As Durazo explained at a recent Senate committee hearing, the bill is “simply adding one line on the forms that anybody fills out…It’s not asking for any more.”
Yet last week, the Senate Appropriations Committee, tasked with putting a fiscal price tag on pending legislation, said implementing the bill would cost the state $9.3 million in its first year and nearly $3 million every year after that. The majority of those ongoing expenses would go toward paying the estimated 24 state employees that Secretary of State analysts say are needed to make the bill work. That would represent roughly 10% of the agency’s workforce that now processes business filings.
Though $9 million is couch cushion change by California budgetary standards, the bill’s supporters say the number mystifies them. For a 2020 bill requiring the Secretary of State to add a different question to the same form, the fiscal estimate was a mere $561,000 in the first year and $79,000 thereafter.
“This is an example of a good governance bill that will fail because of bad governance,” said Jyotswaroop Bawa with the progressive nonprofit Rise Economy, which is sponsoring the bill. “By not collecting beneficial owner information, the Secretary of State’s office is allowing chaos to continue with impunity.”
Bawa and other supporters of the bill say publishing ownership information will make it easier for tenants, workers and regulators to track down scofflaw landlords and other business owners.
Opponents of the bill, which include state and local landlord groups, the California Association of Realtors and the California Chamber of Commerce, argue that it is already easy enough to contact a business and that disclosing the identities of individual owners would violate their privacy and enable harassment.
The Secretary of State’s office refused to break down sky-high estimate
Once a bill receives a big cost estimate, it’s put in a list known as the “suspense file.” Then, in marathon sessions held twice a year, the Assembly and Senate appropriations committees rapidly tick through every bill on that list, passing some along and killing others without debate or a public vote. The first legislative culling of the year is set for mid-May.
With its seven-digit cost estimate, Bawa said she worries SB 1201 will be the latest victim of “death by price tag,” especially when the state is facing a multibillion-dollar deficit. And it wouldn’t be the first time this idea has died a quiet procedural death.
In 2021, a bill that would have required companies to unveil their human owners when filing business records with the state didn’t get a hearing. A revived attempt the next year failed in the Senate after a majority on a key committee declined to cast a vote “yes” or “no” but simply abstained. Last year, a third try succumbed to the suspense file after the bill was dinged with a $9 million cost estimate from the Secretary of State’s office.
In coming up with this year’s figure, the Senate committee’s fiscal analysis said it got the estimates from the Secretary of State. Itemized totals include $3 million in “IT project costs” and more than $2 million in “mailing costs.”
The Secretary of State’s office refused to answer specific questions from CalMatters about the bill’s cost estimate but instead responded by email with an unsigned statement.
“The Office of the Secretary of State continues to be involved in deliberations and ongoing discussions with legislative staff related to SB 1201. In furtherance of this process, we must respectfully decline to publicly comment on the substantive or fiscal issues associated with the bill at this early point in the legislative process,” the statement said.
While the office “did not provide context” for its fiscal breakdown, the committee analysis says, the Secretary of State expressed more detailed concerns over last year’s version of the bill. Back then, the office warned that investigating and verifying the ownership information through a modified form would be costly.
The bill, as currently written, does not require the Secretary of State to perform that due diligence, which led an earlier Senate committee to raise concerns about the bill’s effectiveness.
‘We could do it for $200’
Corporations and limited liability companies exist in part to ensure that investors in a company aren’t held directly legally responsible for the things that that company does or doesn’t do. If a company maintains unsafe conditions at a rental property, a tenant can sue the company itself, seeking damages from the corporate treasury but not from the business owner’s personal checking account.
Publicizing an owner’s name and address, then, doesn’t serve an obvious legal purpose, said Debra Carlton, a spokesperson for the California Apartment Association. Landlords can always be reached through the property management companies they employ. Lawsuits can always be served to a company’s listed representative.
“The point of the corporate veil is that you go after the corporation’s assets” in a lawsuit, said Carlton, but it doesn’t prevent landlords from getting sued. “You see lawsuits every day being brought against the industry.”
Matthew Silver, a lawyer who represents cities and counties in substandard housing cases, agreed that Durazo’s bill isn’t likely to make his work easier going after negligent landlords. It’s often quicker to serve court papers to a corporation or LLC than “an individual slumlord” who doesn’t have a paper trail or web presence, he said.
“There’s a path that leads you from the corporate name to the people who actually own it, ultimately, and we will find them and hold them responsible,” he said.
But there are times when it’s crucial to track down a human business owner quickly, long before matters end up at court, said Larry Brooks, who runs the residential lead prevention program for Alameda County.
He remembers a case in 2022 when twin toddlers were found living in an old apartment with flaking paint. Lead levels in their blood were so high the children were immediately hospitalized. The twins’ parents, undocumented immigrants, initially refused to put Brooks and his team in touch with the building’s property management company, fearing eviction or deportation, he said.
So Brooks began hunting on his own. He turned first to the county assessor’s office to find the property owner’s name, then plugged that name into the Secretary of State’s database. The corporate documents there only listed a street address. Brooks struggled to connect that address with a phone number or email address.
Finally, a county nurse persuaded the twins’ mother to share the phone number of a Sacramento-based property management company. That company put Brooks in touch with the owner, a corporation in Texas, he said. The entire process took two weeks.
“I wish that there were some state or federal law that required every corporate landlord to have a local contact,” said Brooks, who has also advised Human Impact Partners, a public health nonprofit that supports Durazo’s bill. “In a situation like with the twins, where the blood lead levels were so high they were life-threatening, and the kids had to be rushed to the hospital, you want to be able to call somebody immediately.”
Brooks said he couldn’t share additional information about the children or the landlord, citing medical privacy laws and pending litigation. CalMatters was unable to verify the details of the story independently.
Making it easier to find the name and address of a business owner would provide a treasure trove of data for tenant rights organizations, housing researchers and investigative reporters.
But it would also be a boon for would-be harassers and activists, said Carlton. “I can’t figure out what their true purpose is,” she said of the bill’s sponsors. “They want to shame people publicly, maybe.”
