FIRST, They Want to Go After Business Property Taxes

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Here’s the word and the sentence that stood out to me in
Steve Lopez’s Los Angeles Times weekend
column
on Proposition 13: It would
make the most sense to go after commercial property taxes first, Villaraigosa said, since business has gotten the biggest
break.

Underline and circle the word FIRST in that statement by the
Los Angeles mayor. Seems to me the intent is to change the property tax system
for all property owners. They just want to do it in pieces and begin with
business property.

And, don’t fall for the idea that business got a bigger
break than homeowners under Proposition 13. A study from
a couple of years ago
by former state Legislative Analyst Bill Hamm and
economist Jose Alberro stated:

We found
that
the assessed-value-to-market -value ratio for
owner-occupied residential property in the 2006-2007
roll was 53 percent, while
the ratio for commercial and industrial property was nearly 60 percent.
In other words, commercial
and industrial property is being assessed for tax purposes at values
that are closer to market
values than is the case for owner-occupied residential property.

Clearly,
California’s current property tax system has not shifted the

property tax burden from
businesses
to homeowners. (Bold emphasis in the
original study.)

The numbers undoubtedly have not changed much since
the recession hit commercial property as hard as residential property.

The Lopez column was prompted by Mayor Villaraigosa
declaring war on Proposition 13. Villaraigosa told Lopez he plans to be out
front on the issue of changing the law for business property even if the
governor is not. "If he (the governor) needs a guy like me to start
it, then I’m going to do it, " Villaraigosa told Lopez.

Villaraigosa said he is going to rail against deteriorating
public services and offered Lopez an example of faltering public support in
education: "5.6% of Californians’ personal income went to funding public
schools and today that number is 3.5%."

But those numbers don’t tell us much. Was the shrinking
percentage due to less tax revenue or opening up many new programs that claimed
a share of personal income, including one important item that even Lopez
recognized in his piece, out-of-control public employee pensions.

One year ago, a San Francisco Grand Jury reported
that increasing retiree pension and health benefits would equal about one-third
of the City’s current General Fund, something the Grand Jury called
unsustainable.

I wonder if a Grand Jury would find similar circumstances in
Los Angeles?

When items like retiree benefits and other new programs
developed over the 30-plus years since Proposition 13 passed eat up more tax
revenue, older programs are bound to get smaller percentages of the whole.

The question that Lopez never answers in his frequent
articles calling for changes to Proposition 13 is how will increased property
taxes affect the economy and businesses? 
Notice he writes about corporate property but not once mentions small
business.

Small business is the engine of the economy and can least
afford property tax increases. Many small businesses are in the service economy
and are thinly capitalized. They are, in large part, women and minority owned.
Businesses renting office space are most often under a lease agreement that
forces any tax increase on to the renter.

What will a business management team have to consider if new
property taxes are levied on business? 

Let’s take a specific example of a Los Angeles business —
The Los Angeles Times. If an amendment to Proposition 13 raises business
property taxes and the Times’ property is reassessed, management will have to
determine how to handle the larger tax bill. Will they raise the price of
newspapers? Not hire that hotshot young reporter just out of journalism school?
Close a bureau somewhere? Or, just maybe management would decide the paper
couldn’t afford so many columnists?

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