Written by Paul Dictos
On a hot August day, as I stood at the gate of the Stamoules Ranch in Mendota, California, a gentle breeze cooled my razor shaved head and ruffled the leaves of the pistachio tree nearby. My longtime friend and fellow Greek Tom Stefanopoulos, a second-generation farmer, asked if California farms will survive this unprecedented economic and political crisis, AKA Split Roll, listed as Proposition 15 on the Nov. 3 ballot. When faced with tough questions, professional accountants have a simple answer — it depends.
The coronavirus has forced the entire world into disarray. And the farm and food industries are no exception. With restaurants closing, the dominoes are starting to fall for the farmers who suddenly have nowhere to take their produce. For many farmers, its more cost effective to let crops rot in the fields.
Prop. 15 will not help. It will make things worse. It will remove Prop. 13’s protections for California farmers, triggering annual reassessments at market value for agriculture-related fixtures, irrigation systems and improvements, including barns, dairies, processing plants, wineries, producing fruit trees, nut trees and vineyards. Agriculture is a $50 billion industry, the lifeblood of California, and is providing more than one-third of the country’s vegetables and two thirds of its fruits and nuts. But when family farmers are faced with structured uncertainty under a clouded political environment, they may be forced to sell their property to real estate developers because the property taxes have become so burdensome. Many fear that Prop. 15 will create a major fiscal incentive to local government to rezone property away from agricultural use to take advantage of the higher taxes and satisfy Californians’ insatiable appetite for more taxes.
Furthermore, Prop. 15 will inadvertently trigger massive property tax increases on solar energy property and jeopardize the industry. It was only a couple of decades ago — 1980 — when California voters enacted Revenue and Taxation Code Section 73 which excludes active solar energy systems from “new construction.” Passage of Prop. 15 would make all solar systems — except residential solar owned by the homeowner and excluded from property tax — be subject to property tax at their full fair market value, even though voters enacted this incentive to encourage the development of solar energy throughout the state. Section 73 is credited with helping drive California’s national leadership in solar energy and materially lowering energy costs for Californians. This is another California flip-flop. What is wrong with Sacramento?
Fresno County has the largest solar energy installations in the state, with more than 18,000 acres [built and entitled] covered with industrial solar panels. Conservative estimates of the market value of industrial solar panels in Fresno County is pegged at approximately $15 billion. At present tax rates, this translates to $165 million in higher property taxes to the industry. There are also approximately 13,000 residential properties in Fresno County with leased solar panels. Currently they are exempt from taxation. Passage of Prop 15 will make them taxable to the lessor as fixtures. And guess who is going to end up footing the bill? You guessed it right. All Californians because our state depends on solar energy to keep our lights on and A/C running during Fresno’s hot summer nights.
According to Solar Industries Association (SBIA), California has installed enough solar to power 7,812,254 homes. With 2,307 solar companies, 74,255 good paying solar jobs and a projected five-year growth of 14,957 megawatts, I am afraid Prop. 15 may put this industry in a chokehold.
CNBC recently released the “America’s Top States for business in 2019.” The annual study reviews each state, poring over more than 60 measures for business competitiveness to rank categories like cost of living, business friendliness and access to capital. Overall California is ranked 32 of 50. But doubling down on a couple of key categories show that our state is at the bottom of the barrel when it comes to nurturing a pro-business environment. California also ranked 49 out of 50 in the cost of living category.
Passage of Prop. 15 would have an adverse effect on California taxpayers. The small family farmer, the backbone of the industry, may soon belong to history.
California’s cost of living is already among the nation’s highest. We should not make it even more expensive to live here. Prop. 15 will make it more difficult for Californians living paycheck-to-paycheck.
Is there an alternative way to achieve the same result? Yes. Simply change the tax rate for all commercial and industrial properties. My phone is listed. Nobody called.
Vote no on Prop. 15 to save our family farms and keep the American dream alive for the youth aspiring to be the “Future Farmers of America.”
Paul Dictos, CPA, is assessor-recorder for Fresno County.