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Sonoma County farmers at the center of battle over Proposition 15 property tax referendum

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Proposition 13 has long been considered the third rail of California politics — mess with it and meet a political death.

Amid a populist revolt, the 1978 ballot initiative capped property taxes at 1% of the purchase price and limited annual tax assessment increases to 2%. It helped usher in an anti-tax wave that propelled Ronald Reagan into the White House and became the dogma for the GOP ever since.

Now more than 40 years later, that thinking is being challenged with Proposition 15. The referendum on the Nov. 3 ballot would repeal the Proposition 13 property tax cap for commercial and industrial properties, while still keeping it for residential tracts.

Supporters, including the California Teachers Association and other progressive groups, contend the tax readjustment would fetch from $6.5 billion to $11.5 billion annually in additional revenue for cash-strapped local governments statewide that rely on property tax. For example, with passage, Sonoma County would receive $47.5 million in new annual revenue, while the city of Santa Rosa would get $8 million.

Not surprising, the high-profile debate about the thorny issue has prompted at least $58 million in contributions from both sides waging a public relations battle that has played out on social media, television and radio.

Opponents such as gas stations, private clubs and family-owned businesses have lined up to fight the measure, contending a tax hike in the middle of a pandemic would be crippling. Meanwhile, the charity arm of Facebook founder Mark Zuckerberg and his wife, Priscilla Chan, has given almost $7 million to support passage of the referendum in order to provide greater financial assistance to schools and local services.

Between the charges and countercharges, the ballot initiative’s effect on agriculture has become a focal point, especially as the politically powerful sector garners much sympathy from voters across the state. California’s Legislative Analysis Office said that agricultural land would not be affected and continue to be taxed based on its original purchase price. But farm groups such as the California Farm Bureau contend that isn’t the case and have launched vocal opposition to the measure.

Sonoma County farmers and ranchers have taken up the cause because they fear their farms could be at risk, along with the $1 billion in annual crop value derived from agriculture countywide. If the ballot measure passes, new property tax assessments would go into effect over time starting in 2022.

One local dairy farmer, Jennifer Beretta, has been featured in online advertising, saying her family’s Santa Rosa dairy would be severely hurt. Beretta thinks the company’s property taxes will double if voters pass Proposition 15.

In an interview, Beretta said she worries there would be cascading effects from the measure throughout the food supply chain. Her family’s organic dairy sends its milk to Petaluma-based milk processor Clover Sonoma and it ultimately ends up in supermarkets. Clover and the grocers also face higher property taxes under the referendum.

She fears not being able to recover any of the costs associated with her 400-acre farm’s property tax boost. The Beretta family has operated the business since the 1960s. Now, the family has 300 milking cows and 500 heifers and calves.

“If we don’t get those costs back to us, we will not be able to survive,” she said. “My assumption as a fourth-generation farmer is our dairy will be no longer running.”

Most farmers in Sonoma County would face a tax increase, though the extent would vary based on several factors, particularly how long they have had the property in their names, said Tawny Tesconi, executive director for the Sonoma County Farm Bureau.

Those who have held their land within the family for generations would be especially hard hit because the taxable value of land and buildings on it is based on the original purchase price of the property.

Under the Proposition 15 proposal, the farm bureau did a case study of one unnamed winery in Sonoma County. The small winery, with almost 20 acres of vineyards and a production building, would get socked with a 234% increase in property taxes, from paying $15,800 a year to $52,815, Tesconi said.

“It’s going be very, very difficult I think for many of our farmers, especially those ones that are kind of on the edge right now,” she said. “There's a lot of challenges between COVID and trade and tariffs and all these other things.”

Proponents of the hot-button measure contend there would be no effect on agriculture since the initiative — at the behest of local tax assessors — considers the use of the land and not how it is zoned, said Lenny Goldberg, who worked on crafting the proposition and is executive director of the California Tax Reform Association.

In 2018, the Sonoma County tax assessor reported $4.1 billion in agricultural land value and $192 million in agricultural improvements, Goldberg said. Also reported was commercial and industrial properties valued at $13.7 billion. The assessor noted the difference between agricultural and commercial/industrial clearly in their usage details, he said.

“There's nothing on agriculture; nothing that the farm bureau talks about,” Goldberg said, regarding the sector being included in a potential property tax increase. “So the question is why are they doing this?” he said, of the strong opposition to the property tax adjustment referendum.

