Since 2020, we’ve continued to endure a mounting pandemic and the changes it’s brought into our lives. Whether it’s affected your money, how you interact with others, or the places you go, you’ve experienced some kind of adjustment from the way things were and how they are now. However, this is especially true for California’s progressive legislature on the environment and private property.
With irreparable damage from wildfires and increasing tax rates, the state’s landscape has drastically changed compared to 20 years ago. As the planet continues to warm, the effects of global climate change are affecting one of the largest agricultural hubs in the country, which happens to be California. As farmers begin to exhaust their water supply, an ongoing drought will inevitably affect farmers, business owners, and residents alike.
Is California Collapsing?
Some might think this is an exaggeration, but I can assure you that it’s not. The reality is that farmers are extracting higher rates of groundwater to support the country’s agricultural needs. In fact, California farmers will likely pump an additional 6 to 7 million acre-feet of water from their wells this year, which is way above normal use. (1) However, the state is preparing to enforce new regulations on groundwater, which could further affect how farmers do business.
Up until recently, the use of groundwater has been abundant and completely unrestricted. But as years passed, farmers drilled deeper into the earth, creating a shift in the state’s water table. The drilling of more wells has resulted in a sinking phenomenon that’s significantly changed the geology of the region.
In 2014, the Sustainable Groundwater Management Act was put in place to slow the environmental degradation in California. This regulation is planning to put a stop to the overuse of groundwater by the year 2040. With 19 years to spare, farmers have a tough decision to make when it comes to growing their food. Many will have to decide between growing certain crops over others. Or racing against their competitors to pay top dollar for access to the most plentiful aquifers. Either way, this could prove to significantly change how we produce and consume staple crops all over the country.
The Passing of Proposition 19
Additionally, California’s new business practices aren’t just affecting the agriculture industry, but the housing market as well. As environmental changes affect towns and farmers, the state has made a change in how they assess property values.
Proposition 19 (or Prop 19) is a piece of legislation that was passed in 2020 and officially went into effect in February of 2021. In short, this law makes it easier for California homeowners to relocate. If you’re a homeowner who’s 55 or older, you can sell your home and buy another with a better tax rate. Although this is great for a certain demographic, there are pros and cons to consider.
Pros of Prop 19
The two main advantages of Prop 19 is:
- It allows qualified homeowners to keep their low property tax when they relocate.
- It helps wildfire victims who are forced to buy new homes have lower property taxes.
Cons of Prop 19
The two main disadvantages of Prop 19 include:
- Property taxes will increase for people who inherited their home if the property value exceeds a tax value of more than $1 million.
- This could cause a mass exodus of low-income and even some middle-class families who bought their homes at a less expensive price than it’s worth now.
It’s a given that whenever new legislation is introduced, there has to be a winner and a loser, but one thing remains constant: the shift of California’s environment under the stress of natural disasters and an increased population will continue to force the state to rapidly adopt different business practices.
We Can Help You
The uncertainty of the future is never easy to grapple with, especially if you’re a California resident. However, as one of the most progressive states in the U.S., we have to keep an open mind and remind ourselves that California is simply doing what it’s always done, which is accepting and adapting to what we cannot change.
We at Nichols Financial Strategies can help you understand how new business legislature affects your situation. We want to help you adapt to a better future despite the uncertainty and factors outside your control. If you have questions, reach out to us at 559-440-6999 or by email at matt@nfstrategies.com.
About Matt
T. Matthew Nichols is founder, CEO, and wealth advisor at Nichols Financial Strategies with more than 20 years of experience in the financial industry. He spends his days serving business owners and families, specializing in helping those in the agriculture industry proactively prepare for the unique challenges they face in a rapidly changing economy. Matt is an Accredited Investment Fiduciary® (AIF®) and holds his FINRA Series 7 and 63 securities registrations with LPL Financial and his California State Life & Health Insurance license. He’s also pursuing his ChFC designation and is dedicated to continuing his education and staying abreast of the latest financial trends and strategies. Matt’s mission is to help his clients transfer wealth from one generation to the next and work toward achieving their goals so they can spend more time on what they love most. Matt was born and raised in the California Central Valley and resides in Fresno with his wife, Christy, and their two daughters, Holly and Jillian. He enjoys golf, traveling, skiing, and spending quality time with his family. To learn more about Matt, connect with him on LinkedIn.
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