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Will Homelessness Create a New Proposition 13?

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I AUDIT - Many readers remember the passage of Proposition 13 in 1978.  Home and business owners, frustrated by years of property tax increases, often in the double digits, overwhelmingly approved a measure to cap property values at 1978-79 levels and limit future increases to two percent.  Many economists and historians cite Proposition 13 as the beginning of the so-called “taxpayer revolt” of the late 1970’s and early 1980’s. Other states adopted tax limits as well, and one could argue Ronald Reagan used the taxpayer revolt to push his small government platform in the 1980 presidential campaign. In California, Prop 13 was followed by Proposition 4 (the Gann limit), which restricted local government spending to 1979 levels adjusted for inflation and population. In 1996, voters approved Proposition 218, expanding the requirement for voter approval of various taxes and fees.

Although pictured as a grass-roots movement to help homeowners, Proposition 13 was spearheaded by Howard Jarvis, a commercial landowner, who wrote the law to heavily favor commercial and industrial property owners. Prop 13 allows properties to be reassessed when they are sold, and taxed at new, much higher rates.  Because commercial properties change hands far less often than homes, those owners have enjoyed a disproportionate benefit from lower property taxes.  In effect, California operates under a two-tiered property tax system, with older homeowners and businesses benefiting far more than new buyers.  The US Supreme Court recognized the discriminatory nature of Proposition 13 in its 1992 Nordlinger vs. Hahn decision, calling it “distasteful and unwise”, but upholding it nonetheless.

Proposition 13 also fundamentally changed the financial relationship between the state and local governments. According to the Public Policy Institute of California, Proposition 13 “removed the authority of cities, counties, and districts to determine the size of their own budgets: Before 1978, local agencies could set property tax rates to raise the revenue they needed to provide a locally determined level of public services. This was arguably the most important reduction in the authority of local governments in the 20th century.” Since 1979, funding has flowed through Sacramento and then to counties and cities. During periods of economic downturn, the State often reduced local government funding to close its own deficits.  The State raided local funding with such regularity, voters approved Propositions 1A and 22 in 2004 and 2010, respectively, to protect local government budgets.

Perhaps the most surprising fact about Proposition 13 and the follow-up laws it created, is that it was a solution to a self-made crisis.  Years before 1978, state and local legislators turned a deaf ear to property owners seeking relief from exorbitant tax increases.  Proposals to reform the property tax system died in committee.  Lawmakers convinced themselves voters would never feel so unheard that they would be willing to approve a radical change in the tax system.  The consequences of their disregard for their constituents have reverberated over the last 45 years, as local governments scramble to fund everything from police to roads. Proposition 13 was the most radical solution possible to what should have been a relatively straightforward problem.

There are signs we are approaching a similar moment of crisis regarding homelessness policies.  Ever-increasing budgets have promised to solve homelessness, while the unhoused population grows exponentially.  Advocates control the narrative to such an extent that most political leaders dare not mention structural reform.  A few non-profit organizations control hundreds of millions in public funds, which seem to benefit only their highly paid executives. Locally, elected leaders seem oblivious to the reality of encampments as squalid, unsafe and disease-ridden, referring to them as “communities”. They seem more interested in protecting the “personal agency” of people with untreated mental illness and substance abuse problems, than in protecting the safety of residents and businesses. While advocates and leaders discuss funding for unarmed ambassadors and peer outreach teams, the media carries regular stories about violent incidents perpetrated by delusional unhoused people. Most civic leaders seem content to treat homelessness as an abstract crisis, presenting an opportunity to experiment with social policy while regular citizens contend with sidewalks blocked by tents and business owners hire security guards to protect their customers and employees.

All the while, state and local officials have promised the latest influx of funding would finally solve the homelessness crisis.  Measures H and HHH were supposed to fund services and housing construction which has yet to materialize.  Measure ULA, approved last November, was advertised as funding support services for the unhoused, but the City Council is already discussing diverting some of its revenue to create an agency to defend apartment tenants against evictions. The City and County combined will spend more than $4 billion on homelessness programs in fiscal year 2023-24.  Recently, local officials promised a $60 million grant from the state will reduce unsheltered homelessness in Skid Row. Despite massive spending, nothing has improved; the latest PIT count showed a substantial increase in unsheltered homelessness. Taxpayers see no progress to justify the huge expenditures..

