Councilmember Brock's Open Letter on Transfer Tax

By Phil Brock, Councilmember

June 2, 2022 -- During the Council’s study session on May 24, I suggested that the Council ask City staff to study an increase in the existing tax that the City charges when real property is sold -- the “transfer tax.”

I made this suggestion because our budget discussion made it quite clear that our current revenue streams, even if augmented by
another $4,000,000 from an increase in the hotel bed tax, would fall far short of what we need to address problems facing our residents every day, both from homelessness and from the City’s inability to restore important programs which we were forced to curtail during the pandemic.

I spend a lot of time listening to residents and it’s clear to me that the most important things we can do to respond to current concerns are to increase the levels of emergency response services in programs implemented by our public safety officers, such as the Police Department’s Homeless Liaison Program and the Fire Department’s Critical Response Unit, both of which operate on a limited basis today, and bring back critical services reduced during the pandemic such as library services, park maintenance and after-school programs.

The City currently imposes a transfer tax in the amount of $3 per $1000 of value when property is sold, increasing to $6 per $1000 when the sale price equals or exceeds $5,000,000. In contrast, several cities impose transfer taxes at higher rates which become applicable at different thresholds so it seemed to me that Santa Monica could fairly increase our rates so long as they remain at reasonable levels. The additional revenue will address the service priorities important to residents.

I am aware that there is an initiative measure being circulated in the City to increase the transfer tax which would provide additional funding for the school district and establish new funding sources for rent subsidies and affordable housing. And I said during our meeting that while these are certainly worthy goals, they do not respond to
our residents’ most urgent concerns. I also believe that a new tax rate proposed in this measure that is 800% of the existing tax is unfair to many residents and property owners.

The City and its taxpayers have been very generous when it comes to funding our schools and providing affordable housing –- we already have a parcel tax, bond measures, and two sales taxes, one of which is accompanied by an advisory measure that includes money for affordable housing as well as schools, and an agreement under which the City’s general fund provides additional money to the school district. I’m in full support of these measures but do not believe the City’s taxpayers should be asked to provide millions of dollars for new affordable housing in lieu of addressing issues of much more pressing concern to our residents.

As the City pointed out in its letter of 11/10/21 to the State’s Housing Department (HCD), signed by Mayor Sue Himmelrich, the City has permitted most of the affordable housing in the West Los Angeles area. It is time for the State to recognize the effect of its actions and inaction rather than simply establishing another unfunded mandate.

The letter states, “As a result, since 1981 Santa Monica has added more than 4,000 deed-restricted units affordable to lower and moderate-income households, units that represent roughly eight percent of the overall housing stock in the City. . .

"Furthermore. . . during the Fifth RHNA Cycle Santa Monica has issued building permits for more affordable housing units than every other city in Los Angeles County (many of which are considerably larger in both population and size) with the exception of the massively larger City of Los Angeles (and, on a per capita basis, Santa Monica has permitted more than 2.5 times as many affordable housing units as the City of Los Angeles during the Fifth Cycle).”

For these reasons, I suggested that City staff study the possibility of increasing the transfer tax in an amount and in accordance with a threshold that would raise approximately $15,000,000 which would give us sufficient funding to address our residents’ primary concerns without placing an undue burden on taxpayers and funding another development scheme, and I believe this can be done.

I was pleased that all six Councilmembers present at the meeting concurred with my suggestion and I am looking forward to reviewing staff’s recommendations.

I encourage residents to email me with questions and suggestions about this matter.

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