Title
Staff Report for City Council Consideration and Possible Action to Place a Measure on the November 2020 Ballot Requesting Voter Authorization to Increase the Real Property Transfer Tax by $5 per $1,000 in valuation
Staffreport
SUMMARY AND RECOMMENDATIONS
It is recommended that the City Council:
1) By motion, adopt by majority vote the attached resolution placing a measure on the November 3, 2020 ballot asking San Leandro voters to increase the City’s existing, voter-approved real property transfer tax (“RPTT”) measure from its current rate of $6 per $1,000 of property value to a new rate of $11 per $1,000 of property value, and direct staff to execute the related ballot filing procedures.
2) By motion, adopt the attached ordinance codifying the proposed measure at the proposed $11 rate, contingent upon authorization by the voters of the measure described in item 1) above.
BACKGROUND
Over the past several years, the City Council has discussed numerous strategies to close the City’s General Fund structural budget deficit. These strategies have included efforts to reduce the City’s expenditures, alternative service-delivery options, as well as ways of generating new revenues. As of the date of the writing of this staff report, the City has already executed a number of long-term cost-saving measures, including:
• Adoption of labor contracts that require employees to contribute their maximum share towards employee pension costs;
• Implementing new pension tiers that provide reduced pension benefits to more recently-hired employees;
• Holding the line on the addition of new City staffing (the City presently maintains approximately 15% less staff than it had in place over a decade ago);
• Creation of a new program (Prioritization of Unfunded Liability Liquidation, or “PULL”) to set aside funds towards the costs of the City’s long-term unfunded liabilities.
Nevertheless, in order to address the City’s long-term budgetary challenges, the City Council also expressed a desire to also explore ways of generating new revenues, in addition to further exploring additional expenditure reductions beyond those that have already been implemented. The City’s budgetary challenges are further exacerbated by the onset of the coronavirus pandemic and related public health measures, which have resulted in significant revenue losses. Indeed, in the current fiscal year alone, the City forecasts a loss of approximately $9 million in previously anticipated revenue.
In line with direction from the City Council, City staff have been undertaking over the past year a program of community engagement to discuss and gather input from the public on City service priorities and potential efforts to increase revenue. To assist in these efforts, the City contracted with Godbe Research to conduct two separate feasibility polls to gauge potential public support for a variety of potential revenue measures and to provide a quantitative assessment of voter support. The first of those polls was conducted in June 2019.
At the February 11, 2020 City Council retreat, City staff presented the results of community surveying/polling that was completed in June 2019. That 2019 polling work tested the viability of several new revenue options including: a public safety parcel tax, an increase to the real property transfer tax (RPTT) at varying rates, and a vacant property tax, each of which would require voter approval. Out of those various taxes, the real property transfer tax appeared to be the most viable while also having the capacity to generate sufficient levels of new revenue to substantively mitigate the City’s budgetary deficit. At the conclusion of the February 11, 2020 presentation on this matter, the City Council directed staff to continue moving forward with exploration of a potential increase in the real property transfer tax as part of the November 2020 election. Based on that direction, staff returned to the City Council on April 20, 2020 and received direction to work with Clifford Moss and Godbe Research to provide strategic project management support and to facilitate an additional revenue measure feasibility tracking poll in Spring 2020.
Godbe Research conducted a second poll in late May/early June 2020 to test the viability of a potential increase in the RPTT, which is a transaction tax collected when real estate is sold or purchased and ownership transfers from one party to another. Those poll results were subsequently presented publicly at the July 6, 2020 City Council meeting.
Summary of 2020 Public Opinion and Community Survey Results:
Public opinion survey results indicated majority community support exists for increasing the real property transfer tax rate in order to protect and maintain local services such as:
• Repairing potholes and rehabilitating City streets;
• Supporting local small businesses and residents through the economic recovery from the COVID-19 crisis;
• Enhanced pandemic response and economic recovery;
• Maintaining 9-1-1 emergency response;
• Maintaining youth violence prevention and gang intervention programs;
• Preparing and responding to natural disasters and health emergencies;
• Providing mental health programs;
• Maintaining senior services and facilities;
• Maintaining City parks, paths, and playfields;
• Maintaining library programs for children and adults; and
• Maintaining after-school programs for children and teens.
Since the implementation of the survey, Staff also distributed both electronic and mailed community surveys to a broad cross-section of community residents in order to collect additional public input on the specific City programs and services that are of highest importance to the community. Approximately 2,100 survey responses were received. The following city-services received the highest levels of support:
• MAINTAIN 911 rapid response times for police, fire, and medical emergencies;
• REDUCE crime & maintain youth violence prevention services; and
• FIX potholes and repave city streets/sidewalks.
At the conclusion of the presentation of the above survey results at the July 6, 2020 City Council meeting, the City Council directed staff to move forward with presenting for the Council’s consideration the necessary documents to place a measure on the November 2020 ballot that would ask voters to authorize a $5 increase in the City’s existing RPTT.
Proposed Ballot Question:
Should the City Council decide to place the measure on the November 3, 2020 ballot, the following draft ballot language is recommended to be used in the upcoming election. It has been reviewed and is recommended by the City’s consultants, is approved by the City Attorney, and meets the specific legal and technical requirements under State law. Staff therefore recommends that no changes be made to the proposed ballot language. The City Council may authorize the Mayor or a subcommittee of the City Council to file an argument in favor of the measure and a rebuttal to an argument filed against it and to work with an independent campaign committee or other third-parties on the preparation of the argument and rebuttal.
To maintain City of San Leandro services, with revenue that cannot be taken by the State, including: repairing potholes/streets; supporting seniors, families and local small businesses through COVID-19 economic recovery; preserving 911 emergency response; maintaining youth violence prevention programs; and
general city services; shall San Leandro increase the existing real property transfer tax rate, collected when property is sold, by $5 per $1,000 in valuation, generating an additional $4,000,000 annually, until repealed by voters, all funds benefiting San Leandro?
YES NO
Fiscal Impacts
If adopted by voters, staff estimates that the proposed measure would generate approximately $4 million in additional revenue per year.
Budget Authority:
Funds were budgeted in account 010-11-031 in the FY 2020-2021 General Fund budget to off-set the anticipated costs of the November 2020 General Municipal election.
Conclusion:
This report provides an overview of the proposed increase to the City’s Real Property Transfer Tax for the November 3, 2020 election. If the City Council wishes to proceed to place the measure on the ballot, then staff recommends that the City Council take two separate votes:
1) Approve by majority vote the resolution to place the measure on the ballot and direct staff to take all necessary steps to do so;
2) Approve the text of the proposed ordinance for submittal to the County Board of Supervisors and the Registrar of Voters to increase the real property transfer tax from its current rate of $6 to the new rate of $11 per $1,000 in valuation.
PREPARED BY: Eric Engelbart, Deputy City Manager, City Manager’s Office