The Los Angeles Business Journal recently released the Ten Most Business Friendly Cities in Los Angeles County. One of the criteria was just not that they were business friendly, but where businesses could thrive. Unfortunately, the City of Santa Monica was not on the top ten list. They probably rate in the bottom ten. Most of the larger businesses have been run out of town. The largest industry in the city is currently tourism. Unfortunately, with the downturn in the economy the transient occupancy tax, which our hotels pay, is down by over 20% this year. This of course will have a negative impact on the city coffers. It could also push the city to look for other revenue enhancements namely, your money. Stay tuned.

For the first time in a decade, Sacramento is not our biggest enemy, but the lack of financing in the economy has been wrecking havoc on the housing industry. It will probably be another year before the financial markets come back into some semblance of order and normal financing practices will return.

As usual, Sacramento has been dysfunctional because of budgetary problems. The good news is that we have been able to kill some legislation that would have been injurious to your health. Senate Bill SB183 would have required us to put carbon monoxide detectors in each of our units. Luckily, we have been able to move this to the Senate inactive file. If your apartment building has a pool, Assembly Bill 1020 now requires that you have a new anti-entrapment device installed. Senate Bill 290 from Senator Leno in San Francisco now requires that we must give 60-days notice if you are going to terminate tenancy. While this does not impact us too much in Santa Monica, it does lengthen an owner occupancy eviction and for other non-rent controlled units across the state.

On the legal front, the California Supreme Court refused to hear the Palmer vs. City of Los Angeles case. In this case, Palmer sued the City of Los Angeles over the inclusionary housing ordinance. Palmer claimed that the ordinance violated the Costa Hawkins bill because some new rental units would be required to be deed restricted as to the rent level, in violation of Costa Hawkins. Palmer lost at the superior court and then won a reversal on appeal. The Supreme Court, by refusing to hear the case, upheld the appellate court. Therefore, the Los Angeles Inclusionary Housing Ordinance was determined to be in violation of Costa Hawkins.

While at first blush this appears to be a win and creates support for the Costa Hawkins bill. Unfortunately, it may give fodder to the City of Los Angeles and the League of Cities to go to Sacramento to seek a modification of the Costa Hawkins bill to allow for inclusionary housing to be exempted from the Costa Hawkins bill. The mere thought of Sacramento reviewing the Costa Hawkins bill in the current environment brings shivers down my spine. We all know that the City of Santa Monica and SMRR, together with the new tenant group, Tenants Together, all would like to reopen and tinker with the Costa Hawkins Vacancy Decontrol bill. In 2010, we will still have Arnold Schwarzenegger as governor and we can expect him to be a backstop to prevent undue tinkering. We cannot expect the same in 2011. So stay tuned.

There have been a lot of rumblings in Sacramento about having a split role parcel tax. This would be a major change in the Prop 13 protections which we currently enjoy. The opponents of Prop 13 feel that they can not change the property tax protections in Prop 13 for single family homes. However, with the current budgetary crisis there is a movement underway to remove commercial properties and apartment houses from Prop 13 protection. We may expect to see legislation next year on this topic.

A new group is seeking to increase our parcel taxes. Currently, two-thirds of the voters must approve any increase in parcel tax. However, this group is seeking to reduce the two-thirds to 55% of the voters in order to increase parcel taxes. They currently have applied for Title and Summary from the Attorney General’s office. It is expected that this initiative will be on the June primary. Their primary objective is to increase the parcel tax on apartment buildings and commercial buildings. With the state budgetary crisis it is conceivable that they could get this passed.

This time in the recessionary cycle reminds me of the saying from 1993, “Stay Alive ‘til ’95.” While I believe that the worst is behind us, 2010 does not look like it will be much of an improvement. So I am looking for a rhyme for 2011. So far the best that I have heard is “It Will Be Heaven in Eleven.”. I hope that it is not too optimistic. If you have a better rhyme please give me a call at 310-453-9656 or email me at Carl@LambertInc.com.