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Shopping Centers Today -> February 2003
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NEW TAX WILL HIT RETAIL DEVELOPERS
Retail real estate developers in California’s Riverside County will bear the brunt of a new tax to cover transportation infrastructure improvements.
The tax, called the Transportation Uniform Mitigation Fee, was passed by the county’s Board of Supervisors in November. It covers all commercial developments across the county, which takes in part of the Inland Empire (east of Los Angeles), extends to the eastern border of the state and includes the cities of Palm Springs and Riverside.
Retail developers will be charged higher fees than service commercial developers because they generate more traffic, said Roy Wilson, a member of the Board of Supervisors. The board voted unanimously for the measure.
“We need the infrastructure, or growth will shut down from gridlock,” Wilson said, arguing that additional roads are essential.
Southern California in general and the Inland Empire in particular are seeing explosive growth. According to Encino, Calif.-based real estate brokerage Marcus & Millichap, retail space in the Inland Empire grew by 1.9 million square feet last year. The firm expects the region to grow by an additional 1.7 million square feet in 2003.
The tax, which goes into affect in July 2004, will amount to about $2.60 per square foot until July 2005, at which time it will rise to about $5.20. In June 2006 it will increase to $7.81 per square foot. Industrial and service commercial developments will pay on a similar rising scale, reaching $1.45 and $4.84 per square foot, respectively, in 2006. The tax will not affect projects whose building permits are secured before June 30, 2004.
The tax will backfire, persuading developers to build in neighboring counties instead, predicts Rex Hime, president and CEO of the Sacramento-based California Business Properties Association, an ICSC-supported statewide lobbying group.
— I.R.
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