Legislation & Legal

Split Roll – Your Opinion Needed Now!

Here is a great, easy opportunity to spread the word that split roll is dangerous.  Last week the Orange County Register published an article that most likely appeared in all the Southern California News Group’s (SCNG) 12 papers.  They are seeking opinions on split roll, so this is a great time to make the point that it must be defeated.

Please take a few minutes to let SCNG newspapers know that split roll must be defeated.  Read this article and use the email address noted:  opinion@scng.com. I urge you to complete the survey today!

The California Self Storage Association is joining a coalition of business organizations including the CA Business Properties Association (CBPA), Howard Jarvis Taxpayers Association, and NAIOP (the commercial real estate development association). Check out the following: (https://stophigherpropertytaxes.org/) for more information on the coalition, facts, and articles opposing split role tax.

Below are some talking points, some provided by NAIOP and CBPA, regarding the split roll tax and may provide you with information to share when completing the survey:

•         CSSA, which represents all self storage owners throughout California strongly oppose the split roll initiative.  It’s devastating impact on the California economy will negatively impact all the businesses and people of California.  At a time of record high State tax revenues, why is this even being considered?
•         The measure’s $11 billion tax increase on businesses, the largest in California history, will ultimately get passed on to consumers in the form of increased prices on just about everything people buy and use, including groceries, fuel,utilities, day care, health care and more.
•         Californians already face some of the steepest taxes in the country.  Our cost of living is at a record level – highest in the nation.  Split roll will only make this far worse which will cause more businesses to leave the state,thereby reducing
•         With zero transparency and accountability, and no protections against waste, fraud and abuse, this measure turns billions of new tax dollars over to school administrators and local politicians with no guarantee the money will be spent in the classroom. This measure is so full of flaws that we should not give schools more money until there are assurances, they will spend it better.  Supporters say that this measure will help schools, but only 40 cents of every new tax dollar with go to K-12 schools, while 60 cents will go to local governments with zero requirements on how the money should be spent.
•         Split role tax will especially impact small businesses, like commercial buildings, shopping centers, and self storage. Smaller businesses are less able to absorb a sudden increase.

•       It will create volatility in in property tax revenue due to the fluctuation of property values, thereby causing volatility in rent increases. Prop 13 stabilized the flow of property tax revenue by pricing values year to year.

The sponsors of the split roll initiative have already indicated that if this measure passes, they will come after Proposition 13 protections on homeowners next. This will make the housing crisis even worse by increasing the costs of owning and renting a home – it could even force people out of their homes like what happened before the voters passed Proposition 13 in 1978. 

MINIMUM WAGE TO RAISE TOMORROW Reminder: July 1, 2020 is when minimum wage increases in several California cities.    City   Employers with 25 or fewer employees Employers with 26 or more employees 100-plus employees Alameda     $15.00 $15.00 Berkeley     $16.07 $16.07 Emeryville     $16.84 $16.84 Fremont     $13.50 $15.00 Malibu     $14.25 $15.00 Milpitas        $15.40 $15.40 Novato     $13.00 $14.00 (26-99 employees)   $15.00 Pasadena     $14.25 $15.00 Hayward and San Carlos cities have delayed their anticipated local minimum wage increase until January 1, 2021, given the economic burdens imposed by COVID-19. Remain positive and stay safe, Ross Hutchings Ross Hutchings, CAE Executive Director – California Self Storage Association 5325 Elkhorn Blvd., # 283, Sacramento, CA 95842 ross@californiaselfstorage.org 888.CSSA.207 (888.277.2207) – toll-free office

REMINDER - LA CITY NOTICE TO TENANTS DUE NO LATER THAN THIS THURSDAY - JUNE 18, 2020 Self Storage Owners and Operators in the City of Los Angeles,  The Los Angeles self storage ordinance requires that operators provide notice of the ordinance to their tenants by June 18. The notice must be provided in English and Spanish. Click HERE for the mandatory notice in English and Spanish. Thank you,  Ross Hutchings, CAE Executive Director – California Self Storage Association 5325 Elkhorn Blvd., # 283, Sacramento, CA 95842 ross@californiaselfstorage.org 888.CSSA.207 (888.277.2207) – toll-free office

On Thursday, May 14^th, at noon PDT, Governor Gavin Newsom released his revised 2020-21 state budget proposal in lieu of holding his regularly scheduled COVID-19 press briefing.   

Today, Newsom did not mince words regarding the devasting fiscal impacts of COVID-19.  Amid the ongoing pandemic, California’s state budget has gone from surplus to shortfall.  Recall in January – just four months ago – when Newsom released his initial 2020-21 proposal, that plan called for a record-high $222.2 billion in spending.  At the time, the budget included a $5.6 billion surplus and specifically contained 3.5 percent more spending than lawmakers enacted for the current fiscal year which ends June 30^th. 

"These are not ordinary times,” Newsom acknowledged.  His revised budget reflects the latest, more grim, economic forecasts.  He took the podium with no notes and his presentation included  just four slides.  But Newsom also said the state had built up reserves in preparation.  Nevertheless, in spite of those reserves, California is still facing a projected deficit. 

Specifically,  Newsom’s revised budget proposal projects a revenue decline of 22.3 percent compared to January projections; $133.9 billion general fund, which is a 9.4 percent decrease from the Budget Act of 2019; $203.3 billion overall budget, 5.4 percent decrease from 2019.

Overall, the Governor’s press office stated, “The May Revision proposes to cancel new initiatives proposed in the Governor’s Budget, cancel and reduce spending included in the 2019 Budget Act, draw down reserves, borrow from special funds, temporarily increase revenues and make government more efficient.”

