For more than a century, Hollywood studios and networks have been among the largest land-owning entities in Southern California and, as such, have benefited from Proposition 13, the state’s seminal, voter-approved amendment that caps taxes at 1 percent of a property’s assessed value at purchase.
That could all change this year. An effort to overhaul Prop. 13 is gaining steam with the help of a coalition of backers that includes Mark Zuckerberg and the California Teachers Association. If the ballot measure is successful, it could slap The Walt Disney Co., along with WarnerMedia, Fox Corp., ViacomCBS, NBCUniversal and Sony, with tens of millions of dollars more in taxes. In 2019, Disney forked over an estimated $55 million-plus in property taxes for Disneyland alone.
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So far, proponents of the measure — officially called Schools & Communities First but colloquially known as the “split roll” property tax proposal — have acquired 500,000 signatures, about half of what they need to get on the November ballot. Proponents of the measure argue that Prop. 13 has allowed hugely profitable Fortune 500 companies to pay taxes based on ridiculously low assessed land values and then use a variety of loopholes to maintain low taxes. This arrangement, they argue, has come at the expense of local government coffers and public services like education. A recent study by USC estimated that if commercial properties were taxed at current market value, it could add as much as $11.4 billion in revenue a year. Under the proposed measure, commercial properties would be reassessed every three years.
It’s unclear whether entertainment companies will direct their sizable lobbying firepower to help defeat the measure (spokespeople from all the major studios declined to comment), but several factors make it unlikely that they will marshal a coordinated campaign. Because of the way the current law functions, commercial land owned by the entertainment giants is taxed at widely varying rates, and recent consolidation has complicated matters. Take WarnerMedia: Before the 2018 purchase by AT&T, Time Warner was paying taxes on its Burbank studio at an assessed value that was well below its current market value. But the acquisition by AT&T triggered a change-in-ownership reassessment by L.A. County, meaning that WarnerMedia has less incentive to oppose the split-roll proposal than, say, Fox, which did not relinquish ownership of its 50-acre Century City lot when Disney acquired most of its assets last year.
Furthermore, that much of the proceeds would go toward public education makes opposing the split-roll measure a potential PR headache. “I’d think twice about fighting to keep an unfair tax break that takes money away from our public schools,” says political strategist Yusef Robb, whose clients include entertainment industry execs.
The split-roll proposal would repeal many of the protections that have been in place since Prop. 13 was passed by 65 percent of California voters in 1978. For homeowners, nothing changes, because the current proposal targets only commercial and industrial property. Companies with fewer than 50 employees and less than $3 million in property also would be exempt.
It’s hard to gauge which of the studios would be hardest hit. According to data compiled by Lenny Goldberg of the California Tax Reform Association, NBCUniversal could end up paying $28 million more annually on its Universal Studios theme park and headquarters. Goldberg estimates that all the studios combined would pay in the neighborhood of $36 million more a year under the proposed legislation.
Voters can expect a bare-knuckle fight. Californians to Stop Higher Property Taxes has established an impressive coalition of business groups and real estate interests who vow to fight the measure. They say the proposal is tantamount to the largest tax increase in state history and would result in increased costs for every resident.
Speaking out in support of the initiative is TV director Dan Attias (Snowfall, Homeland), who says he’ll be pushing the DGA to come out in favor of the measure: “This is an opportunity for the industry to show real leadership … even if it’s to their financial disadvantage. At the very least, I hope they don’t mount a massive effort to oppose it.”
This story first appeared in the Jan. 16 issue of The Hollywood Reporter magazine. Click here to subscribe.
