Proposal Would Force California Counties to Pay Cash Rebates to Commercial Landlords

A push to provide tax relief to commercial landlords has quietly advanced in California’s capitol. For a scheme with such potentially devastating consequences for schools and local governments, it’s garnered surprisingly little attention.

Come May 29, the state Board of Equalization (BOE) will vote on a plan that would give cash rebates to commercial landlords that claim the pandemic has had a similar value-diminishing effect as fires, earthquakes and other disasters that cause physical damage.

The BOE oversees county assessors, who’d have to cut those checks triggered by reassessments. The proposal’s backers, the California Alliance of Taxpayer Advocates (which goes by CATA), represents the attorneys whose job it is to appeal assessors’ property valuations.

Santa Clara County Assessor Larry Stone vehemently opposes the idea.

The veteran taxman told the BOE as much in a strongly worded May 12 missive, which called the industry-led plan a “direct violation” of the state constitution.

“I cannot underscore enough, the impact these recommendations will have on schools and local government,” Stone wrote. “If assessors adhere to these directives, the BOE would contribute to California’s exploding budget deficit. For every dollar of property tax revenue the BOE diverts away from normal channels, the state, schools, counties and cities will have to cut an equal amount in order to balance local budgets.”

“The property tax system wasn’t designed to give [this type of] relief,” Stone’s second-in-command David Ginsborg said. “There are other programs for that.”

Programs such as the $2.3 trillion federal relief package for the private sector and local governments. Or, Stone noted, the Federal Reserve’s $600 billion in loans for medium and small businesses hurt by the pandemic.

If CATA prevails, local governments would have to hand over scarce dollars to some of the richest corporations on the planet—many of which reside in Silicon Valley.

Under Prop. 13—a controversial law borne out of the late-1970s tax revolt—property can only be reassessed if it’s sold and can only rise by a nominal margin year to year. The statute also lets landlords request a tax cut if they can prove their property’s been damaged enough to lower the value.

As San Jose Inside has reported before, those assessment disputes put the county’s three  appeals boards up against multinational corporate giants—Apple, Google, Facebook and other companies with virtually limitless resources to wage such fights.

With more people working from home and less office space used, rents are bound to fall in the coming year. And come Jan. 1, companies impacted by the trend and that disagree with the assessor’s valuation can file an appeal for temporary property tax reductions going forward. At the height of the Great Recession, Stone’s office took the initiative of lowering assessed values for 136,000 property owners.

What CATA apparently wants, however, is the kind of immediate relief granted in cases of physical property damage. Stone—himself a commercial landlord—calls the lobbying group’s proposition a “radical change” that would endanger the public in a time of crisis.

“The constitution is not a malleable piece of clay that can be molded at will to fit whatever is most politically expedient in the moment to curry favor with a handful of business owners at the expense of all 40 million citizens in the state of California,” Stone wrote. “The legislature can no more define ‘property physically damaged’ then it can define Proposition 13’s annual 2 percent limit on assessed value to mean 10 percent should the state’s budget face a crisis. These changes require a change to the constitution.”

Airlines tried this gambit—to no avail—after 9/11.

In 2002, when Stone served as president of the California Assessors Association, airlines tried to get the BOE to grant them tax relief as a result of economic harm suffered in the wake of the 2001 terrorist attacks. The Sept. 11 strikes grounded flights for 11 days and scared people from air travel for many months after.

“The airlines tried to make the same argument then,” Stone said. “Nobody was flying at the time, it took the airlines a number of years to fully recover and they tried to get us to lower their taxes based on that economic harm.”

Despite warnings that such a policy ran afoul of the state constitution, the BOE hewed to industry demands, prompting years of litigation that ultimately overturned the decision.

“We can go through this again,” Stone said, “but we already know that it’s impossible to do. We already know what the outcome will be.”

The airlines ultimately got significant relief on Jan. 1, 2002—along with other property owners whose values declined below purchase price—in response to the market.

The proposal going before the BOE next week may seem well-intentioned, the assessor said, but said it’s completely political.

“Elected officials are tripping over themselves, saying, ‘See us, we’re protecting the victims from harm,’” Stone said in a phone call this afternoon. “But how about the schools, how about local government, how about the first responders at the county hospital who are risking their lives every day to fight this pandemic? This would take money from them—that’s the revenue that this bill would be giving away.”

