DATE:
July 5, 2022
TO:
Christine Daniel, City Manager
FROM:
Sheri Hartz, City Clerk
SUBJECT:
Resolution Of The City Council Of The City Of Emeryville Ordering The Submission To The Qualified Electors Of The City Of Emeryville At The General Municipal Election To Be Held On Tuesday, November 8, 2022, As Called By Separate Resolution, A Proposed Ordinance Amending Section 3-3.702 Of The Emeryville Municipal Code To Establish Tiered Rates For The City Of Emeryville’s Real Property Transfer Tax Based On Value Of Consideration; Directing The City Attorney To Prepare An Impartial Analysis; And Authorizing The Filing Of Direct Arguments For Or Against The Measure And Rebuttal Arguments Recommendation
Staff recommends that the City Council adopt the above-entitled Resolution placing a measure to amend the City’s Real Property Transfer Tax before the voters at the November 8, 2022, general election, directing the preparation of an impartial analysis and authorizing the filing of arguments.
Background
At the June 21, 2022, regular City Council meeting, staff presented the results of a community survey assessing voter support for a revenue measure at the November 2022 general election. Based on the results of that survey, as well as previous outreach and community engagement, the City Council voted unanimously (with one Council Member absent) to direct staff to prepare the necessary legislation to place a measure on the ballot.
The City has seen General Fund revenue shift and decrease over time due to changes in the economy, and more recently because of the economic slowdown associated with the global pandemic. The City’s primary revenue sources are Transient Occupancy Tax (TOT), Sales Tax and Business License tax. All of these are uniquely vulnerable to economic fluctuations. At the same time as revenue has declined, the City is projecting increasing operational and personnel costs, including the funding of existing Unfunded Actuarial Liabilities, thus leading to projected budget deficits.
The City is projecting a structural deficit in fiscal year 2022-2023, as it has in the past two fiscal years. Addressing these required the use of one-time funds and deferral of capital projects to bridge the gap between revenues and expenditures. In spring 2021, the Budget and Governance Committee requested that staff analyze some options for the City to increase revenue, including possible revenue measures to be placed on the ballot in the 2022 election cycle. Since that time, staff has worked with consultants to assess various revenue measure options, conduct a community engagement process, and undertake two community surveys. Results have been reported to the City Council throughout the process.
Discussion
In 2014, the voters of Emeryville approved Measure V, a tax on the sale and transfer of real property. The tax rate established by Measure V is $12 per $1,000 of sale or transfer value. In recent years both Berkeley and Oakland among others have approved tiered rate structures for their transfer taxes. These tiered structures increase the rate of the tax as the sale or transfer value increases. Over the last six months, the City Council has discussed a structure for the real property transfer tax that would hold the tax rate flat at $12 per $1,000 for sales or transfers valued below $1 million, increase the rate to $15 per $1,000 for sales/transfers between $1 million and $2 million, and then to $25 per $1,000 for sales/transfers above $2 million.
The following ballot question was tested in the City’s May/June voter survey to inform the Council’s discussion about whether to place this type of general tax measure on the ballot in November 2022. The measure would require majority support to be approved. The survey results indicated likely voter support for this measure:
“Shall the measure to fund general City services including fire/ emergency response/police; street/ sidewalk/ park maintenance; water pollution prevention; disaster preparedness; affordable housing; senior/ childcare/ recreation services, by increasing the City of Emeryville Real Property Transfer Tax to $15 per thousand for property sales between $1,000,000 and $2,000,000 and $25 per thousand for property sales above $2,000,000, raising $5,000,000 annually until ended by voters, with citizen oversight, audits, and public disclosure of all spending be adopted?” The transfer tax can be a sizeable revenue source for the City. However, it is a volatile revenue stream due to its dependence on the volume of property sales in any given year. The estimate of $5 million per year in revenue from this source is based on historical averages, but again, this is a relatively unpredictable revenue stream. Accordingly, the City Council’s current fiscal policy sets aside commercial transfer tax revenue for one-time expenditures such as capital projects or paying down accumulated pension obligations. Should the City Council wish to place this measure on the November ballot, staff recommends the Council approve the Resolution included with this report.
Fiscal Impact
The cost of placing a measure on the November 2022 ballot is estimated to be approximately $50,000. Funds are available in the Elections account 010-11-031 for this purpose.
Staff Communication with the Public
Staff provided a report at the May 17, 2022, City Council meeting describing feedback obtained through a community engagement process conducted in spring 2022. This included presentations at Community Advisory Committee meetings and a survey posted on the City’s website. FM3 conducted a follow-up community survey in May/June 2022 and the results of that survey were presented at the June 21, 2022, City Council meeting.
Conflict of Interest
Not applicable to this item.
Conclusion
Staff recommends that the City Council adopt the above-entitled Resolution placing a measure to amend the City’s Real Property Transfer Tax before the voters at the November 8, 2022, general election.
PREPARED BY: Sheri Hartz, City Clerk
Approved and Forwarded to the
City Council of the City of Emeryville:
Christine Daniel, City Manager
Attachments
Draft Resolution with Exhibit A
Resolution Placing Real Property Transfer Tax Measure on November 2022 Ballot City Council Meeting | July 5, 2022
City of Emeryville
CALIFORNIA
MEMORANDUM