SACRAMENTO-California's voters said overwhelmingly Tuesday that buildings should not be reassessed for tax purposes after they are retrofitted for earthquake safety, marking a victory for property owners and the commercial real estate industry. Nearly 85% of the state's voters supported a measure called Proposition 13, which provides that construction to seismically retrofit buildings will not trigger reassessment of property tax value. With 100% of the state's precincts reporting, the measure won more than 3.2 million votes, compared with just under 589,000 opposing it.

Ballot materials describing the measure said that its fiscal impact would be a "minor reduction in local property tax revenues related to the assessment of earthquake upgrades," but the proposition was of more than passing interest to building owners―both private and public―in a state where requirements to retrofit buildings for earthquake safety can sometimes impose onerous costs on owners who are ill-equipped to pay. Business and real estate organizations urged their members to support Proposition 13, taking official positions like that of the Southern California chapter of NAIOP, which advised its members to support the measure.

The passage of measure 13 was "a piece of good news," according to Jack Kyser, founding economist of the Kyser Center for Economic Research at the Los Angeles County Economic Development Corp. Kyser says that with Tuesday's primary setting the stage for a governor's race between Republican Meg Whitman and Democrat and former California Gov. Jerry Brown, business organizations in Southern California are putting together "agendas that they want to discuss with whoever is the next governor, to try to make the state more business-friendly and make it easier to operate here."

Kyser explains that the business community is also concerned with the state's huge budget problem and with other matters, such as a proposed "split-roll" tax that would split commercial properties from residential in certain aspects of the tax code. In essence, the tax would require a reassessment of commercial properties and a corresponding increase in taxes if there is a significant shift in ownership.

Another area of concern is AB 32, the so-called greenhouse gas bill, which could potentially be very costly for certain tenants of commercial buildings. There is talk of an initiative on the November ballot that would suspend AB 32 until the state's unemployment rate declines, Kyser notes.

Although Proposition 13 was the only measure on Tuesday's ballot with such a direct impact on the commercial real estate industry, California's budget problems have already created a connection between government and the real estate industry never before seen and possibly never before anticipated: The State of California went to market earlier this year with an offering to sell 11 office properties totaling 7.3 million square feet on a sale-leaseback basis to raise funds to keep the state government going. The California Department of General Services, which in December named CB Richard Ellis to market the properties, is expected to choose a buyer or buyers soon for the portfolio, which the state hopes will generate in excess of $2 billion in one-time revenue.

In addition to keeping an eye on the race for governor and for other state and national offices, California's commercial real estate industry will also be monitoring state and national laws affecting the industry that are likely to come up in legislative sessions, both at the state level and nationally. NAIOP local chapters in Southern California, for example, have been closely following the carried interest debate in Congress. A statement by NAIOP president Thomas J. Bisacquino, for example, said in reaction to the House passage of the bill: "NAIOP and members of the commercial real estate development industry are deeply troubled by Congress' actions to further damage the recovery of the nation's economy by significantly increasing the taxes paid by real estate partnerships. The passage of this legislation was done without the full consideration of the resulting harmful impact to one of the largest contributors to the nation's GDP."