Retailers, Watch Out for These Government Regs

There was tremendous positivity at ICSC Western States in Los Angeles this week about the state of the retail market, but there are proposed regulations and legislation that could impact retail owners. At the conference, Rex Heim, president and CEO at the California Business Properties Association, talked about the government regulations impacting retail owners and operators, naming split roll property tax as one of the biggest threats to retail owners.

Earlier this year, non-profit Housing California collected and submitted enough signatures to rollback Proposition 13, current property tax legislation passed in 1973 and limited property tax increases to 1% to 2% per year on all property types. Currently, commercial properties have the same protections as single-family residences, and the current proposed rollback of Proposition 13 would tax commercial and industrial properties at fair market value. The proposal has been approved for the 2020 ballot.

“Split tax roll has always been a threat, but it is a bigger threat than it has ever been,” Heim said in his address at ICSC Western States. He said that one of the biggest concerns is that the legislation will allow the government to reassess the value of the property every three years, making future property taxes volatile. This of course would affect both owners as well as triple net lease tenants. Housing California, however, says that the proposed property tax plan for commercial properties would $6.5 billion to $10.5 billion in additional tax revenue per year.