How Will Prop 15 Affect You?

October 9, 2020 • Source: The Storefront • Posted in: Market News

Let’s talk Prop 15.

Have you had a chance to read through the measure? This Prop does not repeal prop 13, it is designed to tax commercial properties of $3MM and over. Doesn’t sound bad yet… right? Now think about this: All these small businesses (just use downtown Livermore as an example) either own (very few do) or LEASE the building/space in which they conduct business. Guess what provision lies in just about EVERY lease? A provision that the tenant pays the property taxes… It is a SMALL BUSINESS TAX. It is a medium business tax, its a BUSINESS TAX. This cost will be passed down to the tenant, who ultimately will have to pass that cost on. So, is Prop 15 going to hit the pocket books mega landlord’s and mega companies? Nope! This bill will disproportionately effect almost all small and medium sized businesses. From restaurants to contractors, to salons and even your independent doctors and dentists.

The reality is $3MM represents the cost of a small commercial building. I would estimate 65% of the buildings in downtown are at or above that threshold and throughout a single town 85% or more are over this threshold (think about those large shopping centers and small industrial parks).What about the family who owns properties that have been passed through generationally? Those families have a low tax basis and thus are more likely to pass on those lower costs to start-up businesses and create a place for businesses that do not generate huge amounts of revenue. Now those expenses have gone up 5x’s. Who pays that cost? I will put my money on the tenant.

Don’t confuse Prop 15 with being a tax on the wealthy property owners. IT IS A BUSINESS TAX. Not just a small business tax, a general business tax that will raise the cost of occupancy and cost of doing business. Add to that, our restaurants and many businesses have been forced to close for months, or restricted operation which has lead to less revenue. Landlord’s haven’t received rents in months and that could go on until March 2021… Let’s go ahead and add MORE COST and more burden to doing business. Does that sound reasonable or logical to you? Who is going to audit the Fair Market Value of these buildings every 3 years? What is the cost to the State to complete these audits? And does the varying costs create instability in cost of ownership and thus rental prices? Would you start a business not knowing if your rent is going to be $5,000 a month or $7,000 a month, without any say at any point in your lease?

My final thought: If you push families who own a couple properties out, or private company who has has more than a handful of properties, by increasing their tax burden from $10k a year to $50k plus per year, per property (or more), what is the end result? Can a family or small ownership group pay the increased taxes, especially those who own multi-family properties (think small apartment complex) who have seen little to no rent for 6 plus months? Are those properties then forced to sell? And who buys those properties? Those with capital… which lends towards LARGE companies with LARGE amounts of capital who will front the cost and pass that cost down. Is Prop 15 leveling the playing field for small business and small ownership groups, or opening a door for more large scale property owners to take over? Ultimately, businesses and consumer will pay the cost of Prop 15. Not large wealthy corporations. It is just another tax on YOU and small and medium sized businesses.

If you want to support your local businesses, I suggest you vote NO ON PROP 15. Don’t be shy about it, spread the word. Support California business owners. If you would like more info on Prop 15, please contact me. I have a lot of literature from a multitude of sources and I am more than happy to share:

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