I've just read the guest opinion in the Oct. 2 edition regarding support for Proposition 15 Clearly the supporters of this proposition do not understand how commercial property leases are written and the ramifications to California tenants and consumers if Proposition 15 passes.
I have been in the commercial real estate business for over 40 years and have represented many commercial tenants. If Prop 15 passes, it will be devastating to most of them and will have a negative effect on the already suffering economy of California for the following reasons:
•Almost all commercial lease agreements, including retail, written with landlords contain a pass-through clause which states that the "Tenants either pay all of the property taxes or will pay the increases in property tax above the base year." If Prop 15 passes and the property taxes significantly increase, the landlord will pass the increases on to the tenants, thus the tenants, not the landlord, will effectively be paying the increase in property tax!
•Many commercial tenants are barely surviving now in California. Retail tenants were already struggling prior to COVID-19 and will be on life support if Prop 15 passes. The manufacturing industry was having a hard time making it work in California with the high cost of living for employees, as well as all of the existing California government regulations and high taxes. If Prop 15 passes, many more businesses will not survive or will move out of California. The tenants that stay will have to raise the cost of their goods and services, ultimately leading to higher prices to consumers. More layoffs will occur, especially in the manufacturing and retail sectors, ultimately hurting the most vulnerable employees. With the exception of some of the tech giants, numerous office tenants are now struggling as well.
The intended beneficiaries of Prop 15 may be deserving, but Prop 15 will also further hurt many vulnerable commercial tenants and their employees, especially retail, manufacturing and office. Examples include your local small and medium-sized businesses, restaurants, doctors' offices, etc. Tenants need to be able to have a choice in what type of building they can afford to lease. A company that has low margins needs to be able to locate in a building with a low tax base to survive. They cannot afford to operate in a new class A or B high-tax building or a reassessed older building and expect to survive. Prop 15 eliminates a tenant's choice.
In summary, the most vulnerable businesses and employees are going to be hurt. Many more small and medium-sized businesses will not make it. The California economy will continue to decline. The cost of California produced goods and services will rise. The most vulnerable of the California population will continue to be harmed.
I urge a no vote on Prop 15.
Brian McCarthy is a Menlo Park resident.