City Hall wants $15 million per year to fund affordable housing and officials are asking residents if they would support new taxes to help secure the necessary money.
At their Jan. 12 meeting, council approved $60,000 to conduct a survey of Santa Monica residents asking which of several new taxes residents would be most likely to support. Options include increases to sales tax, document transfer tax or a tax on new construction.
The city would like to generate about $15 million per year to replace the money lost when voters abolished redevelopment agencies in 2012. Staff is recommending that half the money, $7.5 million, come from a redistribution of the General Fund with the remainder coming from new taxes.
Santa Monica’s Director of Housing and Economic Development Andy Agle said there would be little if any short time impact from diverting General Fund revenue because recent changes at the state level have increased the amount of money repaid to the city related to the loss of redevelopment agencies. However, he said those repayments will expire eventually.
“At worst if no new revenues, it may require you to reprioritize and cut some existing programs,” he said of the long-term implications.
In authorizing $60,000 for the study, council directed staff to maximize the number of potential questions asked with evaluation of sales tax permutations being the top priority.
At minimum, a sales tax proposal would increase the tax by a quarter percent. Agle said sales taxes are the most popular among voters and there’s the possibility of raising the rate by half a percent and splitting the money with other causes. He said the Council could partner with the school district and some councilmembers suggested an increased sales tax could be used to fund other city projects, such as refurbishing the Civic Auditorium. Staff said potential problems include voter fatigue as Santa Monicans approved a sales tax measure in 2010 and county agencies are likely to have sales tax measures on the 2016 ballot.
The document transfer tax draws money from the sale of homes. Changes to the document transfer tax would increase the tax by $6 per $1 million. Voters rejected a similar proposal in 2014, then known as Measure H, but they did pass the companion Measure HH that would have earmarked Measure H money for affordable housing. Staff said it’s possible voters might approve it this time if the campaign were organized differently.
Questions were also raised about a potential construction tax. As proposed it would charge a fee equal to 5 percent of the improvement value on construction with an exemption for single family homes. Agle said a construction tax would have to be carefully evaluated to avoid issues of double taxation and the possibility that the tax could run afoul of state laws that regulate home construction.
Housing Commissioner Michael Soloff was one of several current or former city officials to support establishing a revenue stream for affordable housing. Soloff said none of the city’s rent controlled units will be affordable in the next 20 years due to state laws that allow rent controlled units to be set to market rate once a tenant leaves.
“Part of what makes Santa Monica special is its economically diverse population, but Santa Monica is rapidly losing that diversity, much of which was based on affordable rent controlled units,” he said.
Former mayor Jim Conn said the soul of the city was at stake.
“I have long felt the only difference between Santa Monica and say, Redondo Beach, is we have social economic diversity and to maintain that social economic diversity is to maintain the heart and soul of the city and what makes it unique and rare and special and why it’s of value.”
Council’s decision was limited to authorizing a study of the revenue options. No money was allocated for affordable housing last week and the issue will return for additional discussion once the study is complete.