Critics View Prop. 13 as a Roadblock, Not a Cure : Economy: Four of five Ventura County homeowners call themselves victims of the 1978 property tax initiative.

Of the myriad of taxes extracted from Ventura County residents, none carries the emotional weight of the property tax--a levy reined in by voters 15 years ago in an unprecedented taxpayer revolt.

“I would have lost my home after paying on it for 14 years,” state Sen. Cathie Wright (R-Simi Valley) recalled. “My taxes just shot up. And I knew everybody else was in the same fix.”

So voters stampeded to the polls and hammered state and local lawmakers with a simple, blunt instrument called Proposition 13. By a 2-1 margin, they cut their property taxes by 57% and allowed only slight increases until the properties were sold.

They also made it very difficult for any new state or local taxes to be approved.

But since 1978, reformers studying California’s antiquated tax system increasingly have focused on Proposition 13--not as a cure to government waste and runaway taxes, but as the principal roadblock to meaningful change.

Despite its continued popularity with voters, a broad spectrum of critics has emerged statewide and in Ventura County. Even some politicians, including state Sen. Gary K. Hart (D-Santa Barbara), now support Proposition 13’s elimination or overhaul.

Four of every five Ventura County homeowners could see themselves as victims of the initiative, because their taxes are nearly four times greater on average than neighbors who owned their homes in 1975, the year to which the initiative rolled back valuations.

Two Solimar Beach parcels show how extreme this disparity can be. The assessed value of one parcel, owned by the same couple for decades, is about $20,000, while a nearby parcel that sold this year is assessed at $1 million--a 50-fold increase. The difference in taxes: $250 a year for one owner, $10,000 for the other.

Many local business leaders who once applauded Proposition 13 now say developers and new business owners have suffered a double hit--not only from high property taxes but from a flurry of new government fees meant to make up for losses from Proposition 13. Special levies on a new house in Ventura County can now reach $25,000.

Professional planners say the continuing loss of property taxes by cities and counties--and their increasing dependence on sales taxes--have helped spawn the competition for shopping malls between cities such as Oxnard and Camarillo, and million-dollar rebates from cities to developers.

While cities hustle for new stores and auto dealerships, they no longer have as much financial incentive to build homes or lure office and industrial buildings because little of the new property tax goes to local government. Oxnard estimated last year that a new house costing less than $308,000 would not yield enough property tax to cover its basic city services.

“That’s why you have Ventura falling all over itself to get its mall expanded and why Oxnard has very deliberately created Sales Tax Canyon along the Ventura Freeway,” said William Fulton, of Ventura, a planner and publisher of a statewide newsletter on land-use issues.

“It could lead to the overbuilding of retail (stores), and it does lead to thoughtless planning,” he said.

Under a reallocation of property taxes prompted by Proposition 13, just 18 cents of each property tax dollar in Ventura County goes to general county government, while 7 cents goes to local cities, and 19 cents to special districts for services such as libraries, firefighting and flood control, according to the county auditor-controller’s office.

The county’s share is down 40% since 1978, while the special districts and cities receive 14% and 13% less, respectively, before subtracting the small percentages city redevelopment agencies reclaim from the county, special districts and schools.

The bulk of the property tax dollar, about 56 cents, goes to meet the state’s obligation to schools.

The most obvious effect of Proposition 13--the one that touches every Ventura County neighborhood--was its creation of separate classes of homeowners based on the property taxes they pay.

For one fifth of the county’s homeowners, taxes are based on the values of their houses in 1975--an average of $46,600. Taxed at 1% of value plus a slight increase each year, they now pay about $500 annually.

For the rest, those who have purchased since 1978, taxes are based on homes valued at $168,000. Taking the biggest hit are those 59,000 homeowners--about one third of the total--who have bought here since mid-1989 and paid an average of $213,000 for their houses. The newly arrived pay taxes of about $2,200 a year.

“It’s like religion and politics, with Prop. 13 you just don’t talk about it,” said Dianne Elliott, 50, who bought her Oxnard house new in 1969. “I hear that a lot of our friends are irritated because we are benefiting from it.”

