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Staff Recommends Placing Brock's Transfer Tax on Ballot, Warns of Shortcomings
 

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By Jorge Casuso

July 7, 2022 -- City staff is recommending that Councilmember Phil Brock's proposed property transfer tax be placed on the November ballot but warned it could be a "very volatile" source of revenue.

If the Council accepts the recommendation at its meeting Tuesday, the measure on the November 8 ballot would charge an additional real estate transfer tax (RETT) of $15 per $1,000 for commercial properties that sell for more than $8 million.

SMTT Job Fair

But the tax -- which exempts single family homes and only applies to the sales amount above the threshold -- would generate receipts that "can vary widely from year to year," staff wrote in its report to the Council.

Over the past four years and through May, Brock's proposed tax would have generated additional revenue ranging from $6 million to $15 million per year," staff said.

"As the wide range indicates, this tax source can be very volatile based on market conditions and can be skewed by occasional extraordinarily high value transfers."

The threshold for the proposed tax would be adjusted every five years by the consumer price index (CPI) for the Los Angeles-Long Beach-Anaheim area, which would "essentially increase the threshold amount," staff said.

Staff, however, warned against basing the threshold solely on inflation without accounting for factors such as interest rates and the overall real estate market.

Doing so "could have the effect of decreasing the number of property transfers" subject to the tax and "could negatively impact the ultimate revenue generated," staff said.

Brock's proposed tax would include an Advisory Measure directing that the additional funds be used for a wide array of services "to address homelessness and mental health" and to pay for "public safety and emergency response teams to address safety on City streets and in parks."

It also could be used to reopen and staff "all public libraries, after-school and post-COVID recovery programs for public school children, traffic safety improvements around schools, including crossing guards, and transitional housing and shelters."

According to staff, if the Advisory Measure passes, "it provides an indication of general voter opinion on the proposed uses outlined in the Advisory Measure, but it is not controlling.

"If the Advisory Measure passes and the Transfer Tax Measure does not, there will be no change to existing policy."

Brock's proposed tax will go head-to-head with Mayor Sue Himmelrich's far more ambitious transfer tax, which "has received sufficient signatures to be placed on the November 8 ballot," staff wrote.

Himmelrich's tax would charge $53 per $1,000 on properties valued at $8 million or more, generating an estimated $50 million a year to help pay for "homelessness prevention, affordable housing and schools" ("Mayor's Tax Measure Appears Headed for Ballot," June 16, 2022).

Both measures require a simple majority of the vote. If both receive more than 50 percent of the vote, the one with the most votes would be adopted.


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