This article was published on: 09/01/2003
INDUSTRY WATCH
Sacred cows
Are California’s Property Taxes Too Low?
Billionaire Warren Buffet targets Prop. 13 in discussing the state’s budget woes.
BY TOM DOOLEY
Warren Buffett, the billionaire financier who is advising Arnold Schwarzenegger in his campaign to become California governor, suggested that the state's property taxes are too low. In a recent interview with The Wall Street Journal , Buffett, who is CEO of Berkshire Hathaway Inc., took on California’s famous Proposition 13, which has limited property taxes there since 1978. To point out the disparity in California’s property taxes, he used an example of his own property-tax bills for homes he owns in California and Nebraska. His home in Omaha, he said, is valued at roughly $500,000 and the current yearly property tax bill is $14,401. In California, he owns a Laguna Beach home valued at $4 million and the annual property tax bill for that home is $2,264. More to the point, the taxes on his Omaha home increased $1,920 this year, compared with an increase of $23 on the Laguna Beach home, according to Buffett. Buffett attributed the scant jump in California to the restrictions of Proposition 13, which generally limits property-tax increases to 2 percent a year, regardless of property appreciation rates. Buffett stopped short of saying he would advise Schwarzenegger to seek a reversal of Proposition 13 if he won the recall election for governor.
NRT Inc., the nation's largest residential real estate brokerage company, has acquired two major Long Island, N.Y., brokerages —The Sammis Group Inc. and Signature Properties of Long Island L.L.C. The acquired companies will do business under the banner of Coldwell Banker Residential Brokerage with 27 offices and 900 sales associates. With the formation of this new company, NRT increases its market share in the New York metropolitan and surrounding areas. In New York, New Jersey, and Connecticut, NRT companies will now include more than 130 offices and 7,000 sales associates.
Homestore Inc. has reached a settlement in a class action lawsuit filed by California State Teachers’ Retirement System (CalSTRS) in the U.S. District Court for the Central District of California. Under the settlement agreement, which has to be approved by the judge of the U.S. District Court presiding over the case, Homestore will pay $13 million in cash and issue 20 million new common shares of company stock to plaintiffs in the class action lawsuit. Last year, the U.S. District Court in Los Angeles named CalSTRS lead plaintiff in more than 19 consolidated lawsuits against Homestore and several former executives. The suits alleged that Homestore falsified financial statements and engaged in accounting irregularities. As a result of the settlement, Homestore also has agreed to adopt certain corporate governance provisions, including requirements for independent directors and special committees, a non- classified board of directors with two-year terms, appointment of a new shareholder-nominated director, prohibition on the future use of stock options for director compensation, and minimum stock retention by officers after exercise of future stock option grants. Homestore operates the consumer site REALTOR.com for the NATIONAL ASSOCIATION OF REALTORS®.
A somewhat tepid outlook for commercial real estate seems to pervade the findings of Parsippany, N.J.-based Prudential Real Estate Investors (PREI) in its recently released “ U.S. Market Outlook—Second Quarter 2003.” Among the pertinent findings of the report:
