Comprehensive Real Property Transfer Tax Measure
July 12, 2022
• General Fund forecasting shows slow revenue recovery
• Many services and programs are still operating below pre-pandemic levels
• Proposed Real Property Transfer Tax Measure can provide new, faster revenue stream for high priority restorations and enhancements
Council Direction
• Proposed Tax Structure
• Comparison to Other Cities
• Revenue Range
• Proposed Language for Tax Measure and Advisory Measure Proposed Real Property Transfer Tax Measure- Items for
Consideration
In addition to $1.10 per $1000 County rate
First Tier –Properties selling for under $5 million
• $3.00 for every $1000 of sale value
OR
Second Tier –Properties selling for $5 million and up
• $6.00 for every $1000 of sale value
• Affordable Housing exempt
Current Real Property Transfer Tax Measure-Rate
Third Tier- Non-exempt properties selling for over $8 million Proposed Real Property Transfer Tax Measure-Rate
Tier Rate Applies to
3 +$15/ $1,000 of
consideration or property
value
Sales > $8 million on
amount >$8 million
The City would assess the new rate:
• On the increment of the sale >$8 million
• In addition to the $6/ $1,000 (Tier 2 rate) applied to the entire sale value
The $8 million threshold would adjust by CPI every five years Currently no sunset
Example: $10 million sale
Proposed Documentary Transfer Tax Measure-Rate
Tax = [$10,000,000*(6/1000)]+[$2,000,000*(15/1000)]=$90,0000 Tier 2 Rate Tier 3 Rate
Full sale
amount
Increment
>$8M
CURRENT PROPOSED
Proposed exemptions include:
Proposed Documentary Transfer Tax Measure-Exemptions
# Proposed Exemptions
1 Exemptions in State law
2 Transfers to a non-profit for affordable housing
3 A deed to correct a previously recorded defective deed 4 Transfers that relate only to a change in the way in which the title is held 5 Transfers to or from a tax-exempt charitable organization 6 First transfer of a newly constructed residential property having at least four units 7 Transfers of owner-occupied residential housing with no more than three units, whether or not any other portion of the property is also rented, if the seller has occupied the property for at least two years
8 Ground leases having a remaining term of less than 35 years Real Property Transfer Taxes in California
• Only charter cities can levy their own transfer taxes in addition to County rates
• Most charter cities do not have their own rates
• Five cities in LA County (of 88 total) charge their own transfer tax City Rates ($/ $1,000)
Santa Monica
(current)
Tier 1: $3 on sales < $5 million
Tier 2: $6 on sales ≥ $5 million (with exceptions)
Santa Monica
(proposed)
Tier 1: $3 on sales < $5 million
Tier 2: $6 on sales ≥ between $5-$8 million (with
exceptions)
Tier 3: $21 on the amount > $8 million (with
exceptions) ($15 in addition to Tier 2)
Current Documentary Transfer Taxes in Context
City Rates ($/ $1,000)
Berkeley $15 on sales up to $1.5 million
$25 on sales >$1.5 million
Oakland $10 on sales up to $0.3 million
$15 on sales between $0.3-$2 million
$17.50 on sales between $2-$5 million
$25 on sales > $5 million
San Jose $3.30 on sales <$2 million
$3.30 + $7.50 on sales between $2 million and $5 million $3.30 + $10 on sales between $5-$10 million
$3.30 + $15 on sales >$10 million
San Francisco $5 on sales up to $0.25 million
$6.80 on sales between $0.25-$1 million
$7.50 on sales between $1-$5 million
$22.50 on sales between $5-$10 million
$55 on sales between $10-$25 million
$60 on sales >$25 million
Culver City $4.50 on sales up to $1.5 million
$15 on the amount between $1.5-$3 million
$30 on the amount between $3-$10 million
$40 on the amount >$10 million
Los Angeles (city) $4.50 (applies to all sales)
Proposed Tax Applied to Prior Years
Year
#
Transfers
>$8M
Add’l Rev.
($M)
# Sales
>$100M
Add’l Rev.
from
>$100M
sales
2012 38 6.7 1 0.9
2013 23 6.5 2 2.8
2014 15 5.3 1 1.1
2015 35 14.4 2 4.8
2016 26 18.9 4 7.1
2017 22 16.9 3 4.9
2018 28 15.2 4 7.0
2019 42 13.1 2 4.7
2020 34 6.5 1 1.4
2021 53 7.2 1 1.2
• Volatility from year to year due to
high-value sales, market conditions
Range of Revenue Based on Various Rates
Proposed
$15 on >$8M $20 on >$8M $25 on >$8M $30 on >$8M $35 on >$8M 2012 6.7 9.0 11.2 13.5 15.7
2013 6.5 8.6 10.8 12.9 15.1
2014 5.3 7.0 8.8 10.5 12.3
2015 14.4 19.2 24.0 28.8 33.6
2016 18.9 25.3 31.6 37.9 44.2
2017 16.9 22.5 28.1 33.7 39.4
2018 15.2 20.2 25.3 30.3 35.4
2019 13.1 17.5 21.8 26.2 30.6
2020 6.5 8.7 10.9 13.1 15.3
2021 7.2 9.5 11.9 14.3 16.7
Proposal includes an Advisory Measure that would direct use to include:
• Services to address homelessness and mental health
• Public safety and emergency response teams to address safety on City streets and in parks
• Reopening and staffing of all public libraries
• After-school and post-COVID recovery programs for public school children • Traffic safety improvements around schools, including crossing guards • Transitional housing and shelters.
If the Advisory Measure passes but the Tax Measure does not, there will be no additional funds generated as a result of the Advisory Measure.
Revenue Uses/ Advisory Measure
Comprehensive Real Property Transfer Tax Measure
Shall the measure to enhance the City of Santa Monica’s general governmental services by increasing the one-time tax on real property sales over $8 million, and establishing an additional incremental tax of $15.00 per $1000 of the value in excess of $8 million, excepting transfers: per State law, involving tax-exempt charitable organizations, newly constructed residential properties, owner-occupied residential housing, and certain ground leases; providing an estimated $6-15 million annually until repealed, be adopted?
Proposed Ballot Language
Comprehensive Real Property Transfer Tax MeasureAdvisory Measure “MEASURE __: ADVISORY VOTE ONLY: If the “Comprehensive Real Property Transfer Tax Measure” is enacted, should its revenue be used to fund: (a) services to address homelessness and mental health; (b) public safety and emergency response teams to address safety issues on City streets and in parks, (c) the reopening and staffing of all public libraries, (d) after-school and post-COVID recovery programs for public school children, (e) traffic safety improvements around schools, including crossing guards, and (f) transitional housing and shelters?” Advisory Measure Language
The November 8, 2022 ballot will also include a voter initiative proposing a transfer tax increase
Both measures require 50%+1 voter approval to pass
If both pass, the one receiving the most votes will prevail Other Notes
• Approve and place on the November ballot
• Designate one or more Councilmembers to write the argument in favor of the measure
• Amend and return to Council on July 26
• Sunset date
• Tax rate
• Clarifying language regarding condominiums, other items • Uses in Advisory Measure
• Do not place on the November ballot
Next Steps