Measure to raise tax on commercial buildings undecided

A California ballot measure that would remove property tax protections for commercial buildings was too close to call Tuesday night.

Proposition 15 was narrowly trailing, 49.1% to 50.9%, with more than 10 million ballots counted and an undetermined number yet to be tallied. The measure required a simple majority to pass.

It would require the reassessment of commercial and industrial buildings at least once every three years for property tax calculations, rather than when buildings are sold or after new construction.

Prop. 15 would amount to one of the biggest tax increases in state history, generating an estimated $ 6.5 billion to $ 11.5 billion annually for local governments and schools, according to the state’s nonpartisan Legislative Analyst’s Office.

It would partially undo 1978’ s landmark Prop. 13, which caps annual property tax increases at 2%. Commercial properties would lose that protection starting in 2022. Residential buildings would not be affected.

Supporters argued that the measure would create a fairer propertytax system that required major landlords to pay taxes that reflected a more accurate value of their buildings.

“Prop. 15 closes property tax loopholes exploited by the richest corporations so that we can invest here in California while also giving small businesses a tax break,” Tyler Law, an adviser for the Prop. 15 campaign, has said.

Businesses with fewer than 50 employees would no longer be taxed on equipment in their buildings.

Major unions, including the California Teachers Association, supported the measure. Gov. Gavin Newsom, Democratic presidential nominee Joe Biden and his running mate, California Sen. Kamala Harris, also backed it. President Trump did not take a position, and his campaign did not respond to a request for comment.

Opponents, primarily business and real estate groups, said the measure would batter an economy already weakened by the coronavirus pandemic.

“There is literally not a sector of California’s economy that will not be impacted by this, and all consumers are going to pay for it,” Michael Bustamante, a spokesman for the No on 15 campaign, previously told The Chronicle.

Real estate experts said rents would rise for office and retail tenants through property tax passthroughs.

“This burden’s mostly going to fall on small businesses,” said Chuck Reed, a real estate attorney at Hopkins & Carley and former mayor of San Jose. “Landlords don’t want to have these surprises, so they want the tenants to have the surprises.

“It’ll be another reason not to do business in California.”

“Our triple net leases allow us to pass through, among other costs, substantially all realestate and rent-related taxes to our tenants in the form of additional rent tenant recovery,” Peter Moglia, co-CEO of major landlord Alexandria Real Estate Equities, said on an earnings call last week.

However, a study by Beacon Economics, commissioned by the Silicon Valley Community Foundation, said the measure was unlikely to hurt small businesses, because most rents are determined by local market factors.

The measure also would exempt owners with less than $ 3 million in total California property.