March 2020 Election Guide: Prop D

From the Public Press’ March 2020 Nonpartisan Election Guide:

Proposition D is Supervisor Aaron Peskin’s response to empty storefronts around the city: a vacancy tax. The assumption is that at least one reason storefronts stay empty is because landlords are holding out for a tenant who can pay high rent. To discourage that, Proposition D would tax landlords of commercial property, in named neighborhood commercial districts, at a rate based on how big the storefront is and how long it’s been empty. Note that this is for ground floor commercial space only. 

The tax would go into effect in 2021, and start at $250 per foot of street-facing storefront. The rate doubles every consecutive year that the space is kept empty until 2023. So if a space stayed vacant from 2021 through 2023, the owner would be taxed $1,000 per storefront foot that year. 

So how long does a storefront need to be vacant to start to be taxed? About six months in a calendar year. This is one of the arguments opponents bring up against the tax: They say it can take six months to find, vet and lease to a commercial tenant, so that’s not very long. But it should be noted that the clock stops for six months to a year to allow for needed construction, or if the landlord is waiting for a city department to issue certain permits. There’s also an exception if a fire or natural disaster has made a space unusable.

The tax doesn’t apply to nonprofit landlords. Also, if the tenants or subtenants of a commercial building are responsible for renting out a commercial storefront and are keeping it empty, they would get hit with the tax, not the landlord. 

The city controller estimates the tax would bring in up to $5 million a year. The money would go into a newly created Small Business Assistance Fund. It’s not clear from the bill text how exactly small businesses would get at the money — the revenues from the tax go first to pay staff for collecting it. Then, overpayments are reimbursed, and what’s left is available for “the operation and maintenance” of small businesses. The measure’s backers say the administration of the fund was left open-ended intentionally and will be further developed later.

To pass, Proposition D needs two thirds of the vote. 

Listen to “Civic” host Laura Wenus discuss Proposition D with Lee Hepner, a legislative aide to Supervisor Aaron Peskin, who proposed the measure.