Finance & Management Committee July 9, 2024
AGENDA REPORT TO: Jestin D. Johnson FROM:Erin Roseman City Administrator Director of Finance SUBJECT:Vacant Property Tax Collection and Rates Setting For Calendar Years 2025 Through 2027DATE:June 10, 2024 City Administrator Approval Date: RECOMMENDATION Staff Recommends That The City Council Receive An Informational Report On The Status Of Measure W, Vacant Property Tax Collections, And Adopt A Resolution Establishing Tax Rates For Properties Subject To The Vacant Property Tax For Calendar Years 2025 Through 2027. EXECUTIVE SUMMARY The 2018 Measure W, the Vacant Property Tax Act that was approved by the voters by a margin of 70.04 percent, established an annual tax on vacant property for 20 years to raise the revenue necessary to support and fund homelessness programs and services, affordable housing, Code Enforcement, and clean-up of blighted properties and illegal dumping. A property is considered vacant if it “is in use less than fifty (50) days in a calendar year.” The 2018 Measure W further authorizes the City Council to establish, by resolution, annual tax rates at or less than the maximum tax rates of $3,000 for vacant condominium, duplex, townhouse and ground floor commercial spaces and $6,000 for vacant residential and non-residential properties. Other than the reduction of the first year’s tax rate from $6,000 to $3,000 for vacant resident properties with 4 units or less for properties deemed vacant in calendar year 2019, the City Council set the subsequent tax rates for properties deemed vacant in calendar years 2020 through 2024 at the maximum allowable tax rates. Staff recommends that the City Council adopt the proposed resolution that will maintain the existing maximum tax rates applicable to properties deemed vacant for calendar years 2025 through 2027. The assessment of the tax for properties deemed vacant will continue to be included in the Secured Property Tax bill administered and collected by the Alameda County. This report also provides information on the total revenues collected from the inception of Measure W through the end of Fiscal Year 2022-23.
Jestin Johnson (Jun 26, 2024 14:52 PDT)
Jun 26, 2024
Jestin D. Johnson, City Administrator
Subject: Vacant Property Tax Collection and Rates Setting For Calendar Years 2025 Through 2027
Date: June 10, 2024 Page 2
Finance & Management Committee
July 9, 2024
BACKGROUND / LEGISLATIVE HISTORY
On July 24, 2018, the Oakland City Council adopted Resolution No. 87319 C.M.S calling and giving notice, on its own motion, for a voter consideration of the ballot measure to adopt a Special Parcel Tax on vacant properties to fund solutions for homelessness, illegal dumping remediation, and specified programs.
On November 6, 2018, Oakland voters approved Measure W, the Vacant Property Tax Act, by a margin of 70.04 percent, which established an annual tax on vacant property for 20 years to raise revenue necessary to support and fund homelessness programs and services, affordable housing, Code Enforcement, and clean-up of blighted properties and illegal dumping.
On November 5, 2019, the Oakland City Council adopted Resolution No. 87916 C.M.S setting the tax rates for properties deemed vacant in calendar year 2019 to be levied at the maximum allowable tax rates, except for any “vacant residential land, zoned 4 units or less” under the Alameda County Use Code 1000 to be levied at the maximum tax rate of $3,000.00.
On November 19, 2019, the Oakland City Council adopted Ordinance No. 13571 C.M.S amending portions of Measure W, codified under Oakland Municipal Code Chapter 4.56, to clarify and further define functions and operations of a parcel and to establish a method of identifying parcels subject to the tax.
On December 1, 2020, the Oakland City Council adopted Resolution No. 88422 C.M.S, setting the tax rates for properties deemed vacant in calendar year 2020 and 2021 to be levied at the maximum allowable tax rates.
On July 18, 2023, the Oakland City Council adopted Resolution No. 89839 C.M.S, setting the tax rates for properties deemed vacant in the calendar year 2022 through 2024 to be levied at the maximum allowable tax rates.
ANALYSIS AND POLICY ALTERNATIVES
The Vacant Property Tax advances the Citywide priority of housing, economic, and cultural security by raising revenue to support and fund homelessness programs and services, affordable housing, Code Enforcement, and clean-up of blighted properties and illegal dumping.
The proposed Resolution sets the tax rates at the maximum tax rates, as specified in the 2018 Measure W, for properties deemed vacant in the relevant calendar years.
