prop 15 (split roll)

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Submitted by phaster on October 2, 2020 - 3:06pm

in other news,...

Every tax system has its inequities BUT a predictable property-tax system is superior to a volatile “market value” system. This is because it lessens bureaucracy and the associated perverse incentives like “fiscalization of land use” which was pointed out by bay area Democrats in a 2017 panel discussion.

Actually in 2014, San Francisco–based state Senator Tom Ammiano, a Democrat, proposed legislation to redefine “ownership change” for businesses that makes more sense than Prop 15 (which is on the November 2020 ballot).

Basically the legislative fix tackles “abuses” AND would have generated increased tax revenues

The issue is simply fixed by defining an “ownership change” as having occurred whenever at least 90 percent of a property shifts hands, regardless of whether any one owner ends up with more than a 50 percent stake in a property.

On the surface, the Ammiano bill seemed likely to pass: The GOP wasn’t averse to the reform, the California Chamber of Commerce came out in favor, and the Howard Jarvis Taxpayers Association made statements indicating the group could live with it. Yet the bill died—and not just, or even primarily, because of corporate opposition.

Paradoxically, many progressive politicians opposed it, as did organized labor and a large number of community groups who believed the bill was far too narrow in scope and worried it would take the wind out of a bigger and broader reform movement that was finally coming into its own—one that wouldn’t just change the definition of ownership, but would also require regular reassessments of the value of commercial real estate, both the buildings and the land on which they sit.

With covid-19 there is a very real problem that passage of Prop 15 is a high cost in lost jobs and leakage from businesses relocating out of state.

www.TinyURL.com/SplitRoll

Submitted by gzz on October 3, 2020 - 11:35pm.

I’d like to see a shift away from our excessively high income tax to property taxes that people other than myself pay, and which won’t effect the residential RE market.

So leaning Yes on 15, but would prefer a tax shift over a tax increase.

Submitted by phaster on October 4, 2020 - 8:57am.

passage of prop 15 will do nothing to lessen income tax

www.TinyURL.com/SplitRoll

I know the whole PDF I've posted on GoogleDocs is lots of material to read but one of the key small details mentioned (by an elected bay area democratic) is,...

Quote:

But Wiener added that it could be difficult to fix Prop 13 for another reason: if commercial real estate is taxed at higher rates than residential properties, it might exacerbate the fiscalization of land use that has disincentivized cities from building new housing. This could worsen the state's housing crisis, said Wiener.

www.eastbayexpress.com/SevenDays/archive...

there is the expression the devil in in the details, and the reason I highlighted the PDF is because odds are if this passes more jobs will be lost than gained AND small businesses will be the ones to suffer the most (and truth be told the big underlying unaddressed problem is off balance sheet pension costs)

Submitted by gzz on October 5, 2020 - 10:31am.

California has the highest income tax and nearly the lowest commercial property tax in the USA. A lot of the commercial property owners are out of state, or are local but are owned by out of state investors.

Taxing them at 1% of actual value, the same as new residential purchases, is fair. And if the state eventually needs more money, this is the best possible source.

Henry George proved more than 100 years ago that property taxes are the most efficient. You tax cars, people make less cars or switch to cheaper ones. You tax income, people work less or hide income. But taking commercial property from before 1975 and taxing it on its actual value does not produce a similar avoidance deadweight loss, not unless you think someone who abandon or destroy commercial property.

Submitted by phaster on October 6, 2020 - 10:26pm.

ya think it's bad now, just wait!!!

Quote:

California Legislators Propose 0.4% Wealth Tax, Plus 16.8% Income Tax Rate

https://www.forbes.com/sites/robertwood/...

included in the PDF is an article in the voice of SD that states

Quote:

...recent numbers seem encouraging, though we don’t know what happened in 2012 or 2013. But over the more than 20 years the database tracks, San Diego actually lost more businesses than it gained.

www.TinyURL.com/SplitRoll

also if thumb through the PDF you'll also see an article about a business that use to be based here in (buck knives) which is a case study why there is more outflow than inflow of businesses in SD

did a web search "prop 15 small business" and found others urging caution because this prop is going to hurt small business and farming operations,...

https://napavalleyregister.com/opinion/l...