Not to mention that it would blow an even bigger hole in the state budget, which already faces a $50 billion deficit in the year ahead.

Not that it would even get that far, Ginsborg added, because the BOE can’t just change those kinds of rules as it goes along.

“It’s sort of like you get nine innings, but you want to add an inning because you don’t like the outcome,” he said. “These agents, the ones who file assessment appeals, they want to increase the chaos in the property tax system so they get more business.”

CATA has yet to respond to a request for comment.

Jennifer Wadsworth is the news editor for San Jose Inside and Metro Silicon Valley. Email tips to [email protected]. Follow her on Twitter at @jennwadsworth.

26 Comments

  1. hahaha

    now not paying doesnt seem so cool does it?

    Pay your rent, pay your taxes, everything else is just broken

  2. > it’s garnered surprisingly little attention.

    Lot’s of things “garner surprisingly little attention” in a one-party kleptocracy.

    It’s easier to steal stuff when no one’s looking.

    • So the solution to make things better is to reduce their budget?!? How does that make any sense?

      BTW, I doubt you are paying “high taxes”. Prop 13 has been in effect since the 1970s.

      • I concur with the concern about commercial property’s inclusion in Prop 13. Property gets reassessed when sold. That happens much less frequently than residential property. And there are ways to finagle like trusts or corporate ownership changes that are impractical for most residential property owners.

        Prop 13 was passed after homeowners were forced out due to the relentless tax increases. But there wasn’t enough clout to get it passed without including commercial owners and their financial backing.

        Regardless of your ignorance, my property tax is over ~4X that of relatives in less expensive states with larger homes, larger lots, nicer neighborhoods, and much shorter ownership than mine. California residents (particularly retirees) leave because of our high costs.

        Businesses get breaks despite what you may believe. They range from grants, low costs loans, tax holidays, etc. Some are to stimulate the economy like SJ’s pre-COVID permit fee reduction for commercial construction. Ditto for granny units to encourage more affordable housing.

        Some for disaster relief for events like earthquakes and fires as we see in CA. Of course one can argue that businesses should have insurance to cover such impacts. But the same applies to homeowners. We live in earthquake country, yet a low percentage carry expensive quake insurance. Even fewer with flood insurance for events like Coyote creek’s flooding and the bungling that failed to alert residents.

        COVID is an interesting insurance question and don’t know the answer. A typical policy excludes war, civil unrest, and ‘Acts of God’. My hunch is that income loss due to SIP emergency declarations isn’t covered by commercial policies.

        If not careful, then commercial property in CA risks resembling the apocalyptic experience in Detroit , Newark, St. Louis, and portions of virtually every other large city. Owners just walk away.

        How can revenue reduction like the proposal be a Good Thing ™? History points the way.

        Citizens have few options to control relentless growth. Elected officials pander by promoting more spending. Very few like Proxmire that promote sensible spending. Other than choosing candidates (often with little differentiation), our only other options are ballot initiatives and bond issues. Effectively, we’re limited to not raising taxes or raising them. And “oversight” requirements a joke.

        Almost never are there proposals to economize. VTA could not meet the mandated 15% farebox collection (taxpayers pick up 85% of the cost). They moved the goal posts to 10% – taxpayers now pick up 90% of the declining ridership’s fare train and bus costs.

        Economic shocks like the 2008 recession, nuking redevelopment agencies, etc. forced government to decide what’s essential. We’re overdue for another.

        When facing a $285M deficit, do we *really* need a separate healthcare facility for blacks (the Oakland-based Roots clinic at Hedding & The Alameda)? Do we *really* need the enormous signs atop 70 W. Hedding? Do we *really* need a double-digit number of employees in an Office of LGBT Affairs, the massive increase in SCC CEO’s staff, or an Office of Women’s Policy? Valet parking for SCC employees? VTA ridership might increase otherwise.

        Many more examples of scope creep. Prop 13 had the effect of reigning in unchecked government growth. The CalTax proposal will help to curtail government excesses.

        • Sorry for my being ignorant of your personal property tax compared to your out-of-state relatives. But then again, how would I even know?

          Anyway, you say your taxes are 4x the amount of theirs. I counter that with an argument that we probably have more than 4x the amount of opportunity here. More than 4x the natural beauty. More than 4x a lot of things. You need to determine what’s important to you. If you value low taxes, period, then there’s no one keeping you here in the beautiful Golden State. I’m sure one of your relatives would love to have you closer to them.

