1 Vernice Hankins
From: [email protected]
Sent: Tuesday, June 14, 2022 11:10 AM
To: Kristin McCowan; Phil Brock; Gleam Davis; Lana Negrete; Christine Parra; Oscar de la Torre Cc: Sue Himmelrich; councilmtgitems
Subject: Please PASS the motion to create an alternative measure advanced by Councilmember Brock for the November ballot - Zane Letter Rebuttal
EXTERNAL
Mayor Pro Temp Kristen McCowan, Members, Santa Monica City Council
Re: Denny Zane Objection to Councilmember Brock’s motion I take strong issue with Mr. Zane’s spurious attack on Councilmember Brock’s real estate transfer tax (RETT) proposal as well as his superficial and uninformed defense of the competing Himmelrich RETT proposal in his June 2, 2022 letter to Council.
Spurious Need for More Santa Monica Revenue
Mr. Zane’s entire economic argument about the need for the funds is entirely spurious. Resources for all of Mr. Zane’s listed “needs” are already present and sufficient. In pointing out that Santa Monica would rank in the top 10 of 121 major cities nationwide in revenue per capita and it would be ranked #4 among major and smaller wealthy cities in California. Santa Monica does not have a revenue problem. The draft FY23 budget indicates the City is within 5% of the its historic pre‐pandemic high revenue. It would be the City’s 2nd highest budget ever! It has a spending control and resource effectiveness problem.
When the spending effectiveness issue was directly raised with Ms. Himmelrich in the June 2, 2022 North of Montana Association (NOMA) meeting, Ms. Himmelrich concurred that inefficient City spending was a key issue. She noted that she had “tried” to address it during her tenure on the Council and that it predated her election to the Council.
Item 13.G
06/14/22
1 of 6 Item 13.G
06/14/22
2 School Funding
As to the schools, total Santa Monica‐Malibu unified School District (SMMUSD) funding per enrolled K‐12 student is 29% above the state average, roughly on par with #8 Massachusetts (California is #18). SMMUSD spends over 200% of the amount spent in Arizona or Nevada. Moreover, SMMUSD has been singled out in a 2019 Standard & Poors credit report as being highly unusual in the amount of supplemental revenue funding it receives on top of standard funding from the high levels of property taxes in the City. Like the City, the school district is extremely well funded. Also like the City, it too has a significant spending control problem.
Consequently, the $10 million allocated to SMMUSD by the Himmelrich proposal can only be interpreted as an attempt to use public funds to buy political support for a private initiative.
Reliable Housing and Community Development Spending
The City has spent $1.4 billion since 2004 on housing and community development (HCD). In the 5 years preceding the FY21, the HCD spend has reliably averaged $60 million per year under the current City funding structure. With the City budget on the verge of breaking all‐time records in the following couple of years, there will be no problem in maintaining, and increasing, these spends, as well as their effectiveness, with existing funding sources.
Housing Assistance Priorities
In fact, the Himmelrich proposal is marketed primarily as a policy response to “rent burdened” households in the City. BUT it subordinates that issue to the high‐cost acquisition of existing units for conversion to affordable, and the building of new high‐cost affordable housing projects that benefit non‐residents. This bait‐and‐ switch language obscures the fact that affordable housing projects provide benefits to the smallest number of primarily non‐Santa Monica residents due to their cost.
Item 13.G
06/14/22
2 of 6 Item 13.G
06/14/22
3 As to affordable housing, the City has done more than its fair share, building more than 4,000 affordable units since the 1980s. This represents roughly 10% of the City’s entire multi‐family housing unit inventory!
Moreover, the City could reprioritize rental assistance TODAY with the resources within the spend of the City’s existing HCD average annual spend to benefit a much larger group of Santa Monica residents rather than focusing on building new (very expensive) projects that do not benefit existing residents.
Santa Monica’s historically balanced approach must be maintained for the sake of all its residents.
State “Mandate” as an Excuse
Mr. Zane’s use of the current unfunded state mandates is as unreasonable and entirely unsupported as the mandates themselves. They place an entirely disproportionate burden on Santa Monica. Los Angeles has located almost its entire Affordable Housing Overlay in the San Fernando Valley, leaving Santa Monica alone on the Westside. This is entirely unacceptable. Prior City councils had plenty of opportunity to object to this outlandish state bullying and chose not to do so. Continuation of this bad policy is not an option for the City.
