By Jorge Casuso
July 7, 2022 – City staff recommend Council member Phil Brock’s proposed property transfer tax be put on the November ballot, but warned it could be a source of “very volatile” income.
If Council accepts the recommendation at its Tuesday meeting, the Nov. 8 ballot measure would impose an additional Real Estate Transfer Tax (RETT) of $15 per $1,000 for commercial properties that sell for more than 8 millions of dollars.
But the tax – which exempts single-family homes and only applies to the amount of sales above the threshold – would generate revenue that “can vary significantly from year to year”, the staff wrote in their report to the Council.
Over the past four years and through May, Brock’s proposed tax would have generated incremental revenue ranging from $6 million to $15 million per year,” staff said.
“As the wide range indicates, this tax source can be very volatile depending on market conditions and can be distorted by occasional transfers of extraordinarily high value.”
The threshold for the proposed tax would be adjusted every five years based on the Consumer Price Index (CPI) for the Los Angeles-Long Beach-Anaheim area, which would “essentially increase the amount of the threshold,” it said. said the staff.
Staff cautioned, however, against basing the threshold solely on inflation without taking into account factors such as interest rates and the broader real estate market.
This “could have the effect of reducing the number of property transfers” subject to the tax and “could negatively impact the ultimate revenue generated”, the staff said.
Brock’s proposed tax would include an advisory measure directing the extra funds be used for a wide range of services “to address homelessness and mental health” and to pay for “public safety and emergency response teams.” to keep city streets and parks safe.”
It could also be used to reopen and staff “all public libraries, after-school and post-COVID recovery programs for public school children, road safety improvements around schools, including crossing guards , and transitional housing and shelter”.
According to the staff, if the advisory measure is adopted, “it provides an indication of the general opinion of voters on the proposed uses described in the advisory measure, but it is not determinative.
“If the advisory measure passes and the transfer rights measure does not, there will be no change to the existing policy.”
Brock’s proposed tax will go hand-in-hand with Mayor Sue Himmelrich’s much more ambitious transfer tax, which “has received enough signatures to be on the Nov. 8 ballot,” the staff wrote.
Himmelrich’s tax would charge $53 per $1,000 on properties valued at $8 million or more, generating about $50 million a year to help pay for “homelessness prevention, affordable housing and schools” (“The mayor’s tax measure appears at the head of the ballot”, June 16, 2022).
Both measures require a simple majority of votes. If both obtain more than 50% of the votes, the one with the most votes will be adopted.