San Bruno residents will likely be asked to vote on a new tax in November, with a narrow majority of city council this week approving a property transfer fee to boost city revenue.
Details will be worked out next month, but council members agreed the tax would target commercial properties and large residential properties, but not single-family residences. The move comes as the city has seen a growing number of high-priced real estate sales, such as the recent $328 million sale of the Tanforan Mall or the $215 million sale of the Bayhill campus to YouTube.
“We’re letting money go and we also have to respond to residents asking why there’s no money coming from these sales,” Vice Mayor Linda Mason said. “We really have to take what we want in our city seriously and that’s something I think we absolutely have to move forward with.”
Rates may vary and will be discussed by council following the collection of ballot data. San Mateo has a transfer tax rate of 0.5%, while other Bay Area cities have rates as high as 1.3%. Some also have tiered rates like Berkeley’s, which slides up to 2.5% for transactions over $2.5 million.
City staff estimated that, based on the city’s last five years of sales, a levy could net the city between $61,000 and $2.7 million annually.
Establishing the tax would require a charter – moving the city away from its general law classification. While other measures could be added to a charter question on the ballot, council members have expressed concern that this could prevent the initiative from gaining voter support.
Last week, the council signaled its support for moving to choice or approval voting, systems that provide alternatives to the city’s current elections that allow voters to choose only their preferred candidate. The move would also require a charter, and the measure could be included in the tax issue. Council also expressed a desire to establish term limits for council members and to repeal the city mayor-elect council arrangement, measures that do not require a charter but could also be added to the question.
City staff estimated that each separate voting question would cost the city about $10,000.
“If I’m a voter and I really, really hate term limits, I’m not going to go on the whole charter and then none of this will pass, so even though it’s more expensive, I think they should be separate items,” council member Tom Hamilton said.
Council member Marty Medina agreed, adding that while he would like the other changes, the city’s most important need was to increase revenue.
Council member Michael Salazar, joined by Mayor Rico Medina, showed less enthusiasm for the tax, however. Salazar said that while big companies like YouTube wouldn’t “even flinch,” it could impact smaller operators.
“If you’re an individual and you’ve invested in commercial properties, that would basically impact the value of your properties, and that’s not trivial,” he said.
Rico Medina pointed to other fees the city has recently implemented or increased, such as development impact fees and property taxes.
The city’s revenue estimate was based on the inclusion of all properties except residential buildings with fewer than five units. It included retail space, office buildings, hotels, industrial properties and vacant land. The tax, if implemented, could also be structured to only include properties above a certain price threshold.
City Manager Jovan Grogan said the city will hire a polling consultant to determine the likelihood of success for any combination of ballot initiatives. He said the council would meet again in April to discuss the matter further.