Santa Monica has one of the most expensive housing markets in the country. (File photo)

Santa Monicans will be asked to vote this November on a new tax on luxury real estate that would raise about $3 million each year for public services.

The city of Santa Monica is looking for a way to generate some extra money as its traditional revenue sources — sales and hotel taxes and parking fees — suffer during the pandemic and accompanying recession. City Council voted Tuesday to move forward with a ballot measure that would tax real estate sales over $5 million at $6 per $1,000 of sales price, or $30,000 for a $5 million property. Currently, all real estate transfers are taxed at $3 per $1,000. 

Goodwin Simon Strategic Research, research firm commissioned by the city, conducted a survey of Santa Monica voters on potential tax measures and found that more than 60% of voters support raising the real estate transfer tax on luxury properties.

Although the measure would raise $3 million annually in a healthy economy, city staff said it would generate roughly half of that amount for as long as the coronavirus recession lasts. 

The money would fund foundational community services, including addressing homelessness, food security, economic recovery, protecting tenants at risk of losing their housing, afterschool and mental health support for youth, and ensuring that public spaces are safe and clean, staff said.

As part of $192 million in annual budget cuts, the city has moved to cut grant funding by 12% to nonprofit organizations serving people experiencing homelessness, seniors and youth with mental health issues. Meals on Wheels, the Westside Food Bank and the Legal Aid Foundation of Los Angeles will continue to receive full funding.

Additionally, CREST playground access, youth sports and homework programs would be eliminated. CREST after-school club would be maintained, but fees would increase from $300 to $350 per month.

The other measure that a representative sample of 562 Santa Monica voters were polled on between May 26 and May 31 was an increase in the business license tax, which hasn’t been raised since 1988 and is lower than the tax charged by the city of Los Angeles. 

Goodwin Simon also surveyed voters on what City Hall’s top priority should be over the next year. Twenty-seven percent said homelessness, 18% said economic recovery, 13% said affordable housing or tenant protection, 12% said public health or coronavirus and 9% said public safety.

The poll found more than 70% of voters think the city government is doing a good or excellent job of providing public services and responding to the pandemic, but only 25% think the city has managed its budget well. More than half said the city needs more funding to continue providing services. 

Although Finance Director Gigi Decavalles-Hughes said budget cuts will allow the city’s general fund to remain in the black over the next five years, general fund revenues are not expected to rebound until late 2021 because Santa Monica relies on tax revenue from hotels, restaurants, retail and parking — all of which are projected to take a while to return to pre-coronavirus levels of activity, in part due to physical distancing requirements. 

Even before the pandemic, the city was in a precarious financial position because of its $448 million unfunded pension liability. The city was set to pay off the debt over 13 years, but because of the recession will repay it in 15 years and skip payments in 2020 and 2021.