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Nonpartisan In Depth Analysis of

Proposition 1

PROPERTY TAXES: CONTAMINATED PROPERTY

Legislative Constitutional Amendment

THE QUESTION

Should owners of environmentally contaminated property be allowed to repair or replace it without causing an increase in the assessed valuation of the property?

PROVISIONS

Proposition 1 allows property owners (residential and business) to replace or repair environmentally contaminated property without paying taxes on the market value of the new property but instead maintaining the assessed value of the original property before contamination. In order to qualify:

  • a home or structure must be rendered "uninhabitable or unusable" as the result of health hazards caused by environmental problems such as toxic or hazardous materials

  • the property owner must have purchased or built the residence or structure without prior knowledge of the contamination

  • the property must be designated a toxic hazard by a governmental agency

  • the home or business must effectively be destroyed by the environmental clean-up efforts

  • the lead governmental agency must determine that the owner's actions did not make the property uninhabitable or unusable.

The effective date for this proposition is January 1, 1995. Eligible property must have been acquired, constructed or repaired after that date and within five years after the property owner sells or transfers the contaminated property. Property owners are presumed to replace their property within the same county as the contaminated property; however, boards of supervisors of other counties may grant the property tax exemption at their discretion.

BACKGROUND

This Constitutional Amendment would add an exception to the Constitutional requirement, established by Proposition 13, that all real estate be reassessed when it changes hands or upon new construction. The proposed exception would give a property owner, adversely affected by environmental problems not of their making, the opportunity to replace or repair their property without having to be assessed at a new rate based on market value. In other words, qualifying property owners would maintain the same taxation rate they were paying prior to the environmental hazard.

FISCAL EFFECT

The California Legislative Analyst estimates that, because there are few qualifying properties, the tax revenue loss would be less than one million dollars. Local government would bear half of the loss; the state would make up the other 50 percent school revenue losses. However, should large environmental hazards occur or be discovered this tax revenue loss estimate could change dramatically.

A YES vote on Proposition 1 means that the owner of environmentally contaminated property could transfer the assessed value of that property to a replacement property.

A NO vote means that when the owner of environmentally contaminated property replaces that property it would be assessed at its market value and taxed at that value.

SUPPORTERS SAY

  • Proposition 1 will provide property tax relief for innocent homeowners who are victims of environmental disasters.

  • Current law provides the same protection to victims of natural disasters. The same degree of fairness should be extended to those whose property is destroyed by health and life threatening toxic or hazardous material.

OPPONENTS SAY

  • This measure would only increase the unfairness of the present Proposition 13 property tax system.

  • Instead of tinkering with the system to benefit a very few, the legislature should undertake an overhaul of the system because it creates wide differences in taxation for citizens who become homeowners in different years.

SUPPORTERS AND OPPONENTS

Official ballot arguments in favor are signed by Assembly Member Curt Pringle, Former Speaker, California State Assembly.

No ballot arguments were filed in opposition.


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Last updated: September 12, 1998
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