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Home My WebLink About0540.091~'ii-. . , . " .'.". . .:. '-' .. December 5, 19S1 THE HONORABLE CITY COUNCIL Palo Alto, California Attention: Finance Committee ADDITIONAL SUJtVEY INJ'ORXATION ON REAL PRQ.FERTY TAANsfER TAX Members of the Council: Report in Brief This report provides follow-up information requested by the Finance Committee on November 14 on t~e real property transfer tax. After gathering and reviewing additional data on the 17 cities initially surveyed, plus information from the five entities specifically identified by Council Member Levy, staff recommends City council action to replace the existing real p:roperty transfer-tax (at a current rate of $0.275 per $500 of assessed value) with a real property conveyance tax at a rat~ of $1.65 per $500 of assessed value. This chang~ will result in approximately $1.2 million in net additional revenue to the General Fund. Tax Rates in SU:l'_~.9unding Cities staff has contccted surrounding cities to deterKine the level and date of enactment for their real property transfer tax or real property conveyance tax. The results of that survey are shown below, with t~e highest tax rates first. Also included are the current and recommended rates for Palo Alto. When cities were first contacted, five cities gave the rate the taxpayer pai~ rather than the r-ate that the city received. The chart has been changed to give the rate the ta>:payer pays per $500 valuation, and the distribution of the revenues to each city a~d county. In instituting a real property conveyance tax, qui shes the document transfer tax to the county~ CMR:540:91 Pal~ Alto relin Estimates based ·~~fi . " .,-";:' - on housing sales and real property transfer ta:.< revenue from August 1990 to July 1991 yield total collectio~s of nearly $1.5 million, less the 3 percent county collection fee and the loss of $240,000 i~ revenue from the real property transfer ~ax. th~s generating a net revenue increase of $1.:2 million. As can be seen in the table below, this would raise the rate paid in Palo Alto on the transfer of real estate from $.55 to $2.~C per $500 valuation. Rates per $500 valuati.on: Taxpayer City county Year Jurisdicti..q.Q. Pays Receives Recej.ves Passed Berkeley S8.05 S7.50 SO.55 1991 Oakland 5.55 5.00 0.55 1991 Pied'll.ont 3.8 D 3.25 0.55 1991 San Mateo 3.05 2.50 0.55 1977 Alameda 2.75 2.20 0.55 1978 .Albany 2.75-2.20 0.55 1987 San Francisco 2.50 2.50 "/A Mountain View 2.20 1. 65 0.55 1973 Palo Alto (recommended) 2.20 1. 65 0.55 San Jose 2.20 1. 65 0.55 1972 San Leandro 1. 55 1. 00 0.55 Burlingame 0.55 0.275 0.275 1967 Daly city 0.55 0.275 0.275 1967 Fremont 0.55 0.275 0.275 1967 Los Altos 0.55 0.275 0.275 1967 Los ~ltos Hills 0.55 0.275 0.275 1967 Menlo Park 0.55 0.275 0.275 1967 Palo Alto (current) 0.55 0.275 0.275 1967 Portola Valley 0.55 0.275 0.275 1967 Redwood city 0.55 0.275 0.275 1978 South San Francisco 0.55 0.275 0.275 1967 Sunnyvale 0.55 0.275 0.275 1967 Woodside 0.55 0.275 0.275 1967 NJA ~ Not Applicable CMR: 540:91 2 '-•. staff also asked these cities if they had any plans to increase the rate~ General la'oJ" cities cannot change the tal!: rate. Berks-ley, Oakland and Piedmont raised their rates this year. Pied~ont, San Francisco and San Jose a£e considering incr~ases. As the Finance Co~~ittee requested, staff has also contacted the real estate community. R.V~~U. Est~ The real property convel'ance tax applies to both businesg and residential property. The current Palo Alto tax rate of $0.275 per $500 of valUe provided approximately $240,000 in xevenues in fiscal year 1990-91. At a. rate of $L 65 per $500, reven.ue in 1990-91 ~ould have been $1.47 million, an increase of approximately 500 percent. The County of Santa Clara charges a ) percent administra tion fee for tax collectio!'l. Reeommendation staff recommends the City ccuncil adopt a real property conveyanc~ tax to replace the real property transfer tax. The rate of the new tax would be $1.65 per $500 of valuation. If Council approves the recommendation, staff ..... ill return 'Wi th proposed changes to the Palo Alto Municipal Code. Respe~tfully submitted, :0Jj~,-~ulJ Director o~ance wh:r:I~~~N~--··- City 1anzgt;r cc: Palo Alto Board of Realtors Palo Alto Chamber of Commerce Related Staff Reports~ C}~:49]:91 CMR:540:91 3 •