City Councilmembers agree that the City should seek to raise revenues through a ballot measure, but what taxes to increase and where to spend the money is up for debate.
Measure proponents share an understanding that the City’s post-pandemic revenues do not provide adequate funding for the desired level of library services, after school child care, homelessness services, affordable housing, and public safety.
There are currently three measures on the table to address various combinations of these priorities. Two of these measures could be put on the ballot by Council vote, while one measure is a citizen initiative that requires a petition with signatures equal to 10 percent of registered voters in Santa Monica to be placed on the November ballot.
The first potential measure was crafted by City staff and proposes a 1 percent increase in transient occupancy tax (TOT), also known as hotel room tax. The other two potential measures both propose increasing the transfer tax on real estate sales of properties above $8 million, but at different rates and for different purposes.
While all three local revenue measures could qualify for the ballot, per a state law, the winner between conflicting measures would be determined by the highest percentage of voter support.
Transit Occupancy Tax Measure
Given the pandemic-induced shortfalls in City revenues, Councilmembers directed staff to research potential revenue raising measures to be placed on the November ballot. After months of research and community outreach staff settled on a TOT tax increase measure.
In a community survey the TOT measure received around 70 percent support, which surpasses the 51 percent of support required to pass a general tax ballot measure. In this poll, voters also identified crime and public safety as their top concerns, with 73 percent and 93 percent placing each issue on the top end of a scale from least to most urgent, respectively.
The City’s current TOT rate is 14 percent and was last increased in 2004. Staff now proposes a 1 percent increase for hotels and 3 percent increase for vacation rentals that will raise an estimated $4.1 million annually.
The funding from this ballot measure is small in comparison to the unfunded communities needs, but according to City Manager David White, would likely go towards priorities highlighted in Council’s recent study session on the Homeless Count.
“We would want to start off with expanding our Homeless Liaison program team. We would also want to look to building out our Downtown Services Unit. We want to look at building out our Public Safety Officer program team. And those are just some of the highlights along with some of the outreach programs and SAMOSHEL that we talked about. Now that list of programs exceeds $4 million,” said City Manager David White.
Property Transfer Tax Measure – citizen initiative
A group of three Santa Monica residents are seeking to place a new tax on real estate sales above $8 million on the ballot. The initiative is led by Santa Monica Mayor Sue Himmelrich, her husband Michael Soloff (who is Co-Chair of Santa Monicans for Renters Rights) and Jon Katz (President of the Santa Monica Democratic Club).
Although Himmelrich is a City Council member, she is not trying to place this measure on the ballot via Council support, but is instead pursuing it as a citizen initiative via a petition of registered voters.
This measure proposes adding a third tier of real estate transfer tax, which would charge around $50 per $1,000 in value of properties above $8 million. Santa Monica already has two tiers of real estate transfer tax charging $3 per $1,000 of value on transfers under $5 million and $6 per $1,000 of value on transfers over $5 million. The second tier was established in 2020 when voters approved Measure SM.
According to City Finance Director Gigi Decavalles, the recent passage of Measure SM is one of the reasons city staff did not propose adding a new property transfer tax on this year’s ballot.
The citizen initiative property transfer tax measure seeks to fund homeless services, affordable housing programs and raise money for local schools. According to the proposal, the first $10 million raised annually would be deposited into a school fund and the next $40 million would be deposited into a homeless prevention and affordable housing fund.
Property Transfer Tax Measure – City Council initiative
The latest potential measure was proposed by Councilmember Phil Brock in a May 24 meeting and also targets property transfer tax for properties above $8 million in value.
There are three key differences between Brock’s proposed measure and the citizen initiative. Firstly, Brock seeks to place this initiative on the ballot with Council support. Secondly, the measure proposes a smaller $15 fee per $1,000 in property value. Lastly, the measure directs funds towards different priorities.
“I know there’s been an additional measure that’s been circulated that will substantially raise real estate property transfer taxes to provide funds for schools, rent subsidies and affordable housing. While those are all worthy goals, my sense from talking to residents throughout Santa Monica and looking at the staffs’ description of the poll results we saw earlier is that this initiative will not address the matters that residents care most about,” said Brock.
The draft language of his measure proposes spending the money on “homeless services such as public safety, mental health services and emergency response teams to address problems on our streets and in our parks, he 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, and transitional housing and shelters.”
Brock also said he was proposing this measure as the $4.1 in estimated revenue from the staffs’ proposed TOT tax is not enough to meet pressing community needs. According to Brock, his measure proposal would raise $11 to $15 million in revenue annually.