“It’s probably for some chemical companies and equipment companies and the seed companies that do have large commercial and industrial facilities,” he said.

Supporters of Proposition 15 did take steps to ease the burden, especially on small businesses. Commercial land and buildings valued at $3 million or less would be exempt. And each business would benefit from a provision that would reduce the taxable value of business equipment by $500,000 starting in 2024. Those firms with 50 employees or fewer would have business equipment tax entirely eliminated.

The focus of the tax measure is on wealthy businesses such as the Irvine Co., a large real estate developer based in Newport Beach, and the Walt Disney Co. Both have held their land for decades, but are paying below-market rates on their property taxes, advocates of the referendum said. Sponsors claim 10% of commercial and industrial property owners in California would generate 92% of the additional annual revenue from passage of the measure.

“We’re talking about Disney movie studios in Hollywood that since the 1970s haven’t changed ownership and pay the same property tax rates as they did in the 1970s,” said Alex Stack, spokesman for the Yes on 15 campaign. “They underpay property taxes by millions of dollars every year.”

That message has failed to sway opponents like the Santa Rosa Metro Chamber’s political action committee, which sent an email blast noting the measure “would disproportionately harm small business by creating increased rents at the time they can least afford it.”

Opponents say the sponsors of the measure allowed an omission in the text of the proposed law that classifies the farm exemption for “land that is used for producing commercial agricultural commodities.”

The definition does not include improvements or fixtures such as barns, nut trees, grapevines and other items and would make most farms fall under the category to be taxed, said Robert Spiegel, a policy advocate for the California Farm Bureau.

“It’s only the land,” Spiegel said of the exemption from the measure. “I don’t know anyone who would argue that a barn is not considered ag.”

That exclusion has worried local farmers. Beretta said her family is erecting a new barn to help reduce the release of methane gas into the atmosphere, but that environmental improvement likely would be taxed if the proposition passes.

Balletto Vineyards in Santa Rosa would face increased taxes across the board, from its trellises and fences, to its winery and tasting room, owner John Balletto said.

“We are very concerned about it. ... It would just be devastation,” Balletto said of his yearly property tax bill that could triple.

“We have owned land for 40 years and we have planted vineyards for the last 25 years,” he said. “We still pay a lot of property taxes, but can you imagine if your property taxes triple?”

In an important caveat that North Coast businesses certainly will notice, the Yes campaign for the measure noted a winery could be subject to tax reassessment, but only if it sells wine on its property; there are many such wineries in Sonoma County. That assessment would not apply to production-only winemakers, according to the campaign.

In the end, the tax-adjustment decisions ultimately would be made by local tax assessors, and if there are problems, farmers can appeal to the state Board of Equalization, the agency overseeing tax administration and fee collection in California, Goldberg said.

If property tax issues persist, then the California Legislature can get involved, he said. Proponents of Proposition 15 would work with farm groups to ensure they are not taxed, Goldberg said.

“There are some borderline cases that the Legislature will address, but it’s not one of the things that they're talking about — barns and packing sheds,” he said. “Those are all considered right under the use code as agricultural improvements.”

Proposition 15 referendum

The measure would change property tax law in California, removing the decades-old tax caps from Proposition 13 for commercial and industrial businesses.

Proponents: The change would affect mostly wealthy businesses.The sponsors claim 10% of commercial and industrial properties in California would generate 92% of the additional annual property tax revenue. Local governments, such as Sonoma County would yield $47.5 million in new yearly revenue, and the city of Santa Rosa would get $8 million. Farm properties would not be affected.

Opponents: The landmark tax adjustment would severely hurt small businesses that are trying to survive amid the coronavirus pandemic. Locally, most farmers say they would see a spike in their property taxes since the language in the measure does not exempt property fixtures or improvements. Annual property tax bill increases could be double or triple what some ranchers and farmers are paying now.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.

For stories about what is on the local ballot, go here

For the PD editorial board voter guide, go here

Bill Swindell

Business, Beer and Wine, The Press Democrat  

In the North Coast, we are surrounded by hundreds of wineries along with some of the best breweries, cidermakers and distillers. These industries produce an abundance of drinks as well as good stories – and those are what I’m interested in writing. I also keep my eye on our growing cannabis industry and other agricultural crops, which have provided the backbone for our food-and-wine culture for generations.

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