REAL ESTATE IN THE NAPA VALLEY
Proposition
I
15
t will be an epic battle and could create a slippery slope for all real property owners resulting from eventually paying higher taxes if this proposition passes. Proposition 15 is not going to fix our broken tax system. Ad valorem, “according to value” All real estate in California is assessed, for property tax purposes, by the county, and in most cases, at its purchase price when it is sold. Property tax includes the ad valorem tax, which is one percent of the assessed value BURT plus additional levies and spePOLSON cial districts on top of the one percent that brings the total property tax to much more. Proposition 13, put into law in 1978, capped the ad valorem tax to an annual increase of the cost-of-living index or 2%, whichever is less and applies to commercial and residential real property. Proposition 15 splits the tax roll into two types: commercial and residential real estate. There are exclusions and minimums of value to the commercial real estate until the split occurs. If the proposition passes, we will find a reassessment of particular commercial real estate every three years, bringing the assessed OCTOBER 2020
IS NOT THE ANSWER
value in line to market value. This will have drastic effects on many commercial property owners, and several property owners in Napa County will see a dramatic increase. A 3,900% increase For example, a commercial property in Downtown Napa is assessed at $250,000 because it has been owned by the same owner for decades. They have an annual ad valorem tax of $2,500 (by the way, the additional levies and special districts are another $16,500 a year). If Proposition 15 passes, the new ad valorem tax will be based on the market value, in my opinion, of $10 million. This amounts to a new annual property tax of $100,000 plus the additional levies and special districts, increasing with the new value. This is at least a 3,900% increase! This property owner keeps the rent charged their tenants on the market’s lowend to help new and struggling businesses. I would imagine they would need to reconsider their strategy. The argument of “fair share” The arguments in favor of this proposition claim the “big billion-dollar companies” need to pay their fair share of taxes. In my opinion, this is not the answer but is instead highlighting one aspect of the tax system and creating an unbalance
disadvantage. Many of these “big billion-dollar companies” are either companies you may be invested in or are operators of businesses you frequent. These big companies are also landlords of businesses you patronize, but in any case, companies impacted through the increase in operating expenses if Proposition 15 passes will pass the increase on to the individual investor and consumer. Funding our schools is essential, and it begins far earlier in the process than with another influx of capital. But, this topic would be for another article. Please vote no on Proposition 15. Burt M. Polson is the CEO of ACRESinfo. com, a commercial real estate brokerage company and CEO of StoneMarkerInvestments.com, a private equity real estate fund. Call him at (707) 254-8000 or email burt@ acresinfo.com and burt@stonemarker investments.com. Burt M. Polson is the CEO of ACRESinfo. com, a commercial real estate brokerage company and CEO of StoneMarkerInvestments.com, a private equity real estate fund. Call him at (707) 254-8000 or email burt@acresinfo.com and burt@ stonemarker investments.com. DISTINCTIVE PROPERTIES | 29
