Pending Legislation Will Push the Burden of Paying for General Obligation Bonds onto Rental Property Owners
You may not even notice the small Bond Passthrough amount that your tenants pay each month. Under current law, rental property owners receive a 50% passthrough rate for increases on their property tax bill related to voter-approved General Obligation bonds.
Depending on the net assessed value of your property tax bill, the amount may be as low as $1.00 per month per tenant, or over $20.00. Lingsch Realty takes care of making sure this amount is included on any rent increases we send out for our clients.
San Francisco Supervisor Aaron Peskin has introduced legislation which will drastically reduce a property owner’s right to pass through costs associated with voter-approved General Obligation bonds, which pay for public services and infrastructure improvements that all residents benefit from, like Muni, City College, Affordable Housing, and the seismic retrofitting of public schools and city-owned buildings.
When voters approve bonded indebtedness to fund city services or infrastructure improvements, all city residents are expected to contribute. For over twenty years, a settlement agreement brokered by Tom Ammiano in 2002 stipulates that the cost of future city services and infrastructure improvements should be shared between property owners and renters. Since most SF voters are renters, without this bond passthrough ability, tenant voters will have no reason to vote against additional bonds, giving the Board of Supervisors unchecked spending power.
Peskin argues that for new tenants, the Bond amount is already considered into their lease amount. However, try telling a tenant that $20.00 of their rent is not going to their landlord, but rather the government. They would not agree to pay $20.00 more per month for that cost.
Additionally, Peskin argues that the amount being passed through to tenants doesn’t actually reflect the true increase in bond costs for landlords. However, he doesn’t make the same argument for the increases in utility charges that landlords incur annually in excess of the allowable rent increase percentage. If the balance of income to expenses was rightfully covered by the annual increase, a landlord who purchased a building with a five percent annual return, would be guaranteed that return every year for perpetuity. However, this doesn’t always happen due to rising expenses, necessary improvements, and turnover, which can lower returns over time.
The “General Obligation Bond Passthrough” legislation will eliminate the passthrough altogether for many residents and overall will reduce the passthrough by an estimated 80-90 percent.
In other words, City Hall wants to push the cost of paying for millions of dollars in General Obligation bond debt onto you.
SFAA Needs You To:
- Call or email the full Board of Supervisors TODAY to express your opposition to “File Number 240174, General Obligation Bond Passthroughs” legislation. Contact information for each Supervisor is below.
- Attend in-person and speak out at the legislative hearing on Monday, April 15 at 10am at the Rules Committee of the Board of Supervisors. The hearing will take place at City Hall in Room 250. There will be no opportunity to give public comments over the phone.
Tell the Board of Supervisors to vote “NO” on this egregious proposal, even if you haven’t traditionally used the General Obligation Bond Passthrough.
Talking Points:
- All city residents should share in the cost of funding the public services and critical infrastructure improvements that General Obligation bonds pay for. This legislation unfairly pushes 90% of the burden of those costs onto property owners.
- Tom Ammiano negotiated a compromise in the form of a settlement agreement over an SFAA lawsuit over passthroughs more than twenty years ago. Ammiano’s settlement agreement shares the costs of General Obligation bonds fairly between property owners and tenants.
- The City is looking at approving over $1 Billion in General Obligation bonds over the next few years, including for critical items like waterfront safety, earthquake safety, and emergency response. Now is not the right time to approve this legislation and put future bonds at risk.
- If this legislation passes as currently written, you will be voting NO on all future bond measures and contributing to campaigns to defeat future bond measures.
- If the Board of Supervisors approves this legislation, they are putting the City’s capital plan and future bond measures at risk.
- The existing General Obligation Bond passthrough amount for tenants is minimal, and there are currently financial hardship provisions for low-income tenants. Even so, it’s important that tenants and property owners each contribute to civic improvements.
- Feel free to elaborate with your personal experiences or thoughts on this issue.
Emails and Phone Numbers for the full Board of Supervisors can be found here:
Supervisor Connie Chan: (415) 554-7410
Supervisor Catherine Stefani: (415) 554-7752
Supervisor Aaron Peskin: (415) 554-7450
Supervisor Joel Engardio: (415) 554-7460
Supervisor Dean Preston: (415) 554-7630
Supervisor Matt Dorsey: (415) 554-7970
Supervisor Myrna Melgar: (415) 554-6516
Supervisor Rafael Mandelman: (415) 554-6968
Supervisor Hillary Ronen: (415) 554-5144
Supervisor Shamann Walton: (415) 554-7670
Supervisor Ahsha Safai: (415) 554-6975
Board of Supervisors Clerk Angela Calvillo
Thank you for helping fight back against the City’s effort to unfairly saddle property owners with additional expenses, especially those that pay for civic improvements that all residents benefit from.