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Efforts To Raise Commercial Property Taxes Gaining

November 17, 2009

They have fantastic names, “Protect Homeowners and Close Corporate Tax Loopholes Act” and the “Education and Taxpayer Fairness Act”, but the¬†consequences¬†could be pretty dramatic.

The first would require reappraisals every three years on commercial property. The second would raise property taxes on commercial property by 55%.

If any of these get the required number of signatures, they could show up on the ballot and be enacted as soon as January 1, 2011. For years many landlords have taken Prop 13 for granted and have been happy to dole out caps on operating expense and real estate taxes. Some have been more wise and excluded property taxes from the equation, but with the massive budget and fiscal problems the state is facing, we might see more landlords sit up and take notice. Tenants should still continue to push for caps on taxes and operating expenses where possible, but I suspect fewer and fewer landlords are going to concede on this issue, particularly if the 70,000 signatures required are gathered.

The full filings are embedded below:

[via Globe St.]

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Categories: Commercial Finance and Lending | Commercial Real Estate Investing
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Joshua November 18, 2009

taking a view from outside my industry bias i can understand why the slit tax roll "could" be a good thing. if it works properly it could generate huge revenues while bringing commercial property tax rates in line with the national averages. commercial property has an income stream so it would be "more easy" to absorb the added expense.

however, with assessments and local taxes added in most places would see a tax rate over 1.75%. which would push our rate onto the wrong side of the national average. on the other hand, these increases will be immediately passed on in CAM charges and then into consumer prices. that is not what we need right now. this would trigger massive re-valuations with decreased NOIs and increased CAP rates, so it would probably end up cancelling out a lot of the increase. not to mention the added pressure on already tight deals and what that means for the community banks throughout the state.

we have a severely business unfriendly label in california and this will reinforce that for small business owners. the plans are silly at best. one with a small business owner exemption (can i just create more llcs and keep qualifying?), constant reassessments (those work to the negative too, guys), and play to populous rage. these bills just seem so uneducated. and probably the biggest issue i have is that they funds would be diverted immediately to k-12 schools, universities and public services. because business use more public services than citizens. ive never bought into that line of thinking. if public service is so expensive why not just send people and invoice? and the schools issue?! our UC system is screwed with backwards thinking and will cannibalize itself soon enough. we throw so much money at education with no consequence. start demanding that the children learn and pay the schools based on that. money should be for programs to enhance learning. we just throw good money after bad with the mindset that eventually enough cash will solve the problem. i stopped voting for school bonds as soon as i was able to vote. how about some accountability in the system. kthanks.

Froggy November 18, 2009

This would absolutely crush small retailers with NNN leases who are contractually obligated to pick up their pro rata share of a center's RET. Nothing would exacerbate the CRE collapse in CA like this idea.

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