City Councilmembers Sue Himmelrich and Phil Brock both agree the City needs to raise more revenue, but they disagree on the best way to do so and are backing competing property transfer tax measures.
Neither proposed measure has been confirmed on the November ballot yet. However, in the case that they both are, the measure with the greatest votes will be enacted.
Both proposed measures seek to create a third tier of real estate transfer tax in Santa Monica, but differ in how much they would charge and what the revenue would be used for.
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.
Himmelrich’s proposed measure would charge a tax of around $50 per $1,000 in value of properties above $8 million and is estimated to raise $50 million annually. The first $10 million raised a year would be allocated for school funding and the remainder would be prioritized for building affordable housing and providing rent subsidies to prevent homelessness.
Brock’s proposed measure would charge a more modest $15 per $1,000 in value of properties over $8 million and is estimated to raise $11 to $15 million annually. Brock seeks to use this to fund crossing guards, libraries, after school childcare, public safety and homeless response services.
Himmelrich is pursuing her measure through a citizen initiative and proposing it in partnership with her husband Michael Soloff and President of the Santa Monica Democratic Club Jon Katz. They are currently in the process of collecting the approximately 6,900 petition signatures necessary to place it on the ballot.
Brock announced his potential measure in a May 24 City Council meeting and is seeking to place it on the ballot via Council vote. Brock proposed his measure as an alternative to Himmelrich’s, which he believes is too high and doesn’t direct revenue into top resident priorities.
“There is feedback from various residents throughout the city that her [Himmelrich’s] measure seemed draconian and onerous, and that was a great concern because it wasn’t a reasonable addition to a transfer tax that had just been amended in 2020,” said Brock.
Both Himmelrich and Soloff said they were frustrated by Brock’s proposal and the threat it poses to the viability of their measure.
“I was shocked to see that Phil was suddenly proposing this counter measure that, in my opinion, is completely designed to conflict with and undermine the measure that I’m working on,” said Katz. “It doesn’t take that much of a political strategist to understand that if you have two measures on the ballot, one is a big tax and one is a small tax, that the small tax might end up being the one that gets more votes.”
The proposers of the respective measures disagree about the responsibility Santa Monica has to fund more affordable housing. Per the Regional Housing Needs Allocation (RHNA), Santa Monica is required to build 8,895 new units, of which 6,168 must be affordable, by 2029. Although this is a state mandate, the state is not providing the funding for these new units leaving Santa Monica to seek alternative revenue sources to meet its housing needs.
“At the moment, our biggest need in order to control our future is money to build affordable housing and to support people who are already in housing and prevent them from being evicted,” said Himmelrich, later adding, “nobody is putting up money for permanent affordable housing nor are they putting up money, despite the fact everybody talks about it, for permanent supportive housing and this is the only way we’re going to get homeless off the streets: with permanent supportive housing.”
Brock said that he believes building more affordable housing is a noble cause, but that residents’ taxpayers dollars should not have to fund this in lieu of funding other currently unfunded priorities.
“Her measure is for a noble cause: more housing. On the other hand, we have done way more than our share of affordable housing over the past few years and, frankly, the state may force us to do more of it and is trying to force us to do more development,” said Brock. “In reality, her [property] sales transfer tax is really a development tax.”
Another key difference between the two tax measures is that Brock’s proposed tax measure as currently drafted has seven additional exemptions.
One of these exemptions is for the first time sale of a newly constructed residential property. Jon Katz said he finds this exemption particularly problematic.
“It allows the market rate developers to redevelop and put it back on the market and make their profit before they have to face this tax and it decreases the overall amount of money that’s going to come in as revenue as a result,” said Katz, later adding “I don’t know what exactly is going on, but it definitely does have the air of being influenced by developers.”
Brock said that he did not talk to any developers when coming up with his measure and that he was open to potentially changing the exemptions in the final measure language.
City staff are currently researching Brock’s measure and will return to Council with a report. Council will then vote if they wish to place the measure on the ballot. Himmelrich, Soloff and Katz are currently finishing collecting petition signatures to place their measure on the ballot and intend on turning them in for review in the coming weeks.