enforcement. That leaves about $200 million a year to help pay for other needs, from animal control to parks to emergency preparedness. Not much remains to respond to constituent demands.

“This system,� Supervisor Mike Antonovich said, “cries out for reform.�

Indeed, it’s one of Proposition 13’s big ironies that a populist movement fueled by anti-government slogans--�It’s them or us,� Jarvis used to chant--ended up boosting Sacramento’s power.

Voters everywhere say they don’t trust far-off lawmakers as much as the neighbors they elect to city councils and school boards. In the recent Times poll, for example, when asked whom they most trusted to spend their tax dollars wisely, respondents preferred their city over the state, 30% to 21%.

Recognizing that sentiment, Gann, a Sacramento real estate agent, said before his death in 1989 that he would like to revise Proposition 13 to restore more power to local governments. But proposed reforms never gained momentum.

The resulting sense of disenfranchisement--the feeling that voters lack influence on local spending--fuels cynicism, apathy and rebellions such as the San Fernando Valley secession movement, analysts say. And when that happens, Yaroslavsky warns: “The democracy we’re all part of can unravel in a hurry.�

Even Proposition 13’s most ardent backers acknowledge that Jarvis never intended to strip so much power from local government. They insist, however, that voters do have adequate sway over local spending--more than before, in fact, because Proposition 13 empowered them to vote on nearly every tax increase.

Of course, under the Jarvis initiative it takes a two-thirds majority to pass most taxes. Proposition 13 itself would not have passed under such a requirement; it received just 65% of the vote.

Still, voters have shown a willingness to back assessments and bond measures for a good cause--especially since they now know that politicians can’t raise money any other way. Last year, for instance, 60% of school bonds made it. The year before, 69% passed muster.

“You can call me a Pollyanna,� said Fox, of the Jarvis Taxpayers Assn., “but I have great faith in the taxpayer to do what’s right.�

Whether the taxpayers did right by passing Proposition 13 is still open to debate--and probably always will be.

“Prop. 13 was not perfect. No initiative is,� Gov. Pete Wilson said. “But it was the classic expression of what occurs when, finally, people have had enough. Never has there been a more vehement expression of the people’s will.�

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Taking the Pulse 20 Years Later

The Times Poll summarized Prop. 13’s provisions and asked 1,409 Californians their opinions of the initiative. The results of thhe April survey:

Strongly approve: 39%

Somewhat approve: 27%

Somewhat disapprove: 9%

Strongly disapprove: 11%

Don’t know: 14%

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Has Prop. 13 had a good or a bad effect on public services?

Good effect: 29%

Bad effect: 32%

No impact: 16%

Don’t know: 23%

Source: L.A. Times Poll

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Gov. Pete Wilson, then mayor of San Diego

THEN: “[I oppose it] because I think that local control is fundamental to the kind of California that I want. And I’ll tell you, the shift in spending from the local level, where you elect your neighbors who are accessible to you in the City Council chambers, to Sacramento, which is accessible not to you but to special interests, will bring an end to local control. Because he who controls the purse string calls the tune.�

NOW: “The property tax system had been permitted to run amok. There was no way anyone could dispute that property tax payers in this state had been sorely abused... The performance [of local governments] since 13 has been very erratic. Some cities and counties have managed very well, and have not experienced the deep cuts that were decried at the time... Los Angeles county is a case unto itself. I don’t think it’s been all that well managed.�

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Jerry Brown, then governor of California

THEN: “It’s a temporary mirage that in a few months will blow up in everybody’s face.... It’s a rip-off, a legal morass, and is in reality a long-term tax increase, not a tax reduction.�

NOW: “The impact of 13 is unclear because the system has a way of sucking up the money it needs. It’s like a vacuum cleaner...People like to use Prop. 13 as the negative talisman for all contemporary ills, but that analysis doesn’t stand up.�

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Pete Pitchess, former Los Angeles County sheriff

THEN: “The passage of Proposition 13 will significantly reduce our ability to carry out our basic mission of protection of life and property for the people of this county. Therefore, I must oppose it. To do otherwise would be an abdication of my responsibility to the citizens of Los Angeles.

NOW: “I don’t believe it did as much harm as we thought it would.... As a homeowner, I thought [at the time] it might be a good idea....I was torn between my professional responsibility and my personal feelings. [In retrospect] I think it was a good law. I think it has done its purpose.�

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Mike Antonovich, former state assemblyman, now Los Angeles County Supervisor

THEN: “We have to place government on the same type of budget that we place every other California citizen... The time of spending tax dollars with no regard for the middle class’s ability to pay has to stop.�

NOW: “Proposition 13 was a lifeboat for senior citizens, the lower middle class and young people ... I have faith in controls placed over politicians’ ability to raise taxes [rather than] giving them carte blanche authority.�

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Ed Edelman, former Los Angeles County supervisor

THEN: “[Prop. 13 is] inequitable, dangerous, misleading and an unsure approach to tax relief.�

NOW: “The worst fears did not come true...but we lost a great deal of home rule... we have an unfair property tax system with a lot of inequity... and it is more difficult to raise revenue that is needed, and a lot of areas have suffered as a result, libraries in particular.�

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William Johnston, former superintendent, Los Angeles Unified School District

THEN: “[Prop. 13] is the most devastating, the most threatening, the most destructive possibility [ever faced by public schools].... [It would result in] a chaotic disruption of our educational program and could bring permanent damage to children and young people in our community.�

NOW: “It was great for homeowners, and I’m one of them, but it was bad for schools. [Before Prop. 13] If I laid a nickel on the tax roll I could solve my problems with the schools right away, and the board [of education] could act that very day. Now, boards have lost their independence. Prop. 13 transferred their control to the state and that’s where it remained.�

Researched by Tracy Thomas / Los Angeles Times

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THE JARVIS REVOLT

“The right to own property is basic...If you can’t own property, you lose your freedom... We’re not going to permit the people to go broke while the government gets rich.�

--Howard Jarvis

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“This is more than a passing protest. People have come alive. The hat pin went through their wallet and into their behind, and I hope it stays sore.... They consider our government leaders two percentage points below garbage collectors, and I mean no disrespect to garbage collectors.�

--Paul Gann

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WHAT PROP. 13 DID

Proposition 13 amended the state Constitution to provide that:

* property tax cannot exceed 1% of assessed value

* property is taxed based on its 1975 assessment

* the assessed value cannot increase more than 2% a year

* property can be reassessed when sold

* no governmental body can impose additional taxes based on a property’s assessed value

* “special taxes� imposed by local government require a two-thirds vote of the citizens

* state taxes require a two-thirds vote of the legislature.

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THE MEASURE’S LEGACY

Percentage of properties in Los Angeles County that are still taxed based on their 1975 assessment:

* Single-family homes: 26.7%

* Residential rentals: 26.9%

* Commercial/industrial: 30.9%

Source: Los Angeles County assessor’s office

* California ranks 22nd in the nation in the amount of state and local taxes, fees and assessments residents pay as a percentage of personal income.

Source: California Taxpayers Assn.

* For years, the property tax brought in more revenue than the personal income tax. Prop. 13 changed that. Californians will pay about $20.6 billion in property tax this year, compared with $27.6 billion in personal income tax.

Source: Department of Finance

* The state collects property tax and distributes it to local agencies according to a complicated formula. The amount each agency receives varies widely, but as a statewide average each property-tax dollar is divided this way:

public schools: 53 cents

counties: 20 cents

cities: 11 cents

redevelopment agencies: 8 cents

other special districts: 8 cents