Quote:

...Agriculture land is exempt, too, although not necessarily property improvements — such as orchards, vineyards, barns and irrigation systems. The California Farm Bureau Federation is opposed.

...Rob Lapsley, president of the California Business Roundtable, argues that with the COVID-19 pandemic and subsequent deep recession, “now is absolutely the worst time to enact the largest property tax increase in California history.”

“Small businesses are struggling to survive, trying to get reestablished,” Lapsley says. “If this thing passes, many people will not even try to reopen. Just forget it.”

https://www.latimes.com/california/story...

political conservatives don't believe man made global warming is happening because of their worldview (yet science tells us that mankind is indeed changing the climate)

www.ThereIsNoPlanet-B.org

point being political liberals because of their world view are more likely to likely to favor taxes because their priority is leveling the playing field

the harsh truth is passage of prop 15 is going to make things worse off for everyone one especially those on the lower end of the economic ladder

Quote:

Why is Mark Zuckerberg spending millions to back harmful Proposition 15?

By ALICE HUFFMAN and TECOY PORTER
PUBLISHED: October 5, 2020 at 8:52 a.m.

...In publicly highlighting the campaign contribution, the Facebook founder made a conscious effort to point out – erroneously – that Prop. 15 was “designed to generate and stabilize funding for vulnerable communities…and would put funding directly into the hands of counties across California who are on the frontlines of the pandemic response.”

...Prop. 15 won’t solve any immediate funding crisis and will make the long-term crisis worse for many rural counties. Prop 15 will not be fully implemented until 2025, according to the nonpartisan Legislative Analyst’s Office (LAO). The measure does not provide immediate relief for government budgets affected by COVID-19. Additionally, the LAO clearly stated, “Not all governments would be guaranteed new money. Some in rural areas may end up losing money.” So, to state or imply that communities hurting from COVID-19 now will benefit if Prop. 15 passes in November is not only misleading, but it’s also just plain wrong.

Prop. 15 would have a significant and negative impact on the “vulnerable communities” that the Chan Zuckerberg Initiative claims it wants to protect. Minority businesses are already struggling. They were prior to the COVID-19 pandemic and are even more so since it shut down California’s economy.

Data analyzed by the Stanford Institute for Economic Policy Research found a 41 percent drop in the number of Black business owners between February and April 2020. Latino-owned businesses sunk by 32 percent and Asian-owned businesses decreased by 26 percent.

Despite these staggering numbers, Prop. 15 would raise rents on the surviving businesses during an unprecedented economic crisis.

...One study even concludes 120,000 private-sector jobs will be lost – and that was before the pandemic.

Alice Huffman is president of the California NAACP. Tecoy Porter is the president of the California State National Action Network.

https://www.dailynews.com/2020/10/05/why...

Submitted by gzz on October 7, 2020 - 9:56am.

Prop 15 will generally not lead to rent increases on small businesses.

Rents are determined by supply and demand for rentable space, NOT BY COSTS.

The only way Prop 15 leads to rent increases is landlords do not behave with economic rationality.

Who are these irrational commercial landlords?

Now there might be some soft n mild landlords like myself who will use a property tax increase as an excuse to raise below-market rent. And then you have those "NNN" or whatever leases that pass on property taxes to tenants. But tenants will demand lower base rent in such circumstances.

Ultimately these are all red herrings and insignificant in the long-run. Rents are determined by supply and demand. Prop 15 ending false and ultralow valuations on old commercial properties taxes don't change either supply or demand.

The real question is "what is the incidence and dead-wight loss" of Prop 15. The answer is that it is the tax that hit non-residents and the rentier ultra-rich the most. For example, the publicly traded REITS that own a ton of California's best commercial property are more than 90% owned by out of state people. They will pay the tax increase.

