I wonder how Bay Area land usage would change if property owners were paying tax at the market rate for their use of the land. They would likely move more employees to other offices, as they faced more competitive market forces. On some tracts, Google and Intuit are paying a property tax rate 10-100x lower than local homeowners and businesses who moved in recently.[1]
A "split roll" - modifying the existing system for corporations, keeping the existing for residential -- would level the playing field for large incumbents and new market entrants, paying for office space at a much higher rate.
[1] The assessed value of one 13.7-acre tract underlying part of Google’s headquarters is $789,635, producing an estimated tax rate of 1.3 cents a square foot, far less than most neighboring properties.
In interviews, commercial real estate experts said that both Google and the property’s owner, Richard Peery, a septuagenarian Palo Alto real estate developer and billionaire, were saving hundreds of thousands of dollars. Commercial landowners often pass the cost of property tax on to their tenants.
1. 10x the tax would be $80 million. Google had $74.5 billion revenue in FY 2015. Paying the additional tax wouldn't change that. It's rounding error -- just a cost of doing business. On the other hand, Google relocating out of the Bay area would take a lot of good jobs and housing demand with it. That might impact local tax revenue more significantly than the savings companies like Google receive. In the end, a bit of free market economics occurs in city planning departments.
2. Most significant commercial leases are triple net. The tenant is responsible for taxes, maintenance, and insurance on the building.
Yes, higher operational costs in the Bay Area - market-rate property taxes, for example, would encourage Google and other large incumbents to grow or relocate employees to more favorable locales, all things being equal. Of course, there could be a specific machine learning expert that the company receiving Bay Area-tied subsidies must have, or a startup they would like to acquire, whose employees refuse to work outside the Mountain View office. By paying market rate rents, these companies would look more closely outside the area and existing office space made available to new players - these new market entrants are paying market-rate anyways. "Triple net" only affects long term leases (usually 20-30 years, often longer) and as the real estate consultants cited by the NYT, usually corporate space is not passed onto the lessee (e.g. they would pay more for the lower tax base). Startups and new mom-and-pop shops suffer (maybe the VC can became a long-vested landlord?).
Good point about local planning departments and equilibrium achieved that way. Decreasing tax revenue with fixed costs (sewage, schools, highway, park maintenance) should encourage planning committees to greenlight more new development or better, zoning rights, to increase tax revenue. But this assumes that the new construction would cover their outgoing expenses (families require schools, and everyone needs transit and police services). Thus, you see only a few luxury condos being added like in the San Antonio shopping area in Mountain View.
But the property taxes paid by the companies are relatively trivial, as compared to the property taxes paid by the EMPLOYEES. Shouldn't the property taxes paid by the employees be what's shifting employees to other cities?
Of course, you could argue that the salaries are raised to compensate for cost of living, but then you're back to saying that the companies are footing the bill anyway, and apparently happy to keep doing so.
Incidentally, property taxes are fairly low in the Bay Area. My house cost more than 5x what my sister's house in Ohio did, but my property taxes are less than half.
Wouldn't it be bad for the same reason that it's bad for residential? Residentially, it feels unfair to get priced out of your home due to forces outside your control. I can't help feeling bad for a local mom and pop store getting priced out for the same reason. There are tons of little local downtowns that are rapidly going from small stores to rows of Gap and Abercrombie as landlords see opportunities. This would just exacerbate that.
It's even worse than that. There's a special property tax deal for parts of Shoreline. It used to be a landfill, and there were tax incentives to develop it. SGI, Goldman Sachs, and Google have profited from that.
>> They would likely move more employees to other offices, as they faced more competitive market forces.
Which usually means "outsourcing".
Cargill is famous for doing this. They recently "opened" an office in Bangalore and then said they were moving all their US teams to their "new office" in Bangalore. Is it outsourcing? Technically no. They get away with it because the people in their "new office" are Cargill employees.
It would be be funny to see the corporate equivalent of https://en.wikipedia.org/wiki/Baarle-Hertog (maybe a single office building hallway where some of the offices were used by one company and some by another? but there are coworking spaces and incubators where this actually happens!).
Doesn't that betray the notion of remote work and remote offices being as efficient as on-campus work interactions, or is there something about the units involved which make them exceptional in working under one roof?
I agree with your notion. However, lots of people and organizations make contrary claims. So maybe there are some kinds of teams which can perform relatively well as a dispersed team.
https://en.wikipedia.org/wiki/Enclave_and_exclave