The single biggest political issue facing California commercial real estate is the effort to overturn Proposition 13.
The Building Owners and Managers Association of California and the chapter members, including BOMA San Diego, are part of a statewide coalition of jobs creators fighting efforts -- both political and legislative -- to change Proposition 13. This coalition, representing businesses large and small, believes a split-roll system would devastate the commercial real estate industry and drive even more jobs out of California.
The discussion is centered on overturning Proposition 13 -- the “People’s Initiative to Limit Property Taxes” passed by 65 percent of voters in 1978 -- and instituting a split-roll property tax system wherein commercial properties are taxed at a higher level than residential. Both sides of the argument were on display at a recent breakfast sponsored by BOMA San Diego and the San Diego County Taxpayers Association.
Lenny Goldberg, executive director of the public-union funded California Tax Reform Association, argued that increasing commercial property taxes would benefit California’s economy by depressing land values and spurring economic investment.
BOMA San Diego strongly disagrees with the entire premise that a higher commercial tax rate has any type of economic benefit.
“California is already seen as one of the worst states in the country for business. Defending Proposition 13, preserving commercial real estate land values and protecting private sector jobs is our absolute top priority at the state level,” said Kristin Howell, BOMA San Diego board president.
Ultimately, overturning Proposition 13 requires a voter-approved constitutional amendment. The California Teachers Association has threatened a petition drive to force a ballot initiative if the Legislature refuses to place something before voters. However, in addition to the initiative process, some key bills up for vote in the state Legislature also attempt to address what the advocates of split-roll are trying to achieve. Most of these proposals are controversial, and most are strenuously opposed as “job killers” by the coalition of groups aligned in support of Proposition 13.
However, one area of agreement between both sides lies within making improvements to the existing law while preserving its main intent. That agreement led to amendments to Assembly Bill 2372 (Assemblyman Tom Ammiano, D-San Francisco), which represents a potentially historic pact between the business community and the main group seeking to rework the “change of ownership” rules under Proposition 13.
Over the years, some complicated property purchase deals have appeared as attempts to skirt Proposition 13’s change of ownership rules, regardless of whether that appearance was reality. AB 2372 is designed to address this concern.
A property is reassessed when it is sold and/or changes ownership. However, if no single purchaser acquires more than a 50 percent interest, reassessment may not necessarily be triggered. AB 2372 would clarify that as long as 90 percent of a property is sold, a reassessment would be triggered, regardless of whether any individual buys more than 50 percent of the property. Safeguards are being negotiated now to clarify that the change of ownership definition does not apply to normal turnover of stock for publicly traded companies.
As an organization, BOMA has staunchly defended Proposition 13 as a critical element of maintaining investment in job creation. However, part of an effective defense of the law recognizes that some of the original implementation language can be updated to ensure the goals of Proposition 13 are being met, and a large coalition of business community partners believes the proposed amendments to the Ammiano measure help accomplish that goal.
While AB 2372 has brokered agreement, those sentiments quickly dissipate regarding another piece of Proposition 13 related legislation.
SB 1021 (Sen. Lois Wolk, D-Davis) would allow local school districts to implement parcel tax increases at different rates for residential and commercial properties.
“It’s a giant step toward a split-roll tax system,” said Rex Hime, president of the California Business Properties Association, which includes BOMA California and is leading the fight against the bill on behalf of BOMA and several other commercial real estate associations. SB 1021 has already passed the Senate and is headed to the Assembly where BOMA San Diego, BOMA CAL and the CBPA will advocate strongly for its defeat.
Protecting Proposition 13, advocating for strategic and smart legislation such as AB 2372 and defeating bills aimed at creating a de facto a split-roll system such as SB 1021 will remain BOMA’s focus moving forward. This discussion is pivotal to the future of BOMA’s members and the state’s economy. To get involved or obtain more information, contact BOMA’s legislative advocate, Craig Benedetto, at email@example.com.