A bill that originally sought to tax landlords for vacant storefronts in California passed its first hearing within the state’s Senate Committee on Revenue and Tax on April 23, following a complete rewrite of the proposal earlier in the week.
People who fail or refuse to file the paperwork would face a civil penalty of a currently unspecified dollar amount.
SB 789 previously sought to implement a tax of $5 per square foot on vacant buildings in commercial properties. The tax collected would have been deposited into the state’s California Dream for All Fund, a program that offers loans to first-time, first-generation homebuyers.
This earlier version of the bill faced heavy criticism from commercial property owner associations, building owners, taxpayer advocates, mortgage bankers, housing associations, chambers of commerce throughout the state, and many others.
On April 21, Menjivar revised SB 789 following the opposition by completely rewriting the bill to instead focus on collecting information on vacant properties.
The San Fernando Valley senator said multiple business corridors in her district have sat empty for decades without new shops investing and opening new storefronts. Many of these buildings are now used by squatters, burned, vandalized, or falling apart as a result of being vacant.
“I want investment in my communities,” she said. “I’m looking to find out—why are they empty?”
Menjivar said she just wants to “collect the data” and understand the underlying causes leading to prolonged vacant commercial buildings so the state can seek solutions to incentivize businesses to open in California.
“Is it a problem with us? Our regulations? Is it a permitting issue? Is it because they are just holding onto that building for the best offer possible?” she asked.
A better understanding would allow the state to streamline permit approvals or develop new “carrot-and-stick” approaches to encourage commercial property owners to rent out their buildings, according to Menjivar.
At the committee hearing, union organization SEIU California expressed its support for the recent revisions to SB 789.
However, the bill continued to receive opposition from various property owners’ associations and retailers.
“It’s just repackaged in a bureaucratic, burdensome form, and now poses a sweeping statewide reporting mandate on every commercial property owner in California,” Skyler Wonnacott, a legislative strategist for the California Business Properties Association, said during the April 23 hearing. “While the $5 square foot vacancy tax has been removed, the bill remains equally harmful.”
He raised concerns about the possibility of SB 789 becoming a “Trojan horse” for future vacancy taxes, which he said would impact small business owners and mom-and-pop shopping centers the most.
He said reforms to the state’s current permit process and new tenant incentives would benefit property owners and encourage new businesses to rent the currently vacant commercial buildings.
“We should be trying to remove barriers to encourage investment in this state,” said Oracio Gonzalez, a representative for the California Business Roundtable.
He said that potential financial costs to meet the administrative requirements of SB 789 and cover compliance advisers would likely be passed on to tenants looking to rent.
Following the April 23 vote, the Senate Committee on Revenue and Tax asked Menjivar to revise SB 789 again before sending it to the Appropriations Committee for a review of its fiscal impact.