Measure W defines three different categories of parcels that may be subject to the tax:
1) Residential and non-residential land parcels, both developed and undeveloped; 2) Individually owned condominium, duplex, or townhouse units; and Jestin D. Johnson, City AdministratorSubject: Vacant Property Tax Collection and Rates Setting For Calendar Years 2025 Through 2027 Date: June 10, 2024 Page 3 Finance & Management Committee July 9, 2024
3) Ground floor commercial spaces The maximum tax rate for parcels in the first category, residential and non-residential land parcels, is $6,000 per year. The maximum tax rate for parcels in the second and third categories is $3,000 per year. The Vacant Property Tax is assessed in arrears for each calendar year and included in the secured property tax bill for collection by the Alameda County Tax Collector by fiscal year. By way of example, a property deemed vacant in calendar 2023 will be noticed for the Vacant Property Tax in early 2024. If the tax applies, the amount of assessment will then be included in the secured property tax bill covering Fiscal Year 2024-25. Vacant Property Tax assessment that remains unpaid is included as part of delinquent Secured Property Tax. If the delinquent Secured Property Taxes are not paid, the normal method of collection is to enforce a sale of the property called Tax Sales (Revenue & Taxation Code § 3351 et seq.) Table 1 illustrates the timing. Table 1: Timing of Vacant Parcel Tax Tax Year Administration Review and Identification of parcels subject to VPT Initial Determination & Noticing Process Final Determination & Noticing Process Appeal Process Placement of Charges on Secured Property Tax Bill Owner Receiving the Secured Property Tax Bill 2023 January 2024 February- April 2024 June 2024 June – July 2024August 2024 October 2024 There are a significant number of variables that impact the amount of revenue raised by the Vacant Property Tax each year. First, active use of a parcel for more than 50 days during a calendar year may be a relatively easy threshold to meet. Second, it is very difficult to know the number of parcels that will be in use less than 50 days in a calendar year but will meet one of the ten (10) allowable exemptions in any given year. Finally, the goal of Measure W is to encourage property owners to put the parcels in use in order to increase the housing supply. This, in turn, would naturally decrease the number of parcels that could be subject to the tax. Table 2 shows the number of parcels assessed the tax and the amount collected for each of the first five years since VPT became effective in 2019. Table 2: Parcels Assessed and Amount Collected by Fiscal Year Vacant Property Tax (Fund 2270) No. of Parcels Assessed for VPT RevenueTax year No. of Parcels Amount Tax Year Assessment Year Revenue 2019 1,702 $6,447,000 2019 FY 2020-21 $4,702,7412020 1,647 $8,028,000 2020 FY 2021-22 $6,135,6322021 1,284 $7,821,000 2021 FY 2022-23 $4,939,3232022 1,552 $8,061,000 2022 FY 2023-24 $6,357,011 (*)2023 In Progress In Progress 2023 FY 2024 -25 In Progress (*) Through June 6, 2024 Jestin D. Johnson, City AdministratorSubject: Vacant Property Tax Collection and Rates Setting For Calendar Years 2025 Through 2027 Date: June 10, 2024 Page 4 Finance & Management Committee July 9, 2024
FISCAL IMPACTThe inclusion of the Vacant Property Tax assessment with the Secured Property Tax administered and collected by the County of Alameda is the most effective method of the tax collection. The failure to adopt the proposed resolution in setting the tax rates would result in the City not having the legislation required by the County for the inclusion of the Vacant Property Tax assessment with the Secured Property Tax bill and, therefore, jeopardizing the annual average collection of approximately $5.53 million. PUBLIC OUTREACH / INTEREST No outreach was deemed necessary for this informational report beyond the standard City Council agenda noticing procedures. COORDINATION This report has been coordinated with the City Attorney’s office. SUSTAINABLE OPPORTUNITIES Economic: The special tax provides a dedicated source of revenue to provide services and programs to homeless people, to reduce homelessness, and to support the protection of existing and production of new affordable housing to lower income households, with minimal impact to the General Purpose Fund. Environmental: The special tax will help maintain neighborhoods free from vacant and abandoned properties that could become public nuisances that affect health and the environment. Race and Equity: There are no direct Race & Equity opportunities because the Vacant Property Tax is based on the status of the property regardless of the property’s location, property’s value, owners’ race, or ethnicity.
Jestin D. Johnson, City AdministratorSubject: Vacant Property Tax Collection and Rates Setting For Calendar Years 2025 Through 2027 Date: June 10, 2024 Page 5 Finance & Management Committee July 9, 2024
ACTION REQUESTED OF THE CITY COUNCILStaff Recommends That The City Council Receive An Informational Report On The Status Of Measure W, Vacant Property Tax Collections, And Adopt A Resolution Establishing Tax Rates For Properties Subject To The Vacant Property Tax For Calendar Years 2025 Through 2027. For questions regarding this report, please contact Rogers Agaba, Assistant Revenue & Tax Administrator, at (510) 238-7009. Respectfully submitted, ERIN ROSEMAN Director of Finance Finance Department Reviewed by: Sherry Jackson Revenue & Tax & Administrator Prepared by: Carmen Mac Revenue Operations Supervisor Finance Department