Over the past few months, I’ve seen increasing online discussions on how Los Angeles has devolved into a two-tiered society, where residents are demonized for advocating for their communities, and the unhoused are absolved of any personal responsibility for their situations and behavior. Successful programs like Union Rescue Mission and SOFESA are vilified because they require participants to commit to taking some responsibility for lifting themselves out of the homelessness cycle.  Businesses are fined for minor violations like signs left in the right-of-way, while derelict RV’s dump human and other waste into the storm drain system with impunity.  When citizens believe the government favors one group over another, the result is often a voter revolt.  Besides Proposition13, in the 1990’s and 2000’s, there were movements to limit development in some cities because residents believed elected officials were addicted to developers’ campaign contributions and would approve any new project no matter how inappropriate.

We may be seeing the first signs of a voter revolt over homelessness policies. Last month, a group of Phoenix property owners successfully sued the city’s government for its failure to clear a huge homeless encampment.  Locally, there have been discussions advocating the refusal to pay fines levied against property owners for behavior the city ignores from the homeless. In CD-11, voters elected Traci Park, who promised a more assertive approach to clearing encampments than her predecessor, (although she has since run into the reality of taking action in a city with fragmented accountability).  A coalition of anti-tax organizations has sued to overturn Measure ULA as a violation of Proposition 13. At a recent Santa Monica City Council meeting, residents chastised the Council for its inaction on homelessness. The people who sued Phoenix and the speakers in Santa Monica are not wild-eyed right-wing gadflies; they are common citizens who feel their government agencies no longer listen to them.  Those feelings create fertile ground for voter revolts. At least one LA City Councilmember seems to understand the stakes.  After the Mayor’s office reported on the sluggish progress of Inside Safe on July 5, Marquis Harris-Dawson said, “This city, this society can turn on people in a heartbeat. Just all it takes is a couple bad stock markets and a recession, and suddenly, ‘Why are we wasting all this money keeping people indoors?,’ Right?” You can’t even tell me where the rooms are and how many rooms there are and what hotels they’re at. And so, I think that’s what’s in the back of my head and I’m sure that it’s present for all of you.”

There is already an effort to overturn SB-9, the state law that requires cities to approve denser housing projects with minimal plan review and impact studies.  This could be the first of many direct voter actions on housing and homelessness issues.

The problem with voter revolts is they often go overboard.  Just as Proposition 13 has had unintended consequences like creating two tiers of taxpayers and sparking funding wars between the state and local governments, any voter-approved reform of homeless policies is likely to create a new set of problems.  Voters may approve funding restrictions that stifle creative and cost-effective solutions. Some measures may violate the unhoused’ civil rights (remember Proposition 187, the discriminatory anti-immigrant law passed in 1994 and overthrown by the courts?). Worse, any campaign aimed at reforming homeless programming could further demonize the homeless themselves.  Too many people already regard most homeless people as deranged, drug-addled criminals just waiting to be caught.  On the other side of the divide, people who want encampments cleared are branded as homeless haters who criminalize poverty. The last thing the homeless crisis needs is more divisiveness.

Sadly, like the property tax issue of 1978, if homeless policies come before the voters, it will be because our leaders have failed to act responsibly.  If they were more willing to challenge the status quo now, radical policies would be unnecessary. What we need now is what we needed in 1978; leaders who listen to their constituents and who are willing to get past the rhetoric and address the real problem: the lack of accountability among homeless agencies whose primary talent seems to be finding new ways of spending money while producing no results. The longer leaders ignore growing discontent, the more likely someone like Howard Jarvis will emerge, and lead voters to a “solution” that will make matters worse. By acting in the best interest of the entire community now, leaders can best serve both the unhoused and the communities around them.

(Tim Campbell is a resident of Westchester who spent a career in the public service and managed a municipal performance audit program.  He focuses on outcomes instead of process.)

 

 

 

 

 

 

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