Originally written by Christopher J. Destino, SIOR, of the Lee & Associates-Orange office. Full Article here.

With local and national elections right around the corner, those facing real estate decisions need to consider whether or not to wait until after the votes are in. Here in our home state of California, there is a decision voters need to make that has already gained a lot of attention this year, proposition 15, also known as the “Split Roll” initiative. Prop 15 aims to separate how commercial and residential properties are assessed in regard to their annual property tax bill.

For decades, California property owners have enjoyed protections against dramatic property tax increases as Proposition 13 currently limits how much counties can increase the property tax bill to roughly 2% per year over the ‘base year,’ or year in which the property was originally purchased. However, if Proposition 15 passes, starting in 2022/23 counties will be able to reassess properties at current market values and on a more frequent basis. While there are some limitations to this reassessment, it will impact most businesses.

The allure of Proposition 15 is it promises to raise funds for local counties, schools, and communities. But at what cost? Tenants of industrial/commercial properties, in most cases, will absorb property tax increases, therefore causing many to consider whether they want to continue doing business in California or passing increased expenses down to consumers.

California continues to be one of the most highly taxed states. Proposition 15 is just another tax increase that will create more challenges for companies doing business here. While you may or may not agree that local schools need more funding, please remember that only 40% of this tax increase actually goes to schools; 60% goes to the “general fund.” We are encouraging you to research the impact of Proposition 15 and determine if it is really a good long-term benefit to California. Perhaps it is time for Californians to say “no” to another tax increase and to exert pressure on our leaders to make more efforts to use the money we already give them more efficiently and effectively.

Please contact Christopher J. Destino, SIOR, or one of our other local Lee & Associates agent for more information on this matter.