Election Looms Large for Real Estate Industry

Posted on Friday, October 29, 2010

COSTA MESA, CA-Like the national midterm elections that GlobeSt.com reported on recently for their potential impact on the commercial real estate industry, California’s statewide election Nov. 2 could have far-reaching effects on the industry. From the governor’s race to ballot propositions, the election features issues that would have both direct bearing on real estate and an indirect impact in that they would affect the general business climate in the state.
According to legislative affairs chair Jim Camp of Naiop, which maintains its SoCal Chapter headquarters in Costa Mesa, the governor’s contest is the most important vote on the ballot in terms of potential impact on the industry. Naiop and the California Business Property Owners’ Association are supporting Republican former eBay CEO Meg Whitman in her race against Democrat Jerry Brown, the state’s attorney general, who was governor for two terms in the 1970s. Whitman has the endorsements of numerous business organizations, according to her campaign web site, while Brown has the support of a number of unions and other organizations, including the Sierra Club and other environmental groups, according to his web site.
“By far the most important race in California is the governor’s race,” Camp says. He says that whoever is in the governor’s office “impacts real estate directly because the governor is really the only person who can stop bad legislation from negatively impacting our industry.”
Camp explains that every year, the California Legislature proposes about 3,000 to 3,500 bills, of which around 500 to 1,000 “are problematic for the real estate industry.” This year, for example, about 500 bills were proposed that would have presented problems for the industry. Of those 500, most died either in committee or by vote, but 40 made it to the governor’s desk, and Republican Gov. Arnold Schwarzenegger vetoed all 40.
The reason that so many bills have an impact on real estate is that anti-growth forces attempt to stop growth through land use, according to Camp. “The goal is to slow the process of development and stop new projects from getting built, and a lot of the bills chip away at that from various different angles,” he says.
Camp cites the example of the zero net energy bill, a proposal that has been introduced in various versions through the years, which would require that anyone building a new building in California would have to provide all of the electrical power off the grid rather than buying it from electricity providers. Another example was AB 1975, which would have required that every unit in a multifamily complex have a separate water meter. With water meters costing up to $35,000 each, depending on the municipality and the water company, Camp says that such a requirement would impose prohibitive costs. Another failed bill would have eliminated 1031 exchanges for state income tax purposes in California. Another bill would have required the expiration of all business tax incentives after seven years, so that if there was a change in tax law that helped business, it would disappear after seven years.
Another bill that is of concern to Naiop is one that was adopted by the Legislature in 2006, AB 32. It would require greenhouse gas emissions to be rolled back to 1990 levels by the year 2020. Whitman has called for a one-year moratorium on implementing the bill, saying it is a job killer and needs to be revised; Brown has said that rolling back the program “would not only damage the environment, it would also jeopardize California's standing as a leader in the green economy.”
Naiop’s voter guide does not take a position on Prop. 23 on the Nov. 2 ballot, which would suspend the implementation of AB 32 until California unemployment, now at 12.4%, drops to 5.5% or less for four consecutive quarters. However, the organization supports Prop. 26, which would require that certain state fees be approved by two-thirds vote of the Legislature as opposed to the simple majority now required. Camp explains that the lawmakers can’t raise taxes now without a two-thirds vote, so they have turned to labeling increases as fees to circumvent the two-thirds requirement.
Naiop also supports Prop. 22, which would prohibit the state from taking tax revenue that belongs to cities and redevelopment agencies and using it for state purposes. “Many cities are in dire straits now because they have been relying on these funds,” which the state has been taking in its efforts to balance the budget, Camp points out. Naiop also supports Prop. 20, Congressional redistricting, but opposes four of the remaining five propositions and takes no position on Prop. 21, the vehicle license surcharge proposal.
Regarding the outcome of the upcoming election, Camp says, “We’re hopeful that whatever happens, it will lead to more jobs.”
By Bob Howard October 27, 2010

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