Category Archives: Governmental

Governmental agency policy changes or discussions. City, county, state, federal, or judicial. Related to industrial operations or land use.

Governmental, Market Trends & Indicators

Changes to ASTM Standards for Environmental Due Diligence in 2021

2021-05-18 singlemalt Leave a comment

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There is a big change on the horizon that will significantly impact commercial real estate transactions, especially for industrial manufacturing properties with suspected contamination in the building or soil. ASTM E1527-13, entitled Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process, is the nationally recognized standard for evaluating environmental risk at a commercial property during acquisition or financing.

First released in 1993, the standard has been revised in 1994, 1997, 2000, 2005, and most recently in 2013. The ASTM standards expire every eight years, and ASTM E1527-13 is scheduled to sunset on December 31, 2021. Therefore, the new standard, ASTM E1527-21, must be finalized and published sometime in 2021.

The ASTM subcommittee in charge of this process is considering updating certain key components to the standard. These changes are sure to have an impact on future commercial real estate transactions. While numerous changes are being proposed, most are relatively minor, aimed at reinforcing the current standard. A few, however, will have a significant impact on the standard.

If you have been involved in the procurement, preparation, review, or use of a Phase I ESA Report, you know the biggest concern many environmental professionals, buyers/sellers of commercial property, and lending institutions struggle with is “Are there one or more Recognized Environmental Conditions [RECs] at the subject property?”. Just what defines a REC has progressed through revisions to ASTM E1527 in an effort to clarify this most critical concern. The forthcoming ASTM E1527-21 standard will likely update the definition of a REC.

To heighten awareness, E1527-21 proposes to include Per- and polyfluoroalkyl substances [PFAS] and other emerging contaminants in Non-Scope Considerations that some environmental professionals and end-users may want to evaluate as part of a Phase I ESA report.

How long is a report good for? EPAs All Appropriate Inquiries [AAI] Rule mandates specific components to be conducted within 180 days of the date of the property purchase or intended transaction. These components are 1) interviews with owners, operators, and occupants; 2) environmental cleanup lien research; 3) visual inspection of the property and adjoining properties; 4) review of government records; and 5) declaration by an environmental professional. After one year, the entire Phase I ESA report must be updated to meet the AAI Rule.

The above text was excerpted from Omni Environmental Group.

If you own and wish to sell a suspected environmental impacted property in Southern California then please contact us so we can present it to a buyer that specifically seeks this type of commercial real estate acquisition opportunity.

Governmental, Propound

The Interest Deduction: Origin, Who It Benefits, and Fiscal Impact

2018-09-09 singlemalt Leave a comment

The below paragraphs are excerpted from “Economic Trends in California Real Estate: Realty Almanac 2018-2020“. It describes the mortgage interest deduction origin, whether buyer or seller reaps the benefit, and the fiscal impact upon the national treasury. After reading it you may come to agree with my view that this deduction should be phased out and the $70 billion in lost tax revenue could then be applied towards balancing the budget.

Interest deductions took root in the late 19th century. The first federal income tax was established in 1894 and all forms of interest were deductible. However, homeownership was not what motivated Congress to enact such a policy. An interest deduction was viewed primarily as a business situation. Most people at that time in history paid cash for their homes (as is the case today in countries with less sophisticated financial systems). Mortgages were generally only taken out by farmers or investors.

Not until the 1950s did the home mortgage gain anything close to its current significance. Since then, the home mortgage has become the common concern of the housing industry. Without a mortgage, most tenants wait until they accumulate savings equal to the price. The tax deductions and exclusions are now considered entitlements for those homebuyers who need to borrow and for those homeowners who sell.

The true tax benefits to the taxpayer of interest rate deductions for buying and owning a home were lost long ago. They were arbitraged away by increased home pricing and interest rates. Thus, the benefits are passed on to the seller (increased price) and the lender (interest and charges on increased principal). The howl today by industry insiders is that prices will drop if the deductions go away: exactly the evidence that subsidies go to the seller and the lender, not the buyer/owner.

The interest deduction loophole costs the Department of Treasury over $70 billion in lost tax revenue annually, to the benefit of sellers and lenders received indirectly via the buyer. However, the majority of debt- encumbered homeowners don’t see much for it, except for the wealthier among them. Only half of the tax filers who are homeowners are able to claim the deduction. Usually, they receive less than $2,000 in reduced tax liability (the rest have no mortgages and thus no risk of loss).

More than 50% of the federal tax benefit is taken by those few homeowners with incomes exceeding $100,000. It is fair to say those wealthier homeowners have the least need for a subsidy as an inducement to buy a home, since they are financially capable and most likely to purchase anyway.

Governmental, Market Trends & Indicators

Boyle Heights Land Use Plan Update

2018-08-14 singlemalt Leave a comment

The City of Los Angeles is in the process of updating its land use plans. These plans are the way the City plans for the future. The Draft Boyle Heights Community Plan Update is the blueprint for guiding this change. For a PDF of the plan see Boyle Heights Zoning Plan Update. Note the industrial section known as The Flats, on the left side of the image, is being rezoned from Industrial to an Innovative zone. This may be a riff from the CASP multi-zoned ordinance passed for the area north of DTLA near LA State Park, the cornfield.

Governmental

California Energy Benchmarking Law Now Active

2018-06-11 singlemalt Leave a comment

In 2015, the State of California passed Assembly Bill 802 (AB 802) to provide building owners access to their building energy use data from utilities, and to track consumption in their buildings. AB 802 also fixed several issues related to AB 1103, the previous statute mandating benchmarking.

With some exceptions, all commercial buildings 50K s.f. and larger will have to benchmark and report to the CEC by June 1, 2018, and every year thereafter. This includes manufacturing and warehouse industrial buildings. For more info see http://cbpa.com/government/benchmarking-ab-802/.

Governmental

Breakdown of CA State Payroll taxes

2017-12-11 singlemalt Leave a comment

Anyone who is considered an employer in California must comply with payroll tax obligations, whether or not you may object to them! Yes, some of the programs they fund have questionable track records of abuse by workers and mismanagement by the CA E.D.D. Nevertheless, this article is a good summary provided by Gehres Law Group. Excerpt below.

There are four payroll tax programs in California which are administered by the Employment Development Department. These payroll taxes include:

Unemployment tax: Unemployment tax must be paid on the first $7,000 in wages employers pay to each employee during the calendar year. Employers pay this tax on a quarterly basis. Tax rates vary based on factors including whether the employer is a new employer as well as the employer’s experience with the unemployment program. Taxes could vary between 1.5% and 6.2%. This tax funds unemployment payments for workers who are laid off from their jobs.
Employment training tax: Employment training tax is charged at a rate of .1% of the first $7,000 in wages employers pay to employees during each calendar year. The tax provides funding to train employees in industries necessary to keep California businesses competitive. Employers pay this tax.
State disability insurance: State disability insurance is funded by a tax on employee wages. Employees pay this tax. Employers must withhold .9% of the first $110,902 in wages that are paid to employees during each calendar year. The taxes fund short-term disability payments and paid leave for eligible workers who take time off to care for a new child or for a sick child, parent, grandparent, sibling, spouse, or other close relative
California personal income tax withholding: California personal income taxes are paid by workers on income they earn within the state of California. Employers must withhold an appropriate amount of money from an employee’s entire salary based on the information provided by employees on their W-4 forms.

Employers are responsible for the payment and/or collection of each of these payroll taxes as well as for the timely submission of payroll tax forms and payments of all taxes due.

Industrial Notes & Trends