Transfer tax increase to become contentious issue for Richmond voters

In November, Richmond residents will vote whether or not to raise the “documentary transfer tax” that property owners are required to pay on real estate sales. Photo by Catherine Schuknecht

In November, Richmond residents will vote whether or not to raise the “documentary transfer tax” that property owners are required to pay on real estate sales. Photo by Catherine Schuknecht

Rent control has been the hot-button issue in Richmond this election season: Earlier this month, a city council meeting devolved into a shouting match after the council failed to pass a highly anticipated ban on certain evictions and high rent increases.

But the rent control ordinance—Measure L—isn’t the only measure on the ballot this year. In November, Richmond residents will also vote on Measure M, an ordinance to raise the “documentary transfer tax” that property owners are required to pay on real estate sales.

Under the current law, the city collects $7 for every $1,000 of a property’s sale price. If passed, Measure M would raise this tax rate to $10 dollars for properties sold for less than $400,000 and to $15 for properties priced at $400,000 or more.

Yet Measure M has been largely overlooked this election season.

“I think it’s sort of off the radar,” said Mayor Tom Butt, who originally brought the ballot measure to the city council in June. Butt added that he thinks many residents are likely to vote against the measure by default when they hear the phrase “tax increase.”

If it passes, Measure M could generate between $3 and $5 million in additional tax revenue for Richmond, depending on the real estate market, said Richmond Finance Director Belinda Warner, who conducted the city’s official financial analysis of the measure.

However, opponents of the tax increase have expressed concern that the council may not be capable of managing a potential surplus.

“Frankly, our opinion of the Richmond City Council government is that they do a very poor job,” said Contra Costa Taxpayers Association president Jack Weir, who submitted the official argument against Measure M. “We think they really don’t have a revenue problem; what they really have is a spending problem.”

Councilmember Vinay Pimple is also concerned that the measure will aggravate the council’s reputation for mismanaging the city budget.

A similar measure is on the ballot in San Francisco, where the Board of Supervisors is planning to use the additional revenue to fund the City College of San Francisco and street-tree maintenance, should the measure pass.

But in Richmond, it remains unclear where the revenue from Measure M would be directed.

Councilmember Pimple said he originally suggested using the transfer tax to offset the cost of the Richmond Kids First Initiative, which is slated to be on the ballot in 2018, but his colleagues on the council dismissed the idea. Pimple was the only councilmember who chose to abstain instead of voting to add Measure M to this November’s ballot.

According to Butt, the funds will likely go toward providing appropriate compensation to city employees, including police officers, firefighters and librarians. However, it will ultimately be up to city council to allocate the additional tax revenue if voters pass Measure M in November.

15 Comments

  1. Confidential Commenter

    No thanks. While I’m not anti-tax in general, I think the RPA bloc has amply demonstrated their fiscal incompetence and the thought of a RPA majority not only gives me the shivers but has me reaching for my wallet as well. We need more Vinay Pimples on the city council before I start supporting adding even more taxes to our already full plate of them.

    • Richmond4ever

      Amen. While the City of Richmond has pressing financial needs, giving the RPA a surplus is like giving your kids a credit card.

      Vote Vinay Pimple.

  2. Zoey Mom

    Not a big fan of more property taxes, but this is one that isn’t so odious. And certainly, RPA or no, the city needs some new income.

    After that we can get rid of the corruption like we found in the housing department.

    • ritchie cook

      Yes, the wealthy never want to pay their fair share!!! They have only shifted taxes to the middle and lower income folks. By the way how is it that real estate is exempted from sales tax.? Another bit of social engineering by rich? I like to call it a mizer eradication initiative. Go Pimple!!!!!

  3. Sandra Davenport

    Mr. Mayor, we are not falling for this. One big problem is the higher tax rate is for property over $400,000. Everything now is over $400,000. We are not going to continue to pay for the Council’s misuse of funds. And – get the RPA out of there. They are destroying us.

    • Don Gosney

      I live in an 81 year old piece of cr** crackerbox in a serious state of disrepair and Zillow says that I can get $450,000 for it. And the proponents of this measure are trying to sell us on the idea that only rich people will be affected by this tax?

      Puhleeze–tell us a different lie that is more believable.

      [One of the Council candidates is still trying to sell us on the concept that his Measure U forever tax (will require a ballot measure to repeal it) only applies to to Chevron and rich people. Does that mean that we poor people making purchases here in Richmond are exempt?]

      • ritchie cook

        This is a transfer fee. The person buying the house will pay it , not the person living in it. If someone can afford $450,000 they can afford a few grand for the the city. Whats wrong with a city that has a little money to invest in the community. As far as the RPA goes the city is much improved since Gayle arrived and continues to be so. By their efforts landlords have…. what doubled their rents….. They should be thanking RPA because unlike them they are improving the city and their opponents financially benefit.

        • remaining unconvinced

          Because it adds to the cost of the home, but not the perceived value AND I would prefer to have exact info on what the money will be used for. Not the description given by Mayor Butt.

      • ritchie cook

        Your house probably could use some work , but please don’t get started if at all until after Halloween. Wow!!!! From the peeling paint, the over grown bushes, the patchy lawn and the best touch … What is that as a window covering? an old faded sheet? Fantastic!!!! Central casting couldn’t do better!!!Ah to be 9 years old again dressed like the Lone Ranger and timidly shaking in my Lone Ranger boots while being egged on by fellow goblin friends. This is a community service money can’t buy.

  4. ritchie cook

    Am I the only one who doesn’t want this place to be a slum??The transfer fee would add to the cost ,but unlike the seemingly endless escrow fees, consumer title insurance( which by the way only insure against clouds that have been recorded) real estate commissions, loan fees and interest the buyer recieves in return a community that has something to work with for ….roads , cops,, after school programs etc….Why is a sales tax not levied on houses?Why are they given preferential
    treatment?

    • Jeffrey Wright

      The question has been posed as to why a sales tax is not levied on houses? Depending upon how one evaluates the current fee structure in Richmond, CA, a “sales tax” on real estate transactions is already in place. It is called the City Transfer Tax. Currently every real estate sales transaction of any class/type is levied at the rate of $7.00 per thousand of value. Today a $400,000 sales transaction will generate $2,800.00 of revenue for the City of Richmond. If Measure M passes that same $400,000 sales transaction will generate $6,000.00 in revenue for the City of Richmond. Contra Costa County levies a county transfer tax of $1.10 per thousand and that is countywide. Richmond is the ONLY city in Contra Costa County that currently charges a separate transfer tax and this transfer tax has been in place for many years. The purpose of Measure M is to increase the rate of the tax (“sales tax”) in order to generate more general fund revenue. The manner in which transfer taxes are commonly handled for residential real estate transactions in Richmond is for the seller to pay all of the county transfer tax. The buyer and seller usually split the much larger city transfer tax. So again, going back to the $400,000 transaction, the county transfer tax is $440.00 and the city transfer tax is $2,800.00. The seller typically would pay the $440.00 for the county transfer tax plus $1,400.00 which represents half of the city transfer tax. