Businesses relieved as Prop. 15 fails

Visalia Property owner Stephen Cusenza said the law would have effectively repealed portions of Proposition 13, the landmark 1978 legislation requiring property to be taxed based on the year it was purchased, plus a maximum of 2{a25bda0f8ab6dac90e68079d6f038584ef6ac53f1f4621de3ad526e35cd6c0d6} per year, until it is sold or refinanced for commercial and industrial property. He said both of the commercial buildings he owns in downtown Visalia would have been affected by the law.

“That would have been a substantial increase to the cost of maintaining those buildings at a time when property owners may not be collecting rent but are still being taxed,” Cusenza said.

The proposition did include a five-year pause before applying the reassessment to retail centers where at least half of the occupants are small businesses, those with less than 50 employees, but local business leaders say it would have only delayed the inevitable of commercial property owners passing on the cost to tenants.

“Eventually that cost will have to be passed on to the tenants,” Cusenza said.

As executive director of Downtown Visalians, Steve Nelsen estimated that nearly everyone in the 241-member association would have been negatively affected by the split roll tax. He said the property owners all acknowledged they would have to pass on the tax to their tenants which could have put the downtown’s vibrancy at risk.

“Every type of business dodged a bullet,” Nelsen said. “A lot of these large corporations have owned property for years and that had the potential to kill jobs too. But this all would have come down on the merchants harder than anyone.”

Tim Kochendarfer, assistant assessor for Tulare County, said there are currently 536 commercial/industrial properties valued at or more than $3 million, but that value is based on its Proposition 13 rates. Kochendarfer said the law would have required the Assessor’s Office to appraise every commercial/industrial property in the county to see if it met the $3 million threshold on today’s market. Kochendarfer said there are too many factors to determine how many properties would be reassessed. What he does know is that the initiative would have eliminated taxes on business and personal property of $500,000 or less.

“This would have removed $20 million in annual revenues to the county,” Kochendarfer said.

Prop. 15 also inadvertently left local farms in the lurch when it came to annual taxation. While the intent of the legislation was to make no change to existing laws affecting agricultural land, the ballot measure’s language did not expressly exempt improvements or structures used for agricultural purposes, such as barns, silos and processing plants.

“Without clean up on the legislation, this might have forced the Assessor to increase the taxes for dairies and packing houses,” Kochendarfer said.

Many of Visalia’s small businesses are represented by the Visalia Chamber of Commerce, which formally opposed the proposition for its implications to landlords and tenants alike. Even in Tulare County, where property values are among the lowest in the state, commercial property is often worth $1 million just for the land prior to constructing a building.

“We aren’t talking about giant corporations and their ability to swallow the extra cost,” Zurek said in an interview prior to the election. “We are talking about the people with under 15 employees. We are talking about legacy businesses who have always supported this community not being there anymore.”