During elections plenty of ideas are bandied about, a good many of which should never see the light of day. Some, unfortunately, actually become policy, like raising gas taxes which hits the working poor the hardest, especially when the last one passed by the State also included substantial increases in vehicle license and registration fees. Proposition 6 is a remedy to repeal the gas tax, along with the increases in vehicle registration and licensing and is being strongly opposed by entrenched special interests with an insatiable appetite for your money.
At the local level, candidates are putting forth ideas for improving Atascadero’s financial picture. Some call for the repeal of Proposition 13 which has protected homeowners and small businesses since its passage in 1978. Others suggest a “split roll” which means commercial property would be taxed at a higher rate but homes left alone. That’s an excellent way to force many small businesses to close their doors, especially if they own their building. We’re in a very soft commercial real estate market in Atascadero. Increases in property taxes will force landlords to increase rents and put multiple small businesses currently treading water completely out of business. I saw it happen in SLO years ago as escalating regulatory, fee and tax pressure on landlords resulted in skyrocketing rents downtown. We lost one of the best New York delicatessens in the county as a result, forced out of business by ruinous rent increases.
The worst idea I’ve heard floated about this election season in Atascadero is the suggestion of a “vacancy tax.” This is a penalty on commercial property owners who have vacant spaces in buildings or lots remaining in an unimproved state for prolonged periods. The theory is oblivious to economic facts that cause landlords either not to build or to be unable to fill vacant spaces with tenants.
The vacancy tax has been implemented with generally poor results in the major cities it originated, such as Washington, D.C., Vancouver, British Columbia, Pittsburg, Pennsylvania and New York City where it’s being proposed by its leftist mayor Bill D’Blasio. The mayor seems to think buildings are vacant because landlords are greedy and holding out for high-rent tenants when in fact it’s not in their economic interest to keep spaces vacant.
Real estate critics point out that the retail industry is in the throes of a major crisis, fighting macroeconomic trends and challenges from the online shopping industry. Just this year, over 57 national retailers have declared bankruptcy. Many more may be closing in the next several years or closing large numbers of stores, such as Barnes and Noble to name just one.
For the most part, it’s retail tenants facing economic challenges such as increases in the minimum wage, mandated benefits such as sick leave or medical care and the inroads made by internet sales that keep tenants from leasing brick and mortar storefronts. State and local regulations play a major role in the decision of a retailer to open up a store. In California, the trend is to expand out-of-state if they expand at all. The cost of doing business in California under the dark cloud of Democrat-controlled economic policies has exponentially escalated, earning California the moniker of being the second worst state in America to operate a business. For instance, the cost of Walmart to open in Atascadero increased by over $100,000 per week due to recent mandated wage increases by the State. Doing the numbers, Walmart, which is facing the same economic challenges as every other national retailer, made the decision to not build in Atascadero or anywhere else in California.
Sometimes after a property owner makes a deal to build, the project is held up by delays in obtaining permits, such as a liquor license. That has been a major impediment for Atascadero restaurants wishing to offer something other than beer or wine at dinner. The State Alcohol Beverage Control Board strictly controls issuance of liquor licenses and the wishes of a local City Council or community have little sway over getting them approved for a local restaurant. They’re also expensive; they can easily sell for over $100,000 and holding such a license can be a make or break issue for an upscale restaurant.
But, back to the vacancy tax: Spokespersons for national real estate firms point out that there’s “almost no justification for keeping your (building) space vacant… and that the vacancy tax itself is based upon a flawed set of assumptions.” In other words, don’t penalize the owner if he can’t rent the building.
From information I’ve received, obtaining tenants for local projects has been a significant factor in some of our vacant properties. One developer submitted excellent plans which were approved by the City but obtaining tenants has been difficult. This factor impacts the availability of financing from banks and given the soft real-estate market in our area, obtaining financing has become more difficult.
So, why would you want to punish a developer who has acted in good faith while taking on considerable financial risks with nothing to gain by keeping a property vacant? That‘s what a vacancy tax does, punishes a builder or property owner for trying to invest in your community. How is that going to help achieve the number one City Council goal, economic development of the downtown? I guess that’s a question we should ask at a candidate’s forum.