Proposed Reform of State's Proposition 13 Heads for November Ballot
Article By: Lou Hirsch, CoStar News
April 23, 2020
The Los Angeles chapter of a prominent nationwide real estate group is opposing a split-roll property tax measure headed for California's November ballot, saying higher taxes from the proposal would compound financial problems facing commercial property owners during the coronavirus pandemic.
"Passing split roll into law during an economic turmoil is a terrible idea," said a statement this week on the L.A. chapter website for the Washington, D.C.-based Building Owners and Managers Association, known more commonly as BOMA International. "Currently, many businesses are already suffering from decreasing levels of economic productivity as a result of the novel coronavirus outbreak."
The group is among the first to publicly address how it expects the proposed measure could affect real estate owners in a new economic climate created by the pandemic, which has closed businesses and sent unemployment skyrocketing.
Schools and Communities First, an umbrella group that includes teachers, labor unions and community groups, gathered sufficient signatures to place before voters a proposal to reform the state's existing landmark property tax law known as Proposition 13. The measure would split the property tax roll between residential and commercial properties and would require that property-related taxes on office, industrial, retail and other types of commercial properties be regularly reassessed based on their current market value. Properties are currently taxed based on the purchase price paid by their current owner.
Residential properties would remain assessed based on purchase price, with tax increases capped at 2% annually, under terms of the original Proposition 13 approved by California voters in 1978.
Advocates contend the change is needed to generate an estimated $12 billion annually for needed projects in communities and schools, which have been unable to benefit proportionally from the rapid rise of real estate values in California over the past four decades due to limitations on property tax increases.
The split-roll measure still must be formally certified by state officials for the Nov. 3 ballot, and campaigns could prove to be high-profile and contentious given the involvement of groups including BOMA International. The proposal also garnered opposition from groups including the California Business Properties Association, California Chamber of Commerce and California Business Roundtable, along with some individual developers and real estate brokers statewide.
BOMA notes that several local governments in California and elsewhere have issued moratoriums on commercial evictions during the coronavirus pandemic, leading many tenants to avoid leasing obligations and resulting in lost revenue for property owners. This makes it tougher for building owners to pay their mortgages and meet other property-related financial obligations.
"Certainly adding billions of more taxes is simply not feasible when property owners are already struggling to stay afloat," said the advocacy and research organization that represents more than 16,000 members who own and operate office, industrial and other types of commercial property in the United States and Canada. "Therefore, it is crucial that our industry voice their concerns to Sacramento."
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