I view the only good argument against it that it should be directly paired with a cut of another tax to prevent the government from wasting the new revenue.

Submitted by sdrealtor on October 7, 2020 - 12:47pm.

Great viewpoint gzz. Really love and apreciate it. I may steal some for use elsewhere

Submitted by phaster on October 8, 2020 - 1:01pm.

gzz wrote:
Prop 15 will generally not lead to rent increases on small businesses.

Rents are determined by supply and demand for rentable space, NOT BY COSTS.

ever consider the really BIG picture of climate change where the jobs of the future are going to in the green sector????

(for example tesla which has a factory in Fremont CA)

https://www.youtube.com/watch?v=nEKsX4GNCjU

truth be told prop 15 is a bleeding heart liberal political hack job that was written so that masses are distracted by inequities in property tax payments (AND that increased funds from higher property taxes will go to improve schools)

FWIW owners of apt buildings seem to be classified as "residential" (listen to a podcast by the santa clara tax assessor)

Quote:

At 06:43

...this one is a convoluted terrible initiative and the problem with it is for political reasons they are trying to exclude different types of properties

for example (and mostly for political reasons) they exempt apartments which are income properties

https://soundcloud.com/tbjthoughtleaders...

anyway as you said,... Prop 15 will generally not lead to rent increases on small businesses,... huh?!

just would like to point out, seems on the upper end of commercial/industrial of the real estate spectrum prop 15 will raise the property tax on tesla which has a factory in Fremont CA which in turn might force the company to look else where (just like high business costs forced buck knives out of el cajon years ago)

on the lower end of the commercial/industrial of the real estate spectrum prop 15 will raise the property tax on smaller mom and pop ag businesses (which is why the California Farm Bureau Federation is opposed)

given this forum now let's consider the head pigg himself "rich" @ pacific capital

just a naïve guess but the building in which his business is located at:

4747 Viewridge Ave
Suite 107
San Diego, CA 92123

most likely will be reassessed at a higher "market value" property tax if prop 15 passes and the higher costs will be passed along to "rich"

OTOH the social justice warrior Prop 15 property tax increase most likely will cause some small business owners to move,... so decreased demand might make landlords stuck w/ commercial office space willing to eat the reassessed at a higher "market value" property tax OR decreased demand in office space might actually lower the investor demand for commercial office space (which will drive down prices investors are willing to pay)

in the past I thought LIBTARD was an unnecessary pejorative but looking at the details of prop 15, seems an apt adjective for this voter proposition

Submitted by evolusd on October 9, 2020 - 8:07am.

gzz wrote:
Prop 15 will generally not lead to rent increases on small businesses.

Rents are determined by supply and demand for rentable space, NOT BY COSTS.

The only way Prop 15 leads to rent increases is landlords do not behave with economic rationality.

Who are these irrational commercial landlords?

Now there might be some soft n mild landlords like myself who will use a property tax increase as an excuse to raise below-market rent. And then you have those "NNN" or whatever leases that pass on property taxes to tenants. But tenants will demand lower base rent in such circumstances.

Ultimately these are all red herrings and insignificant in the long-run. Rents are determined by supply and demand. Prop 15 ending false and ultralow valuations on old commercial properties taxes don't change either supply or demand.

The real question is "what is the incidence and dead-wight loss" of Prop 15. The answer is that it is the tax that hit non-residents and the rentier ultra-rich the most. For example, the publicly traded REITS that own a ton of California's best commercial property are more than 90% owned by out of state people. They will pay the tax increase.

I view the only good argument against it that it should be directly paired with a cut of another tax to prevent the government from wasting the new revenue.

Have to disagree here, depending on property type. I've financed a ton of commercial properties around California over the years and will tell you that if an owner's annual property tax expense increases materially, they're going to find any way they can to share that cost with someone else, most logical person being the tenant. NNN leases are very common in commercial property and it will be on the tenant, who is responsible for paying the property tax, to negotiate with the landlord to change the lease. Obviously this will be subject to supply & demand forces. Retail & office where demand is currently soft the tenants are in a better negotiating position, but for apartments and industrial properties where demand is high and vacancy rates are low, you better believe tenant rent or NNN costs are going up.

