California CRE’s ‘No. 1 Target’ On The Ballot May Be A Close Call
California’s commercial real estate industry is preparing for the home stretch of an election campaign that could have major consequences for the state's property owners and businesses.
Thus far, it is shaping up to be a close call, at least for one of the industry's two big items.
Proposition 15, which would raise taxes on commercial and industrial property by taxing based on current market value, was favored by 51% of voters in the latest poll by the Public Policy Institute of California, conducted between early and mid-September and including 1,700 California residents.
That marks a slight decrease from the 53% PPIC recorded in early April. CRE lobbyists said they are watching the change closely.
“If you’re trying to get to 50% plus one, 35 or 36 days from the election, that’s the wrong direction to be headed,” said California Business Properties Association President and CEO Rex Hime, a No on Prop 15 campaign executive committee member.
Meanwhile, Prop 21, which is backed by Housing Is A Human Right and would allow cities to pass rent control laws on units at least 15 years old, appears to have a tougher path to passage. A UC Berkeley Institute of Governmental Studies survey conducted last month shows 37% likely voter support, 37% opposition and 26% indecision.
Other interests across the state are supportive of Prop. 15, which has been led by Schools and Communities First. California Gov. Gavin Newsom announced his support in September, following the mayors of San Francisco, Oakland and LA, as well as groups including the California Nurses Association.
Supporters tout the up to $12B per year in taxes the measure would raise for schools and local governments as long overdue, saying that influx into community coffers during a recession is most likely to get voter support.
“With those margins, it’s pretty clear that we were able to get out early and define this initiative, and the opposition really has not gotten in front of that like we have,” Schools and Communities First Communications Director Alex Stack said.
Specifically, Prop 15, colloquially known as split roll, would repeal part of Prop 13, a 1978 ballot measure that has capped reassessment increases at 2% per year since voters passed it in 1978. With the new measure, commercial and industrial properties valued at over $3M would be reassessed to current market value, starting with the larger properties in 2022 at the earliest, and a projected full implementation by 2026.
Supporters pitch the hike in revenues as mostly falling on the state’s biggest property owners, with 90% of the tax affecting the top 10% most valuable properties. Opponents say those costs will be passed on to small businesses and consumers, worsening the state’s recession.
“This is still a tax increase on small business, and I know that we want to say it's not that and that it's all big corporations and big business, but a lot of them lease to small-business owners and they have triple-net leases,” California Retailers Association President and CEO Rachel Michelin said.
Prop 15 supporters say economic studies (using standard economic theory) project the costs to be shouldered by landlords.
What voters end up deciding for the measure, which Hime has told Bisnow is CRE’s “No. 1 target,” is still up in the air. The UC Berkeley survey, which was taken around the same time as PPIC’s, found only 49% of almost 6,000 likely voters saying they intend to vote yes on Prop. 15. The authors of that study say it has a sampling error of plus or minus 2%, while PPIC’s margin of error is plus or minus 3.5%.
“We’re not letting up,” Hime said. “This is a really important measure, and election days often hold surprises.”