Administrative
Report
H.18., File # 22-4000 Meeting Date: 4/19/2022
To: MAYOR AND CITY COUNCIL
From: STEVEN DIELS, CITY TREASURER
TITLE
APPROVE A MEMORANDUM OF UNDERSTANDING WITH LOS ANGELES COUNTY
REGARDING DOCUMENTARY TRANSFER TAX COLLECTION
EXECUTIVE SUMMARY
The City Treasurer’s office is presenting to the Mayor and City Council a new agreement with Los Angeles County to update the administrative fee on the City’s Documentary Transfer Tax. The new fee structure changes the current flat rate of $1,000 annually to a new rate of $4.00 per recorded transaction. This new fee structure follows a fee study conducted by the Contracts and Grants division of the Los Angeles County Registrar-Recorder’s office. The new fee will be deducted by the County from the remittances made to the City.
BACKGROUND
Both the City of Redondo Beach and The County of Los Angeles impose taxes upon the transfer of real property located within the City of Redondo Beach. The County’s Documentary Transfer Tax is imposed on all documents that convey real property within the cities of Los Angeles County. The Los Angeles County Recorder’s Office collects the taxes on behalf of the City of Redondo Beach at the time the document is recorded.
The City of Redondo Beach Municipal Code section 8-7.02 imposes the City’s Document Transfer Tax as stated: “Realty sold. There is hereby imposed on each deed, instrument, or writing by which any lands, tenements, or other realty sold with the City shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers, or any other person or persons, by his or their direction, when the consideration or value of the interest or property conveyed (exclusive of the value of any lien or encumbrances remaining thereon at the time of sale) exceeds One Hundred and no/100ths ($100.00) Dollars a tax at the rate of One and 10/100ths ($1.10) Dollars for each Five Hundred and no/100ths ($500.00) Dollars or fractional part thereof.” The Contracts and Grants Division of the Los Angeles County Registrar-Recorder’s office submitted an updated agreement after they conducted a fee study. The new administrative rate will be $4.00 per transaction recorded. The previous rate was a flat $1,000 per year regardless of the number of transactions recorded. The existing contract with the County has remained unchanged since July 1,1977.
The new fee will be deducted by the County from their remittances to the City. The City's Document Transfer Tax rate is $2.20 per $1,000 of the selling price of real estate transactions. The County’s
H.18., File # 22-4000 Meeting Date: 4/19/2022
Transfer Tax rate is $2.20 per $1,000 of the selling price of real estate transactions. The County’s corresponding tax rate is $1.10 per $1,000. A total of 1,111 documents were recorded in the calendar year 2021, resulting in $3,455,508.10 collected for the City and $1,727,754.05 for the County. Based on the activity of 2021, the new fee arrangement would amount to an increased collection and administration expense of approximately $3,000 to the City.
To avoid the additional expense resulting from the new agreement, the City would be required to either: 1. Place a tax increase on the ballot, amend the ordinance, and amend the agreement. In this instance the City would increase the documentary transfer tax rate and the County’s increased allocation would not affect the City; or 2. Administer the collection of the tax within the City’s Finance Department. The marginal increased cost of $3,000 incurred by the City with the new agreement remains the most efficient and least expensive alternative.
The City Treasurer’s office recommends that the Mayor and City Council approve this agreement.
COORDINATION
The agreement with Los Angeles County, as amended, was reviewed and approved as to form by the City Attorney’s office.
FISCAL IMPACT
With this new agreement, the City will continue to pay the County an administrative fee for tax collection. The agreement changes from an annual $1,000 flat fee for all transactions to an incremental one of $4.00 per recorded transaction. Modeled on the activity of 2021, the City would incur approximately $3,000 in additional administrative fee expense.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
Memorandum of Understanding Los Angeles County Documentary Transfer Tax Collection