Submitted by phaster on October 19, 2020 - 5:42pm.

evolusd wrote:
I've financed a ton of commercial properties around California over the years and will tell you that if an owner's annual property tax expense increases materially, they're going to find any way they can to share that cost with someone else, most logical person being the tenant. NNN leases are very common in commercial property and it will be on the tenant, who is responsible for paying the property tax, to negotiate with the landlord to change the lease. Obviously this will be subject to supply & demand forces. Retail & office where demand is currently soft the tenants are in a better negotiating position, but for apartments and industrial properties where demand is high and vacancy rates are low, you better believe tenant rent or NNN costs are going up.

sadly have a really bad feeling prop 15 will pass and that this decision will put this states economy in a tailspin

I base this opinion given main street voter resentment sentiment ALONG w/ the inability of most to think two or three steps ahead of various knock on effects

sectors that IMHO will most likely be hit hard again (as if covid was not bad enough) by the "split roll" will be misc food services (small corner markets and various restaurants), small businesses w/ NNN leases (in strip malls and industrial parks), small farms, etc.

I've read,...

Quote:

San Diego is home to over 7000 restaurants, 500 hotels and there are roughly 186,000 employed in the industry. The average cost of living for a Single Parent with One Child is $55,000. The average Industry pay for a full time employee is $28,849.

https://big-table.com/san-diego/

AND FWIW in a TV news segment that reports on a restaurant business, the SD county tax assessor mentions half of the commercial/industrial properties in SD will be affected by higher property taxes because of "split roll" (which in turn will have effects on employment rates)

https://www.nbcsandiego.com/news/local/p...

NOTE supporters say,...

Quote:

Study finds Prop 15 won’t be damaging to small businesses

https://www.mpamag.com/commercial/study-...

where the "study" itself (by beacon economics) highlighted the point(s),...

Quote:

A random sample of about 22,000 commercial property transactions in California’s major population centers from 2018 to 2020 found that two-thirds sold for less than $3 million. The median price was $1.6 million.

OPPONENTS ARGUE THAT THE LEGISLATION WOULD:

• Be the largest property tax increase in the state’s history: The legislation would lead to a substantial tax increase ($12.5 billion per annum) on commercial and industrial entities. This would hurt small businesses, the agricultural industry, residential homeowners, and consumers.

• Raise the cost of living: The tax increases would cause businesses to increase the cost of groceries, health-care, energy, and other products and services. Some residents would be priced out of their communities, and the legislation would have detrimental impacts on low-income communities.

• Destroy jobs and small businesses: The legislation does not prevent increased taxes from being passed on to small businesses.

• Increase taxes on farms: The legislation would increase property taxes on the farming sector (barns, dairies, food processing plants, and cultivation sites), which would raise food prices.

• Enable the legislature to increase homeowners’ property taxes: Business owners who operate from their homes would pay higher taxes.

The merits of these claims notwithstanding, both sides agree that Prop. 15 would increase property tax revenue.

https://beaconecon.com/blog/prop_15_anal...

I'm not an economist but IMHO a better series of questions to ask would be, how many commercial/industrial properties are there in CA AND after that number is determined how many of the properties will be subject to split/roll "market" property tax (seems only after this basis info is known, can a cost/benefit analysis be done)

FWIW the reason I think this is the better approach to look at cost/benefit analysis of prop 15 is because this method accounts for long term successful businesses w/ high paying and skilled jobs (like Robinson helicopter up in Torrance)

https://robinsonheli.com/company-informa...

this home grown company makes big expensive aerospace products here in CA and ships products around the world

then there is the mandate for California to eliminate ICE by 2035,...

https://electrek.co/2020/09/23/californi...

w/ a "split roll" another home grown company TESLA that builds products that will be in much greater demand in the future, is going also going to face additional financial head winds producing products in state

[sarcasm on]

brilliant

[sarcasm off]

bottom line the beacon economics study to support prop 15 is worthless because it does not take into account successful profitable businesses that don't sell (in the short two year sample size of RE sales of commercial/industrial properties pointed out in the beacon economic "study")

Submitted by gzz on October 19, 2020 - 6:16pm.