In taking a balanced approach to closing the budget gap, the May Revise specifically proposes to:

• Cancel $6.1 billion in program expansions and spending increases.
• Draw down $16.2 billion in the Budget Stabilization Account (Rainy Day Fund) over three years.
• Borrow and transfer $4.1 billion from special funds.
• Temporarily suspend net operating losses and temporarily limit to $5 million the amount of credits a taxpayer can use in any given tax year.
• Reflect the Administration’s nationwide request of $1 trillion in flexible federal funds to support all 50 states and local governments, and identifies reductions to base programs and employee compensation that will be necessary if sufficient federal funding does not materialize. 

The Governor’s office press release highlights the following:

• Protecting Public Health, Public Safety, and Public Education – $44.9 billion in General Fund support for schools and community colleges and $6 billion in additional federal funds to supplement state funding.
• Supporting Californians Facing the Greatest Hardships – Maintains the newly expanded Earned Income Tax Credit and maintains grant levels for families and individuals supported by the CalWORKs and SSI/SSP programs.  Prioritizes funding to maintain current eligibility for critical health care services in both Medi-Cal and the expanded subsidies offered through the Covered California marketplace.  Estimates unemployment insurance benefits in 2020-21 will be $43.8 billion – 650 percent higher than the $5.8 billion previously estimated.
• State Government Savings and Efficiency – Negotiations will commence or continue with the state’s collective bargaining units to achieve reduced pay of approximately 10 percent.
• Supporting Job Creation, Economic Recovery, and Opportunity – Proposes an augmentation of $50 million for a total increase of $100 million to the small business loan guarantee program to fill gaps in available federal assistance.

Some additional key points (from the summary document) of revised budget proposal include:

• Wildfire Mitigation Efforts – Overall, the Governor’s Budget and May Revision together contain 106 new positions and $30 million for the Commission to address issues related to utility-caused wildfires.
• Broadband Expansion – To identify which areas of the state lack sufficient access to broadband, the May Revision includes $2.8 million and 3 positions in additional resources from the Public Utilities Commission Utilities Reimbursement Account for the Commission to enhance its broadband mapping activities.
• AB 5 Enforcement –The May Revision maintains the Governor's Budget proposal to enforce compliance with AB 5, including $17.5 million for the Department of Industrial Relations, $3.4 million for the Employment Development Department, and $780,000 for the Department of Justice.
• California Consumer Financial Protection – The May Revision sustains the Governor’s Budget proposal for $10.2 million Financial Protection Fund and 44 positions in 2020-21, growing to $19.3 million and 90 positions ongoing in 2022-23, to revamp the Department of Business Oversight (DBO) as the Department of Financial Protection and Innovation.
• Department of Toxic Substances Control Reform – The May Revision maintains the Administration’s commitment to governance and fiscal reform for the Department of Toxic Substances Control.
• Climate Resilience – Governor is withdrawing the $250 million General Fund Climate Catalyst Fund proposal.
• Office of Environmental Health Hazard Assessment – Governor is withdrawing Evaluating Unassessed Chemicals Using Precision Prevention Methodologies $6 million General Fund Proposal.
• Department of Corrections and Rehabilitation – The May Revision proposes total funding of $13.4 billion ($13.1 billion General Fund and $311 million other funds) for the Department in 2020-21.  The May Revision proposes the closure of two adult institutions—one beginning in 2021-22 and a second beginning in 2022-23.  The closures are estimated to result in savings of $100 million in 2021-22, $300 million in 2022-23 and $400 million ongoing.  When asked, Newsom said the specific facilities have not been determined and this is still being negotiated.
• Cap and Trade Expenditure Plan – The May Revision maintains the Governor's Budget Cap and Trade Expenditure Plan, and establishes a “pay-as-you-go” budget mechanism to authorize budget act expenditures based on actual proceeds received at each quarterly auction.
• Department of Public Health – The May Revision maintains and increases the Department’s disease surveillance and identification workforce. Specifically, the May Revision proposes $5.9 million General Fund for 2020-21 and $4.8 million General Fund ongoing, to support laboratory staff to increase the laboratories’ testing capacity, and to purchase equipment and laboratory supplies that are specifically utilized for COVID-19 testing as well as other diseases.
• Caltrans Investments – While fuel tax revenues used to fund transportation projects are expected to drop by a total of $1.8 billion through 2024-25, the May Revision maintains current planning and engineering staffing levels to continue developing and designing previously programmed projects.
• State Support for Renters and Homeowners – The May Revision proposes to expend $331 million in National Mortgage Settlement funds for housing counseling, mortgage assistance and renter legal aid services.
• State Funding For Housing – The May Revision maintains the $500 million in low-income housing state tax credits in the Governor's Budget.
• Capitol Annex Projects – To reduce costs, the May Revision also proposes a transfer of $754.2 million from the State Project Infrastructure Fund to the General Fund. These funds were previously earmarked for the design and construction of a series of projects necessary for the renovation or reconstruction of the Capitol Annex.

The May Revise marks the start of what will be a month of negotiations with legislators.  The budget, with any legislative adjustments, must be finalized by June 15^th in time for the Governor to sign the package and the new fiscal year to begin on July 1^st.  

For more information, please see  http://www.ebudget.ca.gov/FullBudgetSummary.pdf.

Information provided by:

Naomi Padron

Legislative Advocate

McHugh Koepke & Associates

1121 L Street, Suite 103

Sacramento, CA 95814

(916) 930-1993

www.mchughgr.com

SSA has a new blog post on their website. The most recent post discusses upcoming changes to the salary requirements for overtime-exempt salaried employees. These changes will take effect in early 2020 so now is a good time to start preparations to review employee's duties to ensure they are properly classified as exempt from overtime. Read more