SCP’s Economic Growth Monitor
California’s Proposition 15 will be a major disrupter to commercial and industrial real estate owners in California, if approved by the state’s voters on November 3. Prop. 15 comes as other California and city initiatives for increasing taxes, are also up for voter approval in November. A couple of these additional initiatives includes San Francisco’s Proposition I and the state’s AB 2088 that would establish 0.4% tax on wealth.
The ballot initiative is a major challenge to California’s historic Prop. 13 property tax measure approved by voters in 1978, which was later upheld on challenge in the U.S. Supreme Court.
The ballot proposition title reads: “increases funding sources for public schools, community colleges, and local government services by changing tax assessment of commercial and industrial property.” On the state’s voter guide website, the initiative is summarized in this way: “Taxes such properties based on current market value, instead of purchase price. Fiscal Impact: Increased property taxes on commercial properties worth more than $3 million providing $6.5 billion to $11.5 billion in new funding to local governments and schools.”
As with other California ballot measures that would increase funding and spending, there is no safeguard that such increased taxes on commercial real estate owners would find its way to local government or local schools.
California’s proposition 15 will be a major disrupter in several ways. First, commercial (shopping centers, office buildings, etc.) and industrial real estate owners would see a decrease in the cash flow and value of their properties. This would mean a direct deleterious impact on the resale value of their properties. Conceivably, some property owners with long-held properties may need to sell if their new property tax assessments prove to be onerous.
Second, for any commercial real estate held on a NNN (so-called triple net) basis, typically retail and restaurant tenants, this property tax increase would be directly passed along to such tenants as their responsibility. Presumably, these retailers and restaurants would then attempt to increase their prices to consumers, an unintended consequence and example for how California’s proposition 15 will be a major disrupter.
SCP’s The Growth Monitor
In a bi-partisan vote, a next conservation act has passed the U.S. Senate. The unanimous vote in the Senate pertains to America’s Conservation Enhancement Act, S. 3051 (the “ACE Act”), a package of natural resource management and conservation provisions. The House of Representatives is expected to take up the legislation, and vote, as early as next week.
SCP Growth Monitor update on October 1 – the House of Representatives has approved the ACE Act by voice vote; now the legislation goes to the President’s desk for signing.
Consideration of the Ace Act follows passage in August 2020 of the Great American Outdoors Act, widely considered one of the landmark legislative achievements to protect America’s natural environment.
The legislation authorizes the National Fish Habitat Partnership, an endeavor that brings together local, state and federal partners to coordinate and conduct on-the-ground aquatic habitat restoration projects for the benefit of recreational fishing. The ACE Act also reauthorizes and boosts funding for programs critical to the health of the Chesapeake Bay, the nation’s largest estuary and a critical nursery for sport fish throughout the Atlantic region.
As the bi-partisan Conservation Act passes Senate consideration, attention now focuses on regional benefit. The ACE Act is expected to be a strong boost to recreational economic development in the region. The Chesapeake Bay is the largest estuary in the U.S., and is also a critical sportfish nursery for the greater Atlantic region.
SCP’s The Economic Growth Monitor
Truck tonnage declines in 2020 included the fifth consecutive year-over-year decline in the U.S., through August 2020. Freight transportation is a barometer of U.S. economic health, making monthly truck tonnage estimates a key indicator for local economic development officials.
Trucking represents an estimated 72.5% of tonnage carried by all modes. According to American Trucking Associations, in 2019 trucks hauled 11.84 billion tons of freight. The American Trucking Associations is the largest national trade association for the trucking industry.
Transport Topics reports on truck tonnage throughout the year. Their most recent recap is available here: Tonnage Declines 8.9% Year-Over-Year in August
The American Trucking Associations’ press release about truck tonnage declines in 2020 is available here: Index 8.9% below August 2019. According to the ATA, the apparent softness in truck tonnage was due to softness in the industrial and energy industries where truck loads are heavier, than any softness in consumer-related loads. Fleets hauling for retailers reported strong freight volumes. ATA calculates U.S. tonnage volumes and index based on surveys from its membership and has been doing so since the 1970’s.