BOMA INTERNATIONAL ISSUES CONFERENCE NEXT WEEK

A dedicated band of members from several California BOMA local associations and BOMA California are making a trek across the county to advocate on behalf of your interests in the halls of the nation’s Capitol. BOMA’s California Delegation will do their best to meet with our state’s 52 congress members and two Senators to educate them about issues impacting the commercial real estate industry. Chief among the issues are Energy and Sustainability; Capital Gains issues; and Catastrophe Insurance.

The BOMA International National Issues Conference (NIC) provides a unique opportunity for members of the commercial real estate industry to directly interact with legislators and regulators in Washington D.C. Newly elected legislators and long-time representatives alike are seeking input from commercial real estate professionals and this our industry’s chance to make a difference via grassroots meetings. BOMA delegates that attend this event are there to fight on our behalf – they, and the companies that support them, should be thanked several times over.

SPLIT-ROLL PROPERTY TAX – GETTING READY FOR ACTION

A large coalition of business and industry groups and individual companies, gathered in Sacramento to discuss the renewed threat of split-roll property tax that is bearing down on us. As we have been reporting, leaders in the California State Legislature are seriously considering reviving the thoroughly discredited notion of dumping the protections provided in Proposition 13 and attempting to impose a split-roll property tax that would choke California businesses. Anyone who has objectively looked at this idea knows that Proposition 13 has made property taxes in California one of the most reliable and stable funding sources and they reach the same conclusion that penalizing non-residential property owner simply for existing would be very detrimental to the state’s economy.

The group agreed to take steps to assure that we meet this bad idea with early and stiff resistance and that we make sure California policymakers are educated about the long term benefits and stability that Proposition 13 has brought to our state. Stay tuned, more news about these efforts will be forthcoming in the weeks ahead. Click here to learn more about the issue in general and to read CBPA’s policy statement.

AB 1065 – 80% ENERGY REDUCTION MANDATE – TAKE ACTION NOW!

In a more immediate threat to the industry, a large coalition of business and industry groups have formed a coalition to oppose AB 1065 (Lieber; Mountain View) which would mandate that all buildings (residential and non-residential) reduce their consumption of energy by 20 percent in 2015 and 80 percent no later than 2030. Yes you read that right, 80 percent!

If you think this mandate would impact your business, we ask that you contact the members of the committee and ask that they “vote NO on AB 1065.” The bill will be heard in the Senate Transportation and Housing Committee on Tuesday, March 11.

Below is a list of committee members and the next item has more detail about why this mandate is such bad public policy.

Senate Transportation and Housing Committee Members
Senator Alan Lowenthal (Chair)
Senator Tom McClintock (Vice Chair)
Senator Roy Ashburn
Senator Gilbert Cedillo
Senator Ellen Corbett
Senator Robert Dutton
Senator Tom Harman
Senator Christine Kehoe
Senator Jenny Oropeza
Senator Joe Simitian
Senator Tom Torlakson
Senator Leland Yee

AB 1065 – UNREASONABLE MANDATE

What does AB 1065 do exactly? In plain English it will require that all building in the State of California reduce energy consumption by 80 percent, regardless of building type, use, or location. From the bill:

(4) When compared to the standards adopted on November 5,
2003, the regulations adopted by the commission pursuant to this
subdivision and subdivision (a) shall decrease the energy
consumption of new residential and new nonresidential buildings,
from offsite sources, on a per gross square foot of floorspace basis,
by the following schedule:
(A) Not less than 20 percent no later than 2015.
(B) Not less than 50 percent no later than 2020.
(C) Not less than 80 percent no later than 2030.

Click here to read the full bill text.

Although California companies have long been leaders in the effort to reduce energy consumption, this bill does not seem to acknowledge that fact. New commercial buildings are already 50% more efficient than the national average. And starting in June 2009 new California homes will be 50% more energy efficient than those built to national standards.

AB 1065 – DEVASTATING IMPACTS ON ECONOMY

While our industry supports increased energy efficiency and conservation goals, the aggressive mandate in AB 1065 is unrealistic, would have significant and devastating consequences to California’s already struggling housing sector, and could act as a de facto moratorium on new commercial building construction.