          • “BTW, I doubt you are paying “high taxes” ” – didn’t inhibit ignorant speculation. Spending a bit more time getting publicly available facts helps too. Plus understanding economics.beyond those of Alexandria Ocasio-Cortez.

          • The amount you spend on your property taxes are publicly available. Can I get your parcel number so I can spend that time getting your publicly available facts? Didn’t think so.

            BTW, “high” is a subjective term. What’s high cost for you might not be for Bubbles or Warren Buffet.

        • After 40 years prop 13 has exacerbated and perpetuated many distortions in residential real-estate. Namely that some people who bought homes later than long standing residents can easily be paying several times the property taxes of their neighbors. How on earth is that fair? Eventually everyone dies (terms out) of their home, but an especially egregious allowance is that cost basis of a parents home can be passed onto inheriting children who chose to keep the home. I know of 70s HS classmates who have $2 million homes and are paying a couple thousand annually in property taxes… If you taxpayer bought your valley home over 20 years ago, I’m doubtful that your property tax burden is all that onerous. Try NJ for example, my cousin lives in a $895K home and pays almost $25K annually in tax.

          • Yes, tax policy is rife with distortions. And comparing residential property tax isn’t a good barometer due to variations.

            Cost of living is a better one. There are several cost-of-living indices. Here’s one: https://worldpopulationreview.com/states/cost-of-living-index-by-state/ HI ranks as the most expensive just under 2X the US average, DC #2, CA ranks #3 and 52% higher than the US average.

            Of course living in remote Alpine County is a fraction of Santa Clara County’s cost. Markleeville’s cost pales in comparison to Los Altos Hills. Would be more insightful had the study included a standard deviation so we’d understand the mean’s validity to represent a population.

          • The bottom line, XBR, is that fair or not fair, proposition 13 has kept money out of the hands of the crooks and the crooked institutions that we, for some reason, continue to honor as our “public servants”.
            If we can engineer a way- any way- to reduce the hog at the trough levy, then we oughtta do it. Period. Even if it’s inequitable.
            I say “Whatever it takes”. Any means possible to avoid taxes, to reduce taxes, to shrink the government, to choke these bastards out. Our government, not your wealthy neighbor, is our enemy. And if you can’t see that then you’ve been drinking too much Koolaid.

          • I don’t get Angry Galt’s comments, who says “Our government… is our enemy.” Aren’t the US Armed Forces part of the government? Aren’t the local city cops and sheriff departments part of the government? Is this a message you are trying to send them? Saying those kinds of words are certainly protected, but acting on them might cross the line into treason. It’s not a trivial charge.

            These ridiculous blanket statements put your shallowness of thinking on full display. Stay classy, Galt.

      • Teacher, Is it too much to expect one with that nom de plume to offer a counter argument versus an ad hominem response?

        We need to prepare for a rough 24 months. SCC has outlooked (at least internally) a 3% across-the-board budget cut and hiring freeze to address our looming $285M deficit. And that means tough choices.

        Do we want to aid people like those featured in yesterday’s article of RIFed service industry workers – or maintain headcount of SCC employees offering no tangible value fulfilling no obvious need?

        The piece featured a mile-long line of RIFed service workers getting food because they had no other choice.

        A former Marriott server faced with having his phone service terminated or buying food was interviewed. $3 in his pocket and empty gas tank. Deeply ashamed at accepting charity. The video was wrenching to watch.

        Why spend $300K to fund the Roots clinic when there are abundant medical alternatives? Or shower vagrants with benefits when there’s nothing that County authorities can show for the money. Salvation Army (yes I volunteer there) maintains outcome data, but not SCC funded programs the last time I met with agency director Ky Le.

        Do we return to the ‘separate, but equal’ segregation doctrine? If so, then the Root clinic’s location is better suited to Catholics at nearby Bellarmine or Jews at nearby Temple Emanu-El.

        AFAIK, none of the Supervisors or highly paid staff have offered salary cuts to help those in a desperate plight. Instead, Cortese and Chavez issue showboating emails and ‘we care’ missives for a problem they could correct, but don’t.

        The BOS could fire Sara Cody just as the Connecticut governor fired their public health officer. We could reopen the economy to the extent that Newsom allows instead of Cody’s stringent dictates. Meanwhile we have many small business owners doing what they can for their employees – unlike senior staffers and elected elites.

