To Split Roll or Not to Split Roll Tax – That is the Question

Phil Ting, San Francisco Assessor/Recorder, recently visited with BOMA San Francisco’s Political Action Committee Board to discuss his support for creating a split roll property tax in California. Ting said Proposition 13 needed to be amended to allow commercial property to be taxed at a higher rate, or higher rate of increase, or through more frequent re-assessments than residential property. Ting said the state’s continuing annual budget crisis demanded major reforms, one of which should be the creation of a split roll tax. Ting estimated such action could generate an additional $6-7 billion in annual revenues to local and state governments.

Of course, the Building Owners and Managers Association and its members at this meeting adamantly disagreed with Ting, and stated any split roll tax model would be inherently unfair and discriminatory. Our members also stated the state (and San Francisco!) first needs to reduce its overall costs before taxes are raised by any means.

It’s hard to understand how California can have a $100 billion annual state budget, spend nearly half of that on education and STILL end up with lower per pupil spending than most other states. Californians are also spending far too much money and receiving too little return on their investment if our overwhelmingly poor performing student results are to be believed. Clearly, radical change is needed, but we’re not convinced that means more money or higher property taxes are the solution.

California’s state government needs to be smarter in the way in which it uses the revenues that are collected. Californians need to be provided with greater accountability from every agency and school system that’s funded by their tax dollars.

The fact is, other states are vigorously going after our CA businesses in an effort to get them to re-locate. The Silicon Valley Business Times recently ran a story that illustrated why companies are leaving California for places like North Carolina, Kentucky, and Texas. In fact, 19 Silicon Valley companies have already established satellite offices with more than 100 employees each in Austin, Texas, alone. Their reasons: the cost of doing business in California is simply too high and they considered the state to be unfriendly to business. Consequently, those firms won’t be expanding their shops in the Golden State.

As owners/managers of CA commercial real estate, BOMA members are very concerned about job loss, and want our political leaders to do everything they can to combat it. Adding the uncertainty of a split roll tax on business would not be helpful in trying to convince firms thinking of relocating to not do so. Adding any new taxes onto the private sector when it is shrinking to support an over-extended public sector is simply pushing the state further toward the abyss of bankruptcy.

It may be that the voters of this state will have to re-write California’s constitution to revise the way we conduct and fund government and pass laws. However, BOMA cannot support the raising of any taxes, including property taxes, without demanding reductions and reforms in government spending first. I believe we have reached a “tipping point”, accelerated by the economic recession, wherein our state’s private sector can no longer afford the local and state public sectors that have been built up over the past several generations. It we don’t “right size” state and local governments, the private sector will pick up and leave, and then what kind of property taxes can our local and state governments expect from empty buildings!