The California Chamber of Commerce Board of Directors has taken an oppose position on Proposition 5, a November ballot initiative that lowers the voting threshold for approving local general obligation bonds funded by property tax increases. If passed, Proposition 5 would lower the required voter approval from two-thirds to 55% for bonds intended to support housing assistance or public infrastructure.
Under Proposition 5, local governments must implement specific measures to oversee the use of bond funds designated for housing and infrastructure projects. This includes conducting annual independent financial and performance audits, along with establishing citizens’ oversight committees to monitor spending.
Raises Homeownership Costs
The Legislative Analyst’s Office stated that a lower voter approval requirement would make it easier to pass local general obligation bonds for housing assistance and public infrastructure. In fact, recent local election results suggest that an additional 20% to 50% of local bond measures would have passed under Proposition 5’s lower voter approval requirement.
Local general obligation bonds are repaid through taxes on the assessed value of property, and in some areas of California, local add-on taxes and bond repayments already add thousands of dollars in taxes on top of residents’ annual ad valorem property tax. The California Association of Realtors found that as of April 2024, the median cost for a single-family home in California was $904,210. For a median-priced home, the base 1% property tax alone costs $753 per month in the first year, and increases up to 2% annually.
The CalChamber opposes Prop 5 because it will pave the way for higher housing costs on top of the existing taxes, making the prospect of homeownership further out of reach for the average Californian.
Burdens on Small, Medium-Sized Business
Additionally, Prop 5 will directly increase operating costs for small and medium-sized businesses, whether they own or rent their property.
Most commercial leases include provisions to increase rent when higher property-related expenses are incurred. Higher property taxes associated with the approval of new general obligation bonds will increase the expenses of small businesses, discouraging entrepreneurs from establishing operations in the state and resulting in fewer employment opportunities for Californians.
The two-thirds vote threshold for approval of general obligation bonds has been in place since voters approved the California Constitution in 1879. More than four decades ago, prompted by years of rising taxes, Californians resoundingly approved Proposition 13 to limit ad valorem taxes on property to 1% of the property’s assessed value.
Prop 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, diminishing the people’s voice on tax increases and eroding critical property tax safeguards. Polls have consistently shown that Proposition 13 continues to have a 2-to-1 margin of support from Californians, and this support reaches across nearly every major demographic.