California Proposition 15: Increases funding for public schools, community colleges and local government services by changing the tax assessment of commercial and industrial property.
Also known as the split roll initiative, Prop. 15 would have commercial and industrial properties valued at over $3M reassessed to current market value, generating at least $10.3B in tax revenue, according to a University of Southern California study.
To do so, the measure, which is supported by the Schools and Communities First campaign, would repeal part of Prop. 13, which has capped reassessment increases at 2% per year since voters passed it in 1978.
People on both sides of the issue have already come out in full force. California Business Properties Association President and CEO Rex Hime, one of four No on Prop 15 campaign executive committee members, said he hasn’t seen anything quite like it.
“I’ve been running CBPA since 1984, and I can tell you this is the most organized and committed I have seen this industry,” he said. “It’s our No. 1 target. We’re making sure that this thing gets defeated, and we believe it will be defeated.”
Opponents like Hime and the CBPA say the effects of Prop. 15 would go well beyond the CRE industry, impacting tenants and consumers.
“That tax increase is going to be almost entirely paid by the tenants leasing spaces in a building,” said Liz Wilgenburg, an LA-based partner at Allen Matkins.
Advocates say reassessments for many properties across the state are long overdue and that funding shortfalls for public schools make the need even direr.
“California has been falling behind on how we fund schools and local governments for a long time,” Schools and Communities First Communications Director Alex Stack said.
If it passes, reassessments would be phased in starting in the 2022-2023 fiscal year.
My Take On California Prop 15:
In the case that this bill does pass, I think they were would be panic selling by many commercial/industrial owners all over California whose value in property exceeds the 3 million range.
Imagine paying 1,500 a year in property tax to 10,000.00 a year. That will be a very tough pill for mom and pop landlords to swallow.
Landlords ultimately will increase rents on tenants and I don’t think tenants can sustain to run their businesses here in California anymore.
Unless tenants pass the charges to vendors or businesses, and ultimately that increase will be passed on to consumers, Tenants will have no choice, but to pass on these extra expenses to consumers.
The lack of a transitional period or a moderately scheduled rise in property tax is the problem here. I don’t think landlords should have their properties reassessed to pay more tax in the first place.