Fight involving Measures DD and U1 is costliest in election

Election 2016 campaign lawn signs. Photo: Pete Rosos

The political action committee for the Berkeley Property Owners Association has steered more than $892,540 in donations to defeat Measure U1 and promote Measure DD, two competing measures that would raise the business tax on rental units.

Perhaps none of their numerous mailings and posters, however, has prompted more comment than the one with a picture of Donald Trump.

Starting last week, signs with Trump’s picture and the words “Stop Tax Loopholes for Developers Like Donald Trump: Vote No on U1” have appeared on telephone poles around Berkeley. Numerous readers wrote to Berkeleyside about the signs.

In an ultra-liberal bastion like Berkeley, equating a ballot measure with the Republican nominee for President is a shorthand way of saying the measure is reprehensible.

Both measures would raise the business tax rate on rents, but one (U1) would raise the tax by 166% while the other (DD) would raise it by 39%.

The intent of both measures is to get money for the Housing Trust Fund to help build affordable housing. Measure DD would generate about $1.5 million a year whereas Measure U1 would generate about $3 million a year. Both measures would put the funds into the General Fund but would distribute the money differently. Measure DD would establish a specially-formed citizens’ committee that would recommend how the money is spent to the City Council. Measure U1 would have the existing Housing Advisory Commission make recommendations to the City Council on how to spend the money. There is no legal requirement that Berkeley spend the money on affordable housing – an aspect of U1 that its opponents trumpet – but the Council has pledged that the money will be used for affordable housing. (The entire Council has endorsed U1)

The first measure to make it to the ballot was Measure DD. The Berkeley Rental Housing Coalition, the political arm of the Berkeley Property Owner’s Association, gathered 3,300 signatures to place the measure on the ballot. The Coalition, which formed in 2015, assesses its members $213 per unit annually, the same as the Berkeley Rent Stabilization Board assessment, to fund its political activities, according to its website.

Measure DD would levy an across-the-board increase on all rental units. (Except for landlords with fewer than three units) Measure U1, in contrast, exempts newly constructed units from paying the increased tax for 12 years, although developers will pay the current tax. (It only applies, as well, to landlord with more than five units).

The Yes on Measure DD people are saying this is a huge giveaway to large developers – hence the connection to Donald Trump. On its website, it lists the owners of Berkeley’s apartment complexes with an assessment of the company’s worth. For example, it points out that BlackRock, which has a capitalization of $59 billion, owns Library Gardens. That structure was completed in 2007, so its owners would not have to pay the higher tax until 2019. (That was the building where a balcony sheared off in June 2015, killing six young adults).

“It exempts developers and big, out-of-town owners of new luxury apartment complexes—properties not subject to rent control, charging the highest rents, and changing the fabric of Berkeley,” according to the campaign’s website.

Election 2016 campaign lawn signs. Photo: Kelly Owen

Supporters of U1 say that it makes sense to allow new projects a 12-year grace period. After all, the developers just paid a huge amount of money to construct the new units and it would be financially stressful to pay a tax on top of that.

“There are enormous upfront costs,” said Stephen Barton, who is heading the Yes on U1 campaign. He pointed out that developers of larger units must also make as much as 10% to 20% % of their market rate units affordable or pay a $20,000 to $34,000 fee instead into the Housing Trust Fund.

The reason proponents of U1 want to raise the rental tax by 166% is that there has been an enormous increase in property values in the last few years. Part of that reason is because Berkeley has such a rich cultural life. The city is full of good restaurants, cafes, stores and bookstores. Landlords have benefitted from that desirable environment, one created by Berkeley and its residents, according to Barton. Thus U1 tries to capture a portion of that increased value for affordable housing, said Barton. Technically, that concept is called “rising locational values,” he said.

Part of the U1 ballot measure reads: “This year Berkeley landlords collected $82 million more in rents than they did five years ago.”

Measure U1 was placed on the ballot by a unanimous vote of the City Council.

Landlords spend hundreds of thousands of dollars to defeat U1

One indication of the stakes of the two competing measures is the amount of money landlords are spending. Proponents of Measure U1 say the tax will amount to $30 per unit per month. For opponents of U1, that is unacceptable.

Most of the donors to the “Committee for Real Affordable Housing – Yes on Measure DD, No on Measure U1, Sponsored by the Berkeley Property Owners’ Association,” have not made contributions in their own names. They have used the LLC they created to run various apartment complexes. UC Berkeley’s Progressive Student Alliance filed a complaint about this practice with the Fair Political Practices Commission, which is investigating the situation.

For example, on Nov. 3, Seven Hills Investment donated to the Yes on Measure DD campaign, bringing its contribution to around $29,000. Seven Hills Investment filed with the Secretary of State’s office. Its business agent is listed as Susy Chen at 450 Sutter St., Suite 400, in San Francisco. A web search of that address shows a Dr. James L Chen practicing medicine there.

But Venkata Reddy Vemireddy is the president of Seven Hills Investment and is also on the board of the Berkeley Rental Housing Coalition and was one of its founders, along with Sam Sorokin, Sid Lakireddy, Jon Vicars, Michael St. John, Albert Sukoff, Judy Shaw, Laksh Lakireddy, Franco Reggi, Bob Richerson, Richard Genirberg.

Another donor was 1932 Heart LLC, which was started by Reggi, who is an executive with AP Management and North Berkeley Properties.

The FPPC has not determined yet if this sort of donating is improper and went out of its way to note that an investigation does not mean that anything untoward has happened.

Those supporting Measure U1 have raised about $76,400, according to campaign finance documents.

The donations to Yes on Measure DD, No on Measure U1 are making the Nov. 8 election the second costliest in Berkeley history. It is only dwarfed by the fight for the sugary beverages soda tax. In that election in 2014, the beverage industry spent $2.4 million trying to defeat the tax, but lost.

Follow Berkeleyside on Twitter and Facebook or get the latest news in your inbox with Berkeleyside’s Daily Briefing. Email us at tips@berkeleyside.com. Keep Berkeleyside running and support independent local journalism by becoming a member.

Landlords spend hundreds of thousands of dollars to defeat U1

Frances Dinkelspiel