.Giant Rebates for Commercial Landlords?

Proposal before Board of Equalization could devastate local government finances

A push to provide tax relief to commercial landlords has been quietly advancing in the California Capitol. But for a scheme with such potentially devastating consequences on 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 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 is vehemently opposed to the idea. In a strongly worded May 12 missive, the veteran taxman 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.”

If CATA prevails, local governments will 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 it 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.

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.

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