Ray Avila’s family lives next door in a smaller house. They moved there in 1988 and pay $2,100 a year in taxes. Dianne and Terry Elliott pay $561. The neighbors get along, but they don’t agree on Proposition 13.

“It’s not fair. I think everybody should pay the same. It should be equal,” said Avila, 35.

But Avila agrees that he too has been helped by the initiative. He could afford to buy his first house in 1979 because of the lower taxes, he said.

And while the Elliotts sat on their low taxes rather than cashing in during the soaring housing market of the 1980s, Avila sold his first home and pocketed a tidy $84,000 in equity.

With that factored in, Avila is more satisfied, he said. But still, “somebody’s got to do something about this,” he said.

A half-dozen houses up the street, Assemblyman Nao Takasugi (R-Oxnard), an original homeowner on the block, says he takes no great pleasure in his $571 tax bill.

“There is an inequity there,” the former Oxnard mayor said. “Maybe there should be some legislation that would make it more fair. But I wouldn’t say how far it should be changed.”

In Simi Valley, on Sen. Wright’s street, there isn’t much sentiment for any change at all.

While whacking an ailing neighbor’s hedge, 72-year-old Oscar Gold said he knows his block and its taxes. The retired construction supervisor pays three times the taxes of some neighbors. But he knows he could be in their shoes one day--in poor health, watching the power of a fixed income fade and thankful for a tax bill that hardly rises at all.

“Prop. 13 didn’t help me, but I came here with my eyes open,” Gold said. “For older people, retired people, it’s one of the most wonderful things that ever happened. My neighbor, he’s 86 years old and if it wasn’t for Prop. 13, he couldn’t live here. He’d be under.”

Likewise, Gail and Don Hubbs, a 40-something couple with kids who bought their house in 1988, don’t begrudge their neighbors’ lower taxes.

“Being here is worth the money, just because of the crime,” Gail Hubbs said. “We had been robbed three times in Chatsworth.”

Sen. Wright, who said she saw her taxes jump $300 a month during the unrestrained hikes of the 1970s, thinks her neighbors have it right.

“There are a lot of things in life that aren’t totally fair,” she said. “But the one thing you have now is certainty, when you buy your house, of what your taxes are going to be.”

To Camarillo City Manager Bill Little the mixed results of Proposition 13 “tilt more to the minus side.”

By prompting the Legislature to usurp traditional local control over property taxes, the initiative helped sever the connection taxpayers once made between their property tax dollars and the services they provided, Little said.

“Proposition 13 has generated a real lack of interest by the citizens in how government is financed,” he said. “Now it doesn’t matter how much more the school board spends, because they’re going to pay the same property taxes.”

The proposition has also prompted city leaders to recruit shops and stores that fill city coffers but might not be best for the community, Little said.

“It has brought an overreliance on sales tax,” Little said, “causing in some cases cities to approve land uses because of what returns to them, instead of what is necessarily the best for the city and the area.”

Camarillo agreed early this year to kick back $500,000 in sales taxes to developers of a shopping mall the city wanted to build before a competing center could be constructed in Oxnard. The Oxnard City Council offered its own $2-million package of fee-waivers and subsidies.

The Camarillo project has since been blocked in court. The Oxnard project is stalled by a bad economy.

While Little sees a need for reform of Proposition 13, Thousand Oaks City Manager Grant Brimhall said the initiative “is not the bogyman many would make it out to be.”

It was a wake-up call that state lawmakers have failed to heed, he said. Instead of cutting waste and junking a faulty tax system, the Legislature implemented piecemeal fixes, then blamed Proposition 13 and local government when things didn’t work out.

“I don’t think Proposition 13 should be blamed,” he said. “I think Proposition 13 was a messenger, and some have shot it.”

But some officials point their figures at Thousand Oaks when describing problems generated partly by Proposition 13. A prosperous city with the county’s highest per capita income, Thousand Oaks captures an extra 5% of its property taxes by declaring a portion of the city blighted and forming redevelopment areas.

“You have these redevelopment scams,” Sen. Hart said, “where agencies are created that have nothing to do with blight, but with capturing property taxes. I am thinking about Thousand Oaks.”