        If that’s sociopathic, then I welcome the label.

        • Upvoting you Taxpayer, as being one myself that will demand accountability from the Board of Supervisors for their unwillingness to hold CEO Jeffrey Smith accountable for not weighing the known fiscal impacts that resulted in the absurdly stringent guidelines that vastly exceed the State standards for reopening. $258M deficit is solely owned by Jeffrey Smith, as he had control to allow a less conservative approach to reopening. The BOS needs to fire this at-will employee and at-will Health Officer now.

          At some point, a follow story is needed about the number of (non-essential) businesses and restaurants that closed as a result of this ultra conservative approach to reopening.

      • Fact-based criticism is not sociopathic. The only thing worse than the CA Public Sector Teacher Union’s performance in general, is how you have failed Blacks and Latinos. Except maybe blaming your utter failure on how much parents talk to their kids when they are two, have you no shame?

  3. Commercial landowners and landlords are already enjoying decades of the windfall of Prop 13. Of course they want more. With this move, they want to make it seem like their property was damaged as though a fire ripped through it. If you’re in business to make a profit, you’re also accepting some fair amount of risk. The pandemic is a risk that came to fruition, so I’m sure these commercial rent seekers have prepared for it and have plenty of reserves to keep them afloat and see them through these tough times.

    But let’s not forget that the organization “CalTax”, which is spearheading this idea, is a bunch of lawyers who want to drum up business by keeping things chaotic.

    • > so I’m sure these commercial rent seekers have prepared for it and have plenty of reserves to keep them afloat and see them through these tough times.

      Where did you get this idea?

      Answer: you just made it up.

      Just more primitive Bernie Sanders binary thinking.

      “My tribe good. Other tribe bad.”

      Bernie Sanders wouldn’t know how to feed himself if he weren’t surrounded by capitalists producing his food.

      • Sorry, Bubbles, that was meant to be satirical. I’m sure that the rent seekers didn’t prepare. They put all their excess revenue straight into their pocket. Or into the pockets of the lawyers they pay to buy the politicians. Guess I gotta be more clear for the more dense.

        • > They put all their excess revenue straight into their pocket.

          Yes, So? What’s the problem? Did you expect a cut?

          By the way, SCCrezzy: did we ever establish whether you were “essential” or “non-essential”?

          I don’t recall you ever posting anything that would lead anyone to believe that you were “essential”.

          Is there any reason why society would need you?

        • Yes SCC. Since you can’t seem to debate the points without first knowing the identities of those whose politics you disapprove of, why not go ahead and tell the world YOUR real name and address, your social security number, phone number, and let’s see your tax returns for the past five years.
          Jesus H. Christ, what a jackass.

  4. CA is over taxed. have less than spend less. They should not spend on this
    ‘California Is 1st State To Offer Health Benefits To Adult Undocumented Immigrants’

    don’t do this to save money: Bullet train went from peak California innovation to the project from hell

  5. > Aren’t the US Armed Forces part of the government?

    The US Armed Forces are NOT the government. That would be a military dictatorship.

    The US Armed Forces are a resource assembled by the US government to achieve government purposes.

    A pencil used by an army private is a resource acquired by the US government to achieve government purposes.

    The army private’s pencil is not the government.

    Does any of this make sense to you?

    You don’t have to obey a government pencil.

  6. ” resorting to personal attacks”…humm is the correct spelling h-y-p-o-c-r-i-t-e?

    SCC RESIDENT, I do value your comments. They’ve become input to a social distance party game in my Toastmasters group: count and identify logical fallacies. We use the list of 24 shown here https://thethinkingshop.org/collections/products/products/logical-fallacies-wall-poster. Free PDF available.

    We collect arguments (technically yours are usually quarrels) from a variety of sources. Your comments drive top scores. Some have proven useful in the Propaganda board game – free online at https://propagandagame.org. The Techniques dropdown lends a fun classification refinement.

    Your comments are particularly helpful to those new to critical thinking. Shoots and Ladders type difficulty rather than checkers – certainly not chess, but still useful. The absence of cleverness, witty quips, and double-entres is particularly helpful for non-native English speakers or those with disadvantaged backgrounds.

    Often we fail to recognize our beneficial contributions. Your fallacious reasoning merits acclaim and celebration.

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