"they're going to find any way they can to share that cost with someone else, most logical person being the tenant."

I think my point is getting missed here. For your argument to be true, it requires the landlord to be charging less than what the market can bear.

That can certainly happen in the short term. But long term, rents are determined by supply and demand. Prop 15 does not change either one of those.

As for NNN, a tenant's willingness to pay more rent should not be affected by what you call it. "Hi, I am raising your rent by $100" and "Hi, I am raising your NNN by $100" makes no difference to the tenant.

Basic economics says Prop 15 is entirely on landlords.

The only way that isn't true is when you relax the assumptions of basic economics, which are generally true, especially in the long run, but not ironclad like the laws of physics.

The main assumptions that are not true in the short run are (1) no transaction costs/perfect information (2) economic rationality.

Ultimately, a small and rapidly decreasing bit of the tax increase will be passed on, but in general it won't, because in general the laws of economics do apply to the commercial rental market.

Another point nobody opposing Prop 15 has addressed: if the tax increase is just going to be "passed on" to tenants, why are the huge commercial landlords like the Irving Company spending tens of millions of dollars opposing it?

Likewise, imagine two identical buildings next door to each other. One is taxed at 1% because it just changed owners. The other is taxed at 0.05% of its actual market value because it was purchased in 1970. Does this actually effect what the IDENTICAL units will rent out for?

Of course not. The market sets the rent, not costs. "Hey, you MUST pay more for my unit, because NNN!!!" doesn't mean the first owner can charge more. If his NNN is higher, he'll have to lower his base rent.

Submitted by gzz on October 19, 2020 - 6:27pm.

I can say, with 100% certainty, that Prop 15 will CUT my property taxes by at least $160 per year.

One of its provisions:

"The business tangible personal property tax on equipment and fixtures for small businesses is eliminated."

This an extremely stupid tax where every year I get a letter from the county asking me to value my business's office equipment, computers, etc, and then pay 1% of it.

It reality, my business's various well used PCs and old desks and chairs are not worth $16,000. But I am not fighting over the "suggested" assessment the County sent me, so I just pay the $160 every year.

The reason why this tax is so stupid is the large amount of paperwork involved over petty amounts. It is a bit like making a 16 year old with a part time minimum wage job fill out a full 1040 plus the AMT worksheet.

Submitted by phaster on October 21, 2020 - 1:16pm.

gzz wrote:
I can say, with 100% certainty, that Prop 15 will CUT my property taxes by at least $160 per year.

One of its provisions:

"The business tangible personal property tax on equipment and fixtures for small businesses is eliminated."

This an extremely stupid tax where every year I get a letter from the county asking me to value my business's office equipment, computers, etc, and then pay 1% of it.

It reality, my business's various well used PCs and old desks and chairs are not worth $16,000. But I am not fighting over the "suggested" assessment the County sent me, so I just pay the $160 every year.

The reason why this tax is so stupid is the large amount of paperwork involved over petty amounts. It is a bit like making a 16 year old with a part time minimum wage job fill out a full 1040 plus the AMT worksheet.

if you think its bad now this will be considered the good times if this clusterfuck passes

FYI the association of CA assessors mentioned they are against this mess because they estimate it will take a billion dollars to implement and they say it won't work

AND that does not take into account the non-linear response of jobs and capital leaving the state because of uncertainty

since a picture is worth a thousand words

FYI the two URLs listed in the graphic image are redirects to PDFs I've posted on GoogleDocs (that contain all the full text studies like the association of CA assessors, etc.)

www.TinyURL.com/CalifSmallBusiness
www.TinyURL.com/SplitRoll

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