In order to meet the aggressive energy efficiency goals set forth in this bill, every building in California – residential and non-residential -- will have to become a “mini-utility” and begin to generate its own power. On-site power generation is very expensive and has technological issues that may not allow it to produce the quantity of electricity needed in large buildings. In multi-tenant residential and commercial buildings there is very little a building owner can do to reduce tenant power usage. It is estimated that the “plug-load” of such a building can reach as high as 40%. This bill provides no incentives or tools to reduce the energy usage of people in the buildings.

We are also very concerned about the impact this measure will have on housing affordability especially during this time of a down market. Gearing-up to meet the first mandate in this bill, a 20% reduction no later than 2015, is troublesome in that its ill-timing will add expenses exactly when such disincentives are least needed. The Sacramento Municipal Utility District estimates that a mandate of just 50% in a home’s energy efficiency will cost at least $20 per square foot. Not even getting to the full 80% mandate of this bill will increase the price of a new average sized home by $50,000, reducing affordable workforce housing and pricing many Californians out of the housing market altogether.

The fact is that there are major technological impediments to implementing the on-site power generation requirements mandated by this measure. According to a recent University of California study, even a highly evolved and advanced PV system simply will not be able to provide the required amount of power needed for a large commercial or multi-tenant building, no matter how efficient the building is.

From the pragmatic viewpoint, this policy would be much harder to accomplish in certain building types, uses, and climate zones, yet this bill has a “one-size fits all” mandate. It regulates an apartment complex in the same way it regulates an industrial complex or retail facility. A solar array on top of a 30 story urban building may well have to extend beyond the roofline in manner that is physically impossible, would probably shade neighboring buildings from their needed sunlight, and violate local building, fire, and safety codes.
Please contact members of the Senate Transportation Committee and ask that they vote “no” on this bad policy!

NEW WATER BOND LEGISLATION ANNOUNCED

State Senator Mike Machado (D - Linen) who has been one of the legislative leads on water issues announced that he is introducing a new water bond in an attempt to restart failed negotiations. The bill, SB 6XX, contains $2 billion for "water supply reliability," $2.4 billion for Delta sustainability, $1.08 billion for clean water and pollution clean-up, $1.1 billion for clean beaches, groundwater protection and water quality, and $250 million for water recycling. As of press time, we are still analyzing the bill to see what it means in terms of the most critical water needs – supply, storage, and conveyance.

Reaction from new Senate GOP leader Dave Cogdill (R – Fresno): "I look forward to continuing to work with Senator Machado on a new proposal that acknowledges widespread interests in funding for new water storage, both surface and groundwater, along with other sorely needed water funding. We’re ready to roll up our sleeves and work across the aisle with the goal of passing a comprehensive bond."

Governor Schwarzenegger called a special session on water in 2007, but legislators could not agree on a measure.

WHEN IS A “FEE” REALLY A “TAX” IN DISGUISE?

 Our good friends at the CalChamber attempt to answer this age-old question. This year we have seen an Environmental Fee applied to all companies in the state with more than 50 employees, and there are numerous more tax/fee proposals in the pipeline to help the state balance its tiny budget problem. Click here to read this excellent piece.

UPCOMING EVENT: GREEN CALIFORNIA SUMMIT AND EXPOSITION APRIL 7-9

Builders, property managers, developers, facilities managers and others involved in real estate should not miss the Green California Summit (April 7-9, Sacramento Convention Center). The event, guided by an Advisory Board that includes senior state officials and leaders from the real estate community, combines an exposition featuring hundreds of green products and services with seminars and training. Discover green tools that can save you money, preserve the environment and give you a competitive edge - and find out about regulations and policy that are changing the industry. For more information, click here. BOMA California members (and all local association members) get a special 20% discount – simply enter “BOMA” as a Coupon Code towards the end of the registration.

BOMA CALIFORNIA 2008 CALENDAR

THURSDAY, APRIL 3, 2008  —
BOMA California Board Meeting
11:00 a.m. - 3:00 p.m.
Embarcadero Center #4, Conference Center, Promenade Level
Co-hosted by Boston Properties and Unico Properties
San Francisco

TUESDAY, JUNE 10 & WEDNESDAY, JUNE 11, 2008 —
BOMA California Board Meeting & CA Commercial Real Estate Summit
Sacramento (Hyatt Regency)
Times and locations TBA

OCTOBER/NOVEMBER, 2008 (DATE TBD) —
BOMA California Annual Meeting
Times and location TBD
Los Angeles