Proposition 5: Balancing Homeownership and Fiscal Responsibility

The California Chamber of Commerce Board of Directors has taken an opposing stance on Proposition 5, a November ballot initiative that aims to lower the voting threshold for approving local general obligation bonds funded by property tax increases. If passed, Proposition 5 would reduce the required voter approval from two-thirds to 55% for bonds intended to support housing assistance or public infrastructure.

Empowering Communities or Burdening Homeowners?

Lowering the Voter Approval Threshold

Proposition 5 seeks to make it easier for local governments to pass general obligation bonds for housing assistance and public infrastructure projects. The Legislative Analyst's Office has stated that a lower voter approval requirement would likely result in an additional 20% to 50% of local bond measures being approved. This could potentially lead to a surge in bond-funded initiatives, but it also raises concerns about the long-term impact on homeowners and businesses.

Increasing Homeownership Costs

Local general obligation bonds are repaid through property taxes, and in many areas of California, these taxes already add thousands of dollars to residents' annual expenses. The median cost for a single-family home in California was $904,210 as of April 2024, with the base 1% property tax alone costing $753 per month in the first year and increasing up to 2% annually. The California Association of Realtors has warned that Proposition 5 could further drive up housing costs, making homeownership even more out of reach for the average Californian.

Burdening Small and Medium-Sized Businesses

The CalChamber opposes Proposition 5 because it will not only increase the financial burden on homeowners but also directly impact small and medium-sized businesses. Most commercial leases include provisions to pass on higher property-related expenses to tenants, meaning that increased property taxes associated with new general obligation bonds will directly increase the operating costs for small businesses. This could discourage entrepreneurs from establishing operations in the state and result in fewer employment opportunities for Californians.

Preserving Proposition 13 Safeguards

The two-thirds vote threshold for approval of general obligation bonds has been in place since the adoption of the California Constitution in 1879. Proposition 13, approved by voters more than four decades ago, further limited ad valorem taxes on property to 1% of the property's assessed value. Proposition 5 would reduce the vote threshold to approve general obligation bonds and allow taxes used to repay bond debt to exceed the constitutionally established 1% limit, potentially diminishing the people's voice on tax increases and eroding critical property tax safeguards.

Maintaining Californians' Support for Proposition 13

Polls have consistently shown that Proposition 13 continues to enjoy a 2-to-1 margin of support from Californians, with this support reaching across nearly every major demographic. The CalChamber argues that Proposition 5 would undermine the protections established by Proposition 13, potentially eroding the public's trust in the state's property tax system.In conclusion, the California Chamber of Commerce's opposition to Proposition 5 is rooted in its concerns about the potential impact on homeownership costs, the burden on small and medium-sized businesses, and the preservation of Proposition 13 safeguards. As Californians consider their vote on this ballot initiative, they must weigh the potential benefits of increased infrastructure and housing investment against the long-term consequences for homeowners, businesses, and the state's property tax system.