Orinda's City Council has decided not to pursue a real estate transfer tax as a source of revenue to help reduce the cost of the City's overwhelming infrastructure needs-at least not this year.
With road and drain repair needs exceeding $70 million and a capital improvement budget of just over $3 million that barely scrapes the surface of problem, Orinda's Council has long been in search of new revenue sources. Moving to become a charter city and institute a property transfer tax was the revenue option on the table for discussion at the June 1st City Council meeting. As a general law city, Orinda currently has a real estate transfer tax rate set at .055% of the value of the property being sold which will generate an estimated $90,000 for the City in the next fiscal year.
The property transfer tax rates for charter cities in the Bay Area encompass a range up to the 1.3% rate in Piedmont. Orinda's Finance Advisory Committee has estimated that a 1% property transfer tax rate, which equates to $10,000 on a million dollar home sale, could generate $2 million annually for the city. Voters in a charter city can approve a property transfer tax by a simple majority and designate who bears the costs of the tax in the transaction. According to Tom O'Toole of the Contra Costa Association of Realtors, the seller typically bears the cost of the tax but in higher end markets it's often split evenly between the buyer and seller. Council Member Amy Worth noted that because the real estate transfer tax is a general tax, it can not be designated for a specific purpose such as infrastructure support.
Lafayette City Council members shared information with the Orinda Council that they had compiled regarding the charter city process and property transfer tax option. Lafayette is considering placing a charter city and real estate transfer tax initiative on the November ballot and has embarked on a community-wide education process on the issue in which they have invested $50,000.
Members of Orinda's real estate business community who were present at the meeting were not supportive of the real estate transfer tax option. Local realtors Mary Chatton Brown and Jeannie Anderson both stated that they felt the additional fee would negatively impact housing sales in Orinda. Anderson added that given the vicissitudes of the real estate market, she felt the tax represented an unreliable source of revenue. However, the Council did not seem persuaded by the argument that a modest transfer tax would serve as a real disincentive in the market.
"The only viable alternative that we can currently consider to address the infrastructure problem facing the city is the real estate transfer tax," stated Council Member Sue Severson, who supported the city moving forward with the steps necessary for a ballot initiative like Lafayette. Although the other Council members agreed that charter city status and a voter-approved real estate transfer tax should be pursued, they felt the timeframe to educate residents in order to secure a positive outcome in November was too tight. "I don't think we can do it between now and November," stated Mayor Tom McCormick.
Ballot initiatives to adopt a charter and approve property transfer taxes must be placed on the November ballot in an even election year. The Council directed staff to begin to develop a timeline and action plan for considering a ballot initiative in 2012.
With road and drain repair needs exceeding $70 million and a capital improvement budget of just over $3 million that barely scrapes the surface of problem, Orinda's Council has long been in search of new revenue sources. Moving to become a charter city and institute a property transfer tax was the revenue option on the table for discussion at the June 1st City Council meeting. As a general law city, Orinda currently has a real estate transfer tax rate set at .055% of the value of the property being sold which will generate an estimated $90,000 for the City in the next fiscal year.
The property transfer tax rates for charter cities in the Bay Area encompass a range up to the 1.3% rate in Piedmont. Orinda's Finance Advisory Committee has estimated that a 1% property transfer tax rate, which equates to $10,000 on a million dollar home sale, could generate $2 million annually for the city. Voters in a charter city can approve a property transfer tax by a simple majority and designate who bears the costs of the tax in the transaction. According to Tom O'Toole of the Contra Costa Association of Realtors, the seller typically bears the cost of the tax but in higher end markets it's often split evenly between the buyer and seller. Council Member Amy Worth noted that because the real estate transfer tax is a general tax, it can not be designated for a specific purpose such as infrastructure support.
Lafayette City Council members shared information with the Orinda Council that they had compiled regarding the charter city process and property transfer tax option. Lafayette is considering placing a charter city and real estate transfer tax initiative on the November ballot and has embarked on a community-wide education process on the issue in which they have invested $50,000.
Members of Orinda's real estate business community who were present at the meeting were not supportive of the real estate transfer tax option. Local realtors Mary Chatton Brown and Jeannie Anderson both stated that they felt the additional fee would negatively impact housing sales in Orinda. Anderson added that given the vicissitudes of the real estate market, she felt the tax represented an unreliable source of revenue. However, the Council did not seem persuaded by the argument that a modest transfer tax would serve as a real disincentive in the market.
"The only viable alternative that we can currently consider to address the infrastructure problem facing the city is the real estate transfer tax," stated Council Member Sue Severson, who supported the city moving forward with the steps necessary for a ballot initiative like Lafayette. Although the other Council members agreed that charter city status and a voter-approved real estate transfer tax should be pursued, they felt the timeframe to educate residents in order to secure a positive outcome in November was too tight. "I don't think we can do it between now and November," stated Mayor Tom McCormick.
Ballot initiatives to adopt a charter and approve property transfer taxes must be placed on the November ballot in an even election year. The Council directed staff to begin to develop a timeline and action plan for considering a ballot initiative in 2012.
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