The January Report
January 9, 2020
Happy New Year! Welcome New Board Members
The members of the Chapter’s Legislative Affairs and Political Action Committees welcome the new and returning Board Members. The Legislative Affairs Committee meets monthly in Costa Mesa for a working lunch. We do want to recommend that Board members participate, or that you have someone from your talented staff participate on the committee. To be added to the committee contact list for meeting information, please contact Vickie Talley (firstname.lastname@example.org or 949-380-3300). It is clear 2020 could be the most critical, impactful year in decades for the future of commercial real estate. Not only do we have the November, 2020 Split Roll initiative on the ballot, but local governments seem to be viewing commercial real estate as their piggy bank to tap whenever they need money, primarily to pay for unfunded pension liabilities and healthcare benefits, and the regulatory agencies are pushing hard to get into land use decisions. We will need all of your great insights to be successful. Also, throughout the year, please remember to check the Chapter’s website home page where Legislative Alerts are posted. Thank you in advance for responding on ACTION items requesting that you make calls and send letters to legislators on important issues and legislation. Your personal contact does make a difference. It is vital to have a vocal and united voice supporting commercial real estate.
Washington DC Leadership Retreat, February 3-5 • Meetings with Members of Congress
The annual NAIOP Leadership and Legislative Retreat is fast approaching. This is an excellent time to gain additional insights into what commercial real estate is facing and to trade ideas to make your businesses even more successful. We will also meet with members of Congress, and those appointments are currently being arranged. These visits to our Federal Representatives are very important and provide critical exchanges of information on issues and legislation impacting commercial real estate. We do contact all the Federal Representatives who represent Los Angeles and Orange Counties, yet, if Board Members attending the Retreat have special requests for meetings, please contact Peter Herzog (email@example.com or 949-380-3300). Appointments are scheduled the morning of Wednesday, February 5, the last day of the Retreat. If you have not registered for the Retreat, please contact Executive Director Cynthia Fusco for assistance.
Attention Attendees of the Leadership Retreat! Please do not book your return flight until late afternoon on Wednesday, February 5, 2020 so that you are able to participate in meetings with members of Congress, which are held between 9:30 a.m. and 1:00 p.m. Thank you! Your participation is important.
Split Roll Tax on November, 2020 Ballot – Number One Threat to Commercial Real Estate
As we enter 2020 it is very important to keep the Split Roll Initiative front and center. November will be here sooner than we would like, and in fact the mail in ballots go out the first week of October. So, the voting starts in just 9 months. This is truly a defining, watershed moment for commercial real estate. This is a direct assault on the industry that will fiscally dramatically hit commercial properties, and have significant destabilizing impacts. First, all of your properties will be reassessed to current market values, and then will be reassessed every three years even if there is no sale of the property. So, you will not know what your future property tax burden will be anymore. This will be the largest tax increase in California history, which is even more outrageous in light of the State budget being the largest ever in the State’s history with extensive reserves, and it will impact all businesses, property owners and those who rent space. It will increase the cost of essentially every product people buy, and we are already in the highest cost state in the nation with the highest poverty levels. The devastating impact of Split Roll make it imperative that everyone who makes up our entire industry and its partners must come out strongly opposed to the initiative and spend their time and money to defeat it. This means that every NAIOP Member must take the following ACTIONS:
- Pledge to financially support the campaign to defeat Split Roll. There are two ways to contribute – directly to the campaign or to the NAIOP SoCal Issues PAC. A statewide campaign costs about one-hundred million dollars to defeat and every contribution is absolutely critical.
- Reach out to educate all of your employees and business associates of the devastating impact of Split Roll and provide action items. Contribution Forms and Action Items are posted on the NAIOP SoCal website – www.naiopsocal.org – on the home page – Legislative Alerts!
Legislative Committee Additional Areas of Focus for 2020
Following is but a small overview of what is in store for 2020. Your Legislative Affairs Committee and the two PACs look forward to aggressively protecting the interests of the NAIOP SoCal members. As always, please contact Vickie Talley or Peter Herzog whenever you see an issue arising or have any questions.
- Taxes and Fees – We fully expect local governments to continue to push for new and higher parcel taxes, as well as linkage fees, sales taxes, gross receipts taxes, local transportation development fees and on and on. In fact, in Los Angeles County there already is a new parcel tax on the ballot for March of 2020. What is so problematic about this continued bombardment of tax and fee increases is the cumulative effect it has on businesses. Many businesses are leaving the state or are focusing all of their new development in other states, draining economic stimulus here.
- Land Use Issues – The unfortunate destruction caused by the recent wildfires have really energized state officials to intervene in local land use decisions, and local officials are being pressed hard to avoid any greenfield development. Additionally, the City of Los Angeles is pursuing a so-called LA Sustainability Plan that is designed to get rid of all fossil fuels, even remove existing infrastructure, and go all electric. This would include extensive retrofits to achieve the City’s goal of carbon neutrality. Also, Community Action Plans to supposedly address climate change and GHG emissions are being discussed more than before. It appears many are trying to have land use policy driven solely by air quality/climate issues.
- Over Regulation – SCAQMD (South Coast Air Quality Management District) and CARB (California Air Resources Board) are even more aggressively pushing for restrictive air quality regulations. The SCAQMD has released a draft of an Indirect Source Rule (ISR) that is a supposed points-based measure with a menu of options to choose from, but none of the options are actually realistic for a variety of reasons. So, they also have an ANNUAL “mitigation fee” option that would appear to amount to $1 a square foot based upon the information we have to date. The SCAQMD staff claims they will take this rule to the Board in May, 2020. We are working with a broad coalition to defeat the ISR. CARB has now released the concept of a draft Freight Handbook which really seems to be an effort to get into the land use business, and we will be working with a statewide group on this issue.
- NAIOP Candidate and Issues PACs – Since so many key issues are being placed on the ballot, like parcel taxes, Split Roll, and land use measures, in 2019 NAIOP SoCal formed an Issues PAC to have available to protect the interests of the NAIOP SoCal members. 2020 will be a very busy year for the Candidate PAC with the majority of cities in LA and all of the Orange County cities having elections. NAIOP participates in appropriate interviews of candidates to look for the best business-friendly candidates. The NAIOP Political Action Committees will be actively promoting the idea of NAIOP SoCal members contributing to the PACs. Some members are sensitive to the idea of having their company or individual name listed on direct contribution reports. Any PAC contributions avoid such an issue.