The finger-pointing does not impress local business leaders who have grown impatient with government’s response to a lingering recession that has cut government revenue and further exposed the weaknesses of California’s tax system.

“The problem with Prop. 13 was that we couldn’t really get government’s attention,” said Ventura rancher Carolyn Leavens, a board member of the Ventura County Economic Development Assn. “They’ve done their best to work around it with user fees and every means possible.”

Those fees have now grown to the point that they’re forcing Ventura County businesses out of the state and working against the recruitment of companies that might come here if office and housing costs were not so inflated, Leavens said.

“It makes people very leery about moving into this area,” she said. “At VCEDA, we’ve had many businesses say, ‘We’d love to move to the Ventura area, but we can’t afford to.’ ”

Leavens thinks Proposition 13 also fails because it encourages cities to recruit chain stores and malls that to a large extent simply take in money that would have been spent in smaller, family-owned stores anyway. They create few good jobs and bring in little new wealth, she said.

“I’m concerned about all these shopping malls,” she said. “What they’re doing is trading our heritage and our cities on the hope that these shopping malls will lure more money. But in fact, they lure it away from existing business and change the nature of our cities.”

Land-use consultant Elaine Freeman of Simi Valley, another director of the county’s economic development association, said she thinks the current tax system works against new companies and new construction through lopsided property taxes and excessive local start-up fees.

The one-quarter of the business property that has not changed hands since 1975 pays just 12% of total business property taxes.

“If we’re going to see business succeed and get employment going, then we have to look at this whole fee and taxing system so that everybody is treated equally,” she said. “We keep tacking fix-it things on, but that’s not enough.”

Solving the problems of Proposition 13, say its critics, requires a more equitable sharing of the property tax burden.

Before the U.S. Supreme Court declared Proposition 13 constitutional in 1992, one proposed modification called for a reduction in the tax rate from 1% of current value to .44%, thereby lowering the taxes for most owners but raising them for a substantial minority over several years.

“That would introduce more equity, and you’d have to put a cap on the tax rate so you would retain the certainty of Prop. 13,” planner Fulton said.

Businessman Richard Fausset, who pays taxes on a fraction of the value of his Nob Hill Lane home overlooking Ventura, said he’d welcome the change.

“I recognize I have a windfall. It’s nice,” Fausset said. “On the other hand, I hate to see the system crumble.”

Reforms could also de-emphasize sales tax by returning the bulk of property taxes to cities and counties, the jurisdictions that make land-use decisions in local communities but now receive a minority of the benefit.

Even reformers, however, say that changing Proposition 13 remains a long shot politically.

A series of proposed reforms have made little progress in the state Legislature, where lawmakers remain wary of voter backlash to any tinkering with Proposition 13.

Any alterations to Proposition 13, which is part of the state Constitution, must be approved by the voters in another ballot initiative.

Hart found out how strong the opposition can be when his motion helped established a Senate commission to look into possible reform in 1990.

“There was just an outpouring of criticism and resentment directed towards me, and it was just a study.”

* MAIN STORY: A1

BACKGROUND

Proposition 13, the 1978 ballot initiative:

1. Rolled back property values to 1975 levels and set the tax rate at 1% of value for all business and residential property. 2. Limited tax increases to 2% a year. 3. Provided that a property’s value can be reassessed only when it is sold. 4. Required a two-thirds vote of both houses of the Legislature to pass any statewide tax increase, and a two-thirds vote among local voters to approve any city or county special tax.

Property Values Under Prop. 13

Only one of five houses in Ventura County is assessed at its original Prop. 13 value, and one of four businesses. Less than one-third of apartments and about half of farmland still carry the low 1975 values for tax purposes.

Houses Apartments Businesses Farmlands Total Parcels Avg. Value Avg. Value Avg. Value Avg. Value Avg. Value At 1975-76 $46,589 $102,823 $370,260 $80,572 $76,302 Prop. 13 Values At Post $167,934 $403,683 $891,082 $214,629 $208,671 Prop. 13 Values

Source: Ventura County Assessor’s Office