By Stephen Golub, June 18, 2024
On June 11, the City Council took the first step in a multi-stage process to put on the November ballot a vote on whether Benicia should adopt a Real Property Transfer Tax (RPTT) for the sale of real estate, be it residential, commercial or industrial.
Kudos to the Council for both biting the bullet on this significant step to close the City’s budget gap and conducting its discussion and initial community input in a collegial way. Thanks too to City Manager Mario Giuliani and the City staff for undertaking the grunt work to date (as summarized by a “Policy Direction” memo from Mr. Giuliani to the Council in preparation for the June 11 meeting, and for further figuring out over the next several weeks optimal options for the Council to consider regarding this potential tax.
If adopted, the transfer tax will levy a fee on the sale of real estate. Among the many matters the City staff and Council need to address are how high the fee should be. One figure being considered is one percent (i.e., $10 for every $1,000 in sales price, or $8,000 on an $800,000 house). As per the Policy Direction memo I mentioned, that $10 rate – which is actually lower than the $12 mean for many other Bay Area cities – would generate an additional $2.1million for the City annually at this point. Presumably, that figure would rise over the years as housing prices escalate.
Some initial thoughts on the matter:
- Pardon the cliché, but there’s still no such thing as a free lunch. As Mayor Steve Young, City Manager Giuliani and others have consistently pointed out, the City is taking multiple cost-saving and revenue enhancing steps toward putting our finances on stable footing going forward. But there’s still much to do if we want to keep Benicia the pretty, pleasant, enjoyable, safe, special place we love. With the building of new housing mandated by state law, a potential generational turnover in housing ownership due to our aging population and other conceivable developments coming down the pike, the transfer tax makes sense as big way of closing our budget gap.
- This need not affect most or any current Benicia residents at all in the near or medium terms or even permanently. For one thing, most of us won’t be selling our homes in the foreseeable future. Even more importantly, the City could mandate or at least strongly push for the tax to be paid by property buyers – rather than by sellers or by the two splitting the cost. (Admittedly, whether it could mandate who’d pay the tax was not clear from Tuesday’s discussion, but some sort of “Sense of the Council” suggestion might at least nudge realtors’ arrangements in the right direction.)
- This approach would ensure that buyers enjoying the pleasure of moving into our wonderful town would pay the additional price for doing so, rather than sellers – who may need to maximize their finances on the way out – bearing that burden. Plus, it’s an investment of sorts by the buyers: In paying that price, they would help ensure a balanced Benicia budget that enables it to provide services that in turn increase their property values over the years.
- The additional cost is relatively manageable. While I don’t want to dismiss the significance of a buyer taking on, say, an additional $8,000 of debt due to the RPTT, that works out to less than $50 per month for a 30-year, six percent loan. It’s not a deal-breaker, in other words, particularly given the overbidding that has come to characterize parts of Benicia’s housing market.
- I’m also plugging for the Council and realtors alike to push for the buyers to pay the tax because, frankly, it’s more politically palatable (as well as substantively sustainable) to point out to current residents that they won’t bear the burden of the RPTT.
- The Council discussed, and the staff will explore varying the transfer tax rates according to the size or nature of the transaction. Thus, hypothetically, the tax might be only $5 per $10,000 sale for lower-priced homes and $15 or more for more expensive houses, commercial properties and/or industrial concerns. This approach seems fairest in that it burdens lower priced transactions less. I want to emphasize the “hypothetical” here, however – this all remains to be sorted out in the process that will unfold.
- So what is that process? As I mentioned, in the next several weeks the staff will get back to the Council (and public) with further reporting on options for moving forward. On July 16, there will be another Council meeting on the transfer tax and on the crucial related matter of the City amending its Charter so as to allow the tax. On August 6, the Council may vote on whether to put the two related measures – the Charter change and the RPTT – on the November ballot; the deadline for ballot submissions is August 9.
I’m seeking to summarize a lot here; I’m unavoidably leaving out even more. For instance, there may well be all sorts of exceptions to the potential RPPT rule, including intra-family transfers, division of property in case of divorce, etc. For more on this matter, keep track of future messages from Mayor Young and City Manager Giuliani, as well as postings at the City site.
And spice up your summer by circling the July 16 and August 6 Council meetings on your calendar!
[Steve Golub also blogs about U.S. politics, international developments and lessons America can learn from other countries at his site, A Promised Land, apromisedland.org]
MORE POSTS ABOUT BENICIA FROM AUTHOR STEPHEN GOLUB:
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- Benicia Herald columnist Stephen Golub’s questions about Valero’s ‘Hydrogen Sulfide Saturday’
- Great Stuff at Arts Benicia
- Benicia, Don’t Let the Fox Guard the Henhouse
- It Takes a Village…and a Scott…and a Birdseye
- Important endorsements and qualifications
- Despite Its Problems, Benicians (Mostly) Really Like Benicia
- Don’t Let Duck Hunting Ruin Benicia’s ‘Great Day by the Bay’
- Benicia’s Budget Crisis
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