Vintners and Farmers Are Breathing Easier After the Demise of Proposition 15, a ‘Headache’ at Best

The measure would have increased property taxes on commercial property worth more than $3 million. It exempted agricultural land, but not farm buildings.

Nov 17, 2020
The vineyards at the Somerston Estate Winery & Vineyards are seen amid California wildfires on Sept. 30, 2020 in St. Helena, California. Credit: Kent Nishimura/Los Angeles Times

The vineyards at the Somerston Estate Winery & Vineyards are seen amid California wildfires on Sept. 30, 2020 in St. Helena, California. Credit: Kent Nishimura/Los Angeles Times

In a year of disasters for California wine country, grape growers like Steve Sommer were filled with existential dread over a tax measure on the Nov. 3 ballot. Signs on fence posts throughout the winding roads of the vineyards pleaded: "Save Our Sonoma County Family Farms! No on Prop. 15!"

Then Proposition 15 failed. With nearly 16 million ballots counted as of Nov. 10, nearly 52 percent of voters rejected the proposal to tax commercial and industrial real estate based on its current market value rather than purchase price. Although ballots remain to be counted, statistically the yes votes can not overcome their deficit, according to an analysis by the Associated Press. 

Just like that, palpable worry over the possible impacts Proposition 15 might have on the nation's world-class wine region morphed into weary relief.  

"This was already the worst year we've ever had," said Sommer, who has grown wine grapes for 50 years in Sonoma County and is active in several industry groups. "Prop. 15 would have created more headaches."

Sommer Ranches and Vineyard, like most wine grape farms in the bucolic Dry Creek Valley, has suffered from the domino effect of the pandemic lockdowns, losing business from vintners when vintners lost business to the closures. Compounding the losses, smoke taint from the worst wildfires in California history, at the worst possible time—harvest—ruined tons of grapes. Sommer lost 40 tons of zinfandel and petit syrah grapes, half his crop.

Proposition 15's target was wealthy corporations paying very low property taxes ever since California's landmark 1978 law, Proposition 13, rolled taxes back to 1 percent of a residential or commercial property's 1976 market value, subject to no more than 2 percent annual increases and reassessment at its current market value when it is sold and changes hands. 

After Proposition 13 passed, property taxes dropped by about 60 percent, seriously depleting local budgets for schools, law enforcement and local services, Large, wealthy corporations are still paying taxes on properties they purchased in the 1970s based on real estate prices at the time, far less than owners of similar properties must pay now when they acquire them in California's overheated real estate market.

Proposition 15's architects argued that corporations still being taxed on the basis of purchase prices from the 1970s could well afford an increase. The ballot measure left residential properties alone under Proposition 13, creating a "split-role"—two tax systems—for assessors. Commercial real estate worth under $3 million would have been exempted from Proposition 15. 

The wine industry opposed the measure for two main reasons.The law would have reassessed wineries with public tasting rooms (worth more than $3 million). Some family wineries are struggling because of wildfire losses over the last three years as well as the pandemic, even though their land values in hyper-expensive wine country meet the measure's threshold. (Not all wineries are owned by the ultra-rich.)

Secondly, while the measure exempted agricultural land, the California Farm Bureau Federation argued—and the state tax assessors' association agreed—that as worded, Proposition 15 left agricultural buildings and improvements, which are taxed separately from land, vulnerable to  the new law. 

The farm industry was not the only influential group opposed to the measure. Small business associations rallied against it, convinced that commercial landlords would pass along their tax increases to tenants. Allan Zaremberg, president of the California Chamber of Commerce, applauded the measure's defeat as a win for the little guy. "California voters understood the very real threat Proposition 15 presented to small businesses, farmers and consumers," he said in a written statement. "Voters in California smartly recognized that enacting the largest tax hike in California history would have been devastating to jobs, our economy and California's future competitiveness."

The measure's failure proved that in 2020, voters chose who and what to approve based on their individual concerns rather than political party endorsements. Nearly two-thirds of California's voters supported the Democratic presidential ticket, and all the top elected Democrats and their allies endorsed Proposition 15, including President-elect Joe Biden and Vice President-elect Kamala Harris.

The California Teachers Association was one of the measure's main sponsors, and it was strongly supported by labor unions and environmental groups. Proposition 15's proponents, who worked for years crafting the measure, raced to have it on this year's ballot, assuming that during a presidential election, when voter turnout is highest, the measure would have its best chances to pass. 

But voters were queasy, polls taken before the election showed, about raising taxes during hard times. In a poll conducted by the University of California, Berkeley's Institute of Governmental Studies a week before the election, 49 percent of likely voters said they would approve Proposition 15, a warning sign that it would fail since most measures that poll with under 50 percent approval fail to pass. Although California lags behind almost every state in per-pupil spending, the promised increases in local school funding failed to assuage concerns about possible repercussions.

Sommer, who has led growers' groups, owned tasting rooms and made wine, said that over the years, the business has become subject to more and more regulations. He is currently working on producing a zinfandel and a petite syrah under the label "Dry Creek Flower Co." 

Sommer knows large growers who hire people to help them comply with licensing requirements and smaller ones, like him (he farms 60 acres), who spend at least one day a week on compliance. 

Proposition 15, he said, would have meant more bureaucracy and hassles and costs for an industry that has not yet learned to manage or mitigate the disasters that are becoming standard operating procedure. "We don't need more hassles," he said. 

He gave a short tour of his farm to show its wreckage. Withering grapes hung heavily on vines for acre upon acre. The grapes were still sweet, but Sommer could not find the help needed to pick them or the funds needed to process them. "Like I said, " he said, "we don't need any more hassles."

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