Mr. Zane’s use of the unsupportable (in both theory and execution) state mandates is completely self‐serving support for his organization’s political agenda.
Disingenuous (and Uninformed) Justification of the Scope of the Himmelrich Tax
Mr. Zane tries to justify the Himmelrich tax as a luxury tax impacting a small number of people. His complete lack of understanding (or intentional misdirection) about the implication of this nefarious concept is nothing short of astounding. By providing a massive incentive for legal avoidance of sale transfer recording (which the Himmelrich proposal explicitly endorses with the §6.96.080 Partnerships clause) of the highest value properties in the City, the Himmelrich proposal guarantees that property tax reassessments, which are also triggered by Item 13.G
06/14/22
3 of 6 Item 13.G
06/14/22
4 sale transfer recordings will decline. That is a key source for schools and the City itself. the question must be asked as to why such a provision was included to begin with.
And, Mr. Zane fails to mention that exclusion of the highest value properties was political, intended to mute opposition to the tax by big investors in the City and discriminate against resident homeowners, who are less able to mount any resistance. And, as there is no inflation indexing, more properties each year would get ensnared in this tax, regardless of how long the property was owned. Residents that use their homes for shelter will not be able to avoid the tax while commercial properties can structure ownership around it.
Moreover, by moving towards direct taxation of the residents, the Himmelrich Tax disincentivizes the City from fixing it’s destroyed downtown economic engine that is incurring tax revenue opportunity costs of between $25 million and $40 million per year, just about the same revenues as the Himmelrich Tax assumes.
Mr. Zane fails to point out that the Himmelrich Tax would make Santa Monica the highest RETT taxed City ion the state up to $25 million and just below San Francisco above that. Santa Monica is currently #14 in the state with its existing RETT.
The Brock RETT Proposal’s Inclusion of Resident Values
To be clear, Councilmember Brock’s proposal does address the absolute key priorities THE TAXPAYING RESIDENTS have demanded through their elected representatives:
• Reducing crime
• Enhancing public safety
o Traffic safety improvements around schools including crossing guards • Making public areas safer cleaner
• Addressing problems created by our homeless population that we need to try and solve by giving them more help
o Police department homeless liaison team
Item 13.G
06/14/22
4 of 6 Item 13.G
06/14/22
5 o Fire department's crisis response unit
o Funding for transitional housing and shelters within our City • Restoring library services
• Enhancing after‐school programs
The Brock proposal is a funding stopgap until the City gets its financial house in order. That needs to happen very soon. It is currently a municipal embarrassment, acknowledged by Mayor Himmelrich. His proposal therefore also needs a sunset date.
Mr. Zane’s note must be recognized for what it is, an entirely political‐driven attempt to further Ms. Himmelrich’s personal initiative, which will place the City on a destructive path impacting the quality of life of all residents, almost entirely at the expense of homeowners.
Ms. Himmelrich has repeatedly professed to desperately want to avoid created an economically walled off City of the very rich and everyone else. Yet that is EXACTLY what her tax proposal sets the City on course to do with the shift to direct taxation of residents, especially homeowners.
This divisive war on homeowners must stop, immediately. It is exacerbating the profound disunity in this City, which is the opposite of the lip service provided by Ms. Himmelrich, and is obviously endorsed by Mr. Zane and his organization.
The Himmelrich initiative is being marketed as reflecting the City’s values, but the proposal entirely shields the resulting cash flow from the City’s elected representatives’ spending priorities, which negates the democratic expression of the City’s values. That is a cost no one in the City can afford.
I strongly urge the Council to direct City staff to complete its preparation of the Brock initiative as a council sponsored measure for the November general election.
Respectfully,
Item 13.G
06/14/22
5 of 6 Item 13.G
06/14/22
6 Marc L. Verville
Sunset Park, Santa Monica
Reference:
https://smmirror.com/2022/04/sma‐r‐t‐column‐new‐city‐financial‐plan‐the‐ resident‐homeowner‐bank‐part‐ii‐who‐pays‐the‐proposed‐transfer‐tax‐and‐ where‐does‐the‐money‐go/
Item 13.G
06/14/22
6 of 6 Item 13.G
06/14/22