Prop 15
Commercial Property Tax Changes
Constitutional Amendment
Increases Funding for Public Schools, Community Colleges and Local Government Services by Changing Tax Assessment of Commercial and Industrial Property

Taxes most commercial property worth more than $3 million dollars at market value and uses the funds raised from this change to support schools and local government.

Vote YES

Jump to SPUR’s Recommendation

What the Measure Would Do

Proposition 15 makes a set of changes to the state property tax system. The current system, passed in 1978 as Proposition 13, caps property taxes at 1% of a property’s assessed value and sets that assessed value at the time of purchase, plus a 2% annual inflation adjustment. In practice, Prop. 13 benefits long-term property owners because the value of properties in California rises much faster than inflation. This keeps property taxes low for long-standing owners. For example, Walt Disney Studios in Burbank pays property taxes based on its 1975 assessed land value at of $5 a square foot, whereas current market value is somewhere between $150 to $200 a square foot.1 Prop. 13 applies both to homes and to commercial and industrial buildings, as well as to business property, such as machinery and equipment.

Prop 15. would make the following changes to California’s property tax system:

1. Raise taxes on most commercial property.

The measure would continue the current system of capping assessed value at the time of sale for all residential properties, including multifamily housing. However, it would change the system for commercial properties worth more than $3 million, which includes business property (such as office and retail buildings), industrial property (factories) and improvements to commercial agriculture property.

Under Prop. 15, commercial property worth more than $3 million would be reassessed no less than every three years at fair market value (i.e., the estimated price if the property were sold in the current year). Vacant parcels that are zoned for residential use would also be subject to reassessment. Agricultural land would be exempt from changes. For mixed-use buildings, only the portion of the building being used for commercial uses would be reassessed.

Properties worth less than $3 million would not be subject to the ongoing reassessment. However, if the owner of a property worth less than $3 million owns several properties in California with a total value of more than $3 million, then all the property would be subject to annual reassessment.

Properties that are occupied by small businesses could apply for a deferral of their reassessment until 2025–2026. These properties must be at least 50% occupied by small businesses (defined as those with 50 or fewer employees and independently owned by a resident of California).

Additionally, the measure would exempt the first $500,000 of business property (on items such as machines, computers, furniture, etc.) for a business entity. For small businesses, this tax would be eliminated entirely.  

A study commissioned by the proponents of the measure indicates that 54 percent of small businesses are home businesses and therefore are unlikely to be impacted by this measure.2 An additional 30 percent would not be impacted because they are located within a property that doesn’t meet the $3 million requirement for reassessment. These businesses would not be reassessed and would also see their business property taxes eliminated.

2. Use proceeds generated by these tax changes to fund schools and local government.

The Legislative Analyst’s Office estimates that Prop. 15 would generate an additional $6.5 billion to $11.5 billion annually. These proceeds would be used to fund schools and local governments. Typically, California raises more than $60 billion from property taxes annually.3

Roughly 40 percent of the proceeds from Prop. 15 would be set aside in a protected fund for schools.4 These funds would be allocated based on the Local Control Funding Formula, a formula adopted in 2013 that prioritizes funding for high-need students.5 Higher-income jurisdictions would be guaranteed a minimum amount of funding, as well. Eleven percent of education funds would go to community colleges and the remaining 89 percent would go to K-12 education.

The new funding from Prop. 15 would be in addition to current funding for schools. The measure prevents the state legislature from reallocating existing school funding to other uses.

The remaining funds (roughly 60 percent of the total6) would be returned to cities, counties and special districts. Several hundred million dollars a year would be used to cover the increased expense to County Assessor’s Offices from implementing Prop. 15.

The Backstory

Prop. 13 has constricted funding for local governments in California, and for education in particular. When it passed in 1978, local government revenues dropped by roughly 60 percent.7 Total local government revenue in California has recovered since then due to new fees, utility taxes and sales taxes, which are more regressive than property taxes. Despite this, local government revenue per person remains lower than it was before Prop. 13 because the population has grown.8 

School funding was particularly hit by the passage of Prop 13, with per student spending falling by 10%.9 While funding for schools has risen since Prop. 13 passed, funding for schools in California is now very volatile because it relies on income tax. California schools are better funded during boom years, but during recessions they suffer more severely than schools in comparably sized states. Studies have shown that the level of school funding is below what’s required to provide a high-quality education for California’s diverse student body in a state with such a high cost of living.10 At the same time, California’s public-school finances are also beset by ballooning unfunded pension and post-retiree health care costs.

