The year was 1978. It was a monumental year for real estate in California. The voters overwhelmingly approved Proposition 13, which reduced property taxes by 57 percent. California real estate boomed.
Before Proposition 13, property taxes were out of control. People were losing their homes and businesses because they could not pay their property taxes. Proposition 13 gave commercial and residential property owners the benefit of a reasonable maximum property tax and the certainty of knowing what their tax would be in future years. Proposition 13 stabilized the business climate in California.
With a supermajority of labor-friendly Democrats in Sacramento, 2014 could be just as important for real estate but for all the wrong reasons. Proposition 13 protections for commercial properties could be eliminated. State legislators, led by new Assemblyman Phil Ting from San Francisco, have an appetite for what’s called a “split roll” tax, a tax that would eliminate commercial real estate from the safeguards of Proposition 13.
According to a recent Pepperdine University School of Public Policy study, “the cost to the California economy of this property tax increase would total $71.8 billion dollars of lost output and 396,345 lost jobs over the first five years of a split roll property tax regime. These losses would be even greater in succeeding years.”
Many county assessors have voiced a concern that if the split roll tax is passed it would mean:
• Commercial property owners would pass the increased costs on to tenants.
• Apartment owners also would raise rents on their tenants.
Manufacturers in California also would be hit hard. Additionally, homeowner exempt properties could also fall into the commercial rolls, forcing reassessment on second homes and vacation properties.
Now is the time for action while there is still a window to organize and stand strong against a split roll tax. The Commercial Real Estate Alliance of San Diego is hosting an event beginning at 8 a.m., Sept. 4 featuring Jon Coupal, president of the Howard Jarvis Taxpayers Association, to help educate the commercial real estate and business community about the proposed tax. Coupal is Sacramento’s leading advocate against the split roll tax. He will be joined by Michelle Steel, vice chairwoman of the California Board of Equalization and the highest-ranking elected official who opposes the split roll tax.
Tickets are available at www.CRASDProp13.Eventbrite.com or 858-715-8005.
Taylor is president of the Commercial Real Estate Alliance of San Diego.