OAK Measure X

Tiered Transfer Tax

Regular Measure

Amendment to the Real Property Transfer Tax to Establish Tiered Rates

Amends the Oakland property transfer tax to establish tiered rates based on the size of transaction; provides discounts to low- and moderate-income first-time homebuyers.

Vote YES
 

What the Measure Would Do

This measure would change Oakland’s transfer tax rate from a flat tax of 1.5 percent to a graduated tax based on the size of the real estate transaction. The new tax rates would be as follows:
 

Amount of Transfer

Transfer Tax Rate

$300,000 or less

1%

$300,001 to $2,000,000

1.5%

$2,000,001 to $5,000,000

1.75%

$5,000,001 and above

2.5%

The measure would also allow for reductions in the transfer tax rates based on certain criteria. Low- and moderate-income first-time homebuyers would receive a .5 percent reduction in their rate. Low- and moderate-income first-time homebuyers who complete a seismic retrofit and/or install a solar energy system could reduce their transfer tax rate by the cost of these upgrades up to one third of the total amount of the tax.

Real estate transfer taxes are a volatile source of revenue, higher during real estate booms and lower during busts. An analysis by the city administrator of how revenue would differ under a tiered system versus a flat tax of 1.5 percent for the transactions between 2012 and 2018 shows that that revenues collected under the tiered system would have been higher than the flat tax in total for all those years except fiscal year 2011–2012.
 

Fiscal Year

Net Gain Under Tiered System Versus Flat Tax1

2011–2012

($997,565)

2012–2013

$1,700,042

2013–2014

$8,370,410

2014–2015

$7,706,031

2015–2016

$16,977,013

2016–2017

$15,154,240

2017–2018 (through April)

$5,803,831

TOTAL

$54,714,001

The Backstory

Oakland is experiencing a chronic structural deficit. The sponsors of this measure note that while volatile, the current transfer tax has raised between $30 million and $89 million a year since fiscal year 2001–2002, a significant source of revenue for Oakland. They also note that San Francisco has a progressive transfer tax that generates significant revenue.
 

San Francisco Transfer Tax

Transaction Size

Rate

As Percentage

$100-$250,000

$5.00 per $1,000 of sales price

0.50%

$250,001 - $1,000,000

$6.80 per $1,000 of sales price

0.68%

$1,000,001-$5,000,000

$7.50 per $1,000 of sales price

0.75%

$5,000,001-$10,000,000

$22.50 per $1,000 of sales price

2.25%

$10,000,001-$25,000,000

$27.50 per $1,000 of sales price

2.75%

Above $25,000,000

$30.00 per $1,000 of sales value

3.0%


However, should this measure pass, Oakland would have higher transfer tax rates than other jurisdictions in Alameda County.
 

City Transfer Taxes in Alameda County

 

City

Rate

As Percentage

Oakland

$15.00 per $1,000 of sales price

1.50%

Alameda

$12.00 per $1,000 of sales price

1.20%

Albany

$11.50 per $1,000 of sales price

1.15%

Berkeley

$15.00 per $1,000 of sales price

1.50%

Emeryville

$12.00 per $1,000 of sales price

1.20%

Hayward

$4.50 per $1,000 of sales price

0.45%

Piedmont

$13.00 per $1,000 of sales price

1.30%

San Leandro

$6.00 per $1,000 of sales price

0.60%

     

Alameda County Transfer Tax

$1.10 per $1,000 of sales price

0.11%

This measure was placed on the ballot by a 7–0 vote of the City Council. It requires a simple majority (50 percent plus one vote) to pass.

Pros

  • A tiered transfer tax has the potential to raise a significant amount of funding for Oakland, capturing some of the benefit of higher value transactions while easing the burden on lower value transactions. This measure would add much-needed tax revenue to help address Oakland’s budget challenges.
  • Transfer taxes are the least likely of any land tax to have a negative economic impact because they do not affect job creation or business attraction.2 The sale price of property is directly related to the overall level of investment that society has made, and therefore it is appropriate for society to capture some of the upside when property values rise. This is particularly relevant in California, where property taxes don’t grow based on market conditions.
  • This measure supports two important policy goals: increasing seismic safety and solar power use. No additional staff would be needed to process the exemptions and the refunds for seismic and/or solar work. 3

Cons

  • Very few people would be helped by the reduction in the transfer tax for transactions under $300,000 because few properties sell for that little.
  • While increasing the transfer tax itself is unlikely to have a negative impact on real estate development in Oakland, the city should be analyzing the overall impact of all the fees, taxes and requirement on development and should be mindful that at some point the combined requirements on new development could deter new construction.

 

SPUR's Recommendation

This measure has the potential to provide significant income to the City of Oakland while not negatively impacting the economy. Oakland’s transfer tax has not been raised since 1993. While we have some concerns about ongoing increases to the overall set of taxes and fees on new construction, this measure itself is unlikely to have a negative impact on either new development or the economy as a whole.

Vote YES on OAK Measure X - Tiered Transfer Tax
Footnotes 

1 Memorandum “Establishing Tiered Rates for the Assessment of Real Estate Transfer Tax,” from Katano Kasaine, Director of Finance to Sabrina Landreth, June 16, 2018.

2 SPUR Analysis of San Francisco Proposition L, a 2002 measure to increase the transfer tax on properties over $1 million from .75% to 1.5,: https://www.spur.org/publications/voter-guide/2002-11-01/proposition-l-real-property-transfer-tax. Also SPUR analysis of San Francisco Prop N, a 2008 measure to increase the transfer tax on properties over $5 million: https://www.spur.org/publications/voter-guide/2008-11-01/proposition-n-transfer-tax-increase

3 Memorandum “Establishing Tiered Rates for the Assessment of Real Estate Transfer Tax,” from Katano Kasaine, Director of Finance, to Sabrina Landreth, City Administrator, June 16, 2018.

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