Prop. 15 was placed on the ballot by signature collection. The three largest supporters are the California Teachers Union, SEIU and the Chan Zuckerberg Initiative.

Equity Impacts

Reforming Prop. 13 has the potential to create billions of dollars in state funding for local governments and for schools. Currently California ranks somewhere between 22nd and 46th in per pupil spending in the United States, depending on what calculation is used.11 Roughly 50% of all California public school students are Hispanic, and almost 60% are eligible for free and reduced-price lunch.12 California ranks first in the nation for percentage of English language learners, with roughly 21 percent of students in that group. Although California’s pupil-to-teacher ratio is one of the highest in the country, it ranks in the bottom fifth for educational performance. 13 Additional funding from Prop. 15 would help support the large percentage of California students who are people of color, from low-income households or English language learners. Moreover, the funding would be allocated according to the Local Funding Control Formula, which prioritizes funding for school districts with higher percentages of low-income students and English language learners.


  • California’s ability to raise essential funds for public education, infrastructure and local services has been hobbled for four decades by the passage of Prop. 13. This measure takes an important step in addressing the fiscal challenges created by Prop. 13 and would provide significant revenue to schools and local governments.
  • The current system benefits long-standing commercial property owners over the owners of new and growing businesses. There is no policy rationale for essentially subsidizing long-standing owners in the form of artificially low taxes while making new owners pay taxes on higher assessed values. Prop. 15 would level the playing field between older and newer businesses.  
  • Prop. 15 taxes vacant commercial land at market value, which could create an incentive for owners to develop the land with a mixture of uses, including housing.


  • Prop. 15 could exacerbate the problem of commercial development being more lucrative for cities than housing, one of the factors in California’s chronic housing shortage. Because it would increase revenue from commercial property taxes, Prop. 15 could further incentivize local governments to zone for commercial development over housing. Some form of regional tax sharing should be considered in order to blunt this negative impact.
  • This measure does not tackle the need for holistic tax reform at the state level. California’s tax system is so complex and cumbersome that a wholesale overhaul should be considered.
  • This measure would be challenging to implement, particularly in the first several years. Prop. 15 requires that commercial properties be reassessed, which would significantly increase workload for county assessor’s offices. How that work would be funded is unclear.
SPUR's Recommendation

SPUR opposed Prop. 13 in 1978 due to concerns about its impact on state and local funding,14 and we have written many times about the numerous problems created by its passage. Prop. 13 causes local governments to turn to more regressive taxes and fees, and taxes on new housing development to fund local public infrastructure and services. Prop. 13 places a disproportionate tax burden on new would-be homeowners and businesses, benefitting the well-established. Prop. 13 incentivizes cities to develop new retail and commercial space that can generate sales taxes, at the expense of developing new housing. Prop 13 negatively impacts almost every issue that SPUR has worked on over the past several decades. There’s much more work to be done, but this measure would be an important step toward fixing California’s troubled property tax system.

Vote YES on Prop 15 - Commercial Property Tax Changes

1. Murray, Bobbi, “Prop 15’s Big-Spending Opposition: Cash of the Titans”, accessed on October 1st, 2020.

2. Yes on 15 - Schools & Communities First, Impact of Proposition 15 on Small Business, August 2020,

3. Urban Institute, California’s K-12 Education Needs, July 2020,…

4. Legislative Analyst’s Office, 2020 Proposition 15 description,

5. High-needs students include low-income students, English language learners, homeless students and foster children. EdSource, Local Control Formula Funding Guide, updated February 2016,

6. Ibid.

7. Legislative Analyst’s Office, Common Claims About Proposition 13, September 19, 2016,

8. Ibid.

9. KQED, “How Proposition 13 Transformed Neighborhood Public Schools Throughout California,” October 25, 2018,

10. Ed100, “Does California Skimp on Education?”

11. EdSource, “How does California rank in per-pupil spending? It all depends,” February 28, 2017,

12.  Urban Institute, California’s K-12 Education Needs, July 2020,, page 7.

13. Legislative Analyst’s Office, 2020 Proposition 15 description,

14. SPUR, “Interview With John Jacobs,” May 1999,…