The recent sale of the Transamerica Building in San Francisco creates an interesting case study in Prop 13. The last time this property sold was in 1972. As most of us know, Prop 13 was passed in 1978 and rolled assessments back to their 1975 values while limiting the assessment increases to a CPI trend factor capped at 2% per year. The current assessed value of the Transamerica building is approximately $257 million, resulting in a tax liability of about $3 million. Doing the math, the 1975 assessment would have been about $117 million with a $1.4 million tax (based on current rates). The increase in assessment over 45 years was 120%. However, the increase in value has been about 500%. When this building is reassessed for the new owner, they will be the recipients of a $700 million assessment, resulting in about $8.3 million in taxes.
Against the backdrop of the split-roll initiative, this is a stark reminder of what is at stake. As you may know, the split-roll initiative on the ballot in November would cause commercial property to be reassessed every year (initially every three years, eventually leading to annual reassessments). Regardless of which side of the debate you stand, this example shows the tax dollars sitting under the protection of Prop 13.
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