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It's remarkable how giddy this state's more left-leaning voters -- and that'd be most of us -- get whenever even the most tepid announcement is made about rejiggering Proposition 13.
The 1975 ballot initiative, which froze property tax rates at that year's level and only reassesses them upon sale or transfer of a structure,
is a prime example of the law of unintended consequences. The state's school system was eviscerated and our roads have been left to fend for themselves. Students can't read well enough to decipher signs warning of crater-sized potholes. It's not a good look here in the Golden State.
But, in yet another
Waiting for Godot moment, those hoping to do away with the iniquitous law were pleased
by a recent poll showing major support for tweaking Prop. 13. The vast majority of respondents would favor reassessing business properties upon sale or transfer akin to residential properties.
There's a problem here, however. It's damn near impossible to keep track of this if the business involved doesn't want you to. And, oftentimes, they don't.
Your humble narrator wrote a cover story about the loopholes in Prop. 13 back in 2012. In their extreme, those loopholes are large enough to pass a skyscraper through them: But for a series of improbable circumstances and a pair of lawyers who doggedly worked for years and ended up with nothing to show for it, San Francisco's One Market Building would, effectively, have been "stolen."
That's because determining "ownership" -- and when it changes hands -- of an office tower isn't as simple as doing so with a house. In the latter case, someone sells their home, a deed is recorded at the assessor's office, and, you mail them a check when they demand it. Simple.
In the case of businesses and the property they own, it's not so simple. Selling a building or the land beneath it is not the same as selling the shares of a company that controls the land or building. It is possible for a company to sell 100 percent of its shares, but do so in a way that a property reassessment is not triggered. Companies, and their lawyers, know this. As such, many billion-dollar corporations are paying 1975-era taxes on their California holdings.
That's because property is only reassessed if a sole individual or company is left holding more than 50 percent of the entity controlling that property. So Seller A can cash out and sell his shares to Buyers B, C, and D -- and, as long as none of them is a majority holder, there's no reassessment.
That's why there was no reassessment of the massive Golden Gateway center along the Embarcadero, even though the Perini corporation sold off its last share in the property in 1994. A consortium of interconnected buyers took advantage of this building-sized loophole.
So, it's interesting that voters might be amenable to having our legislators alter this law. Yet, even if our special interests-driven leaders see fit to do so, determining what it means for a building to be "sold" or "transferred" with regard to businesses changing hands is a task that quickly descends into a Kafkaesque realm.
But, who knows? Maybe this stinkbug of a law can have a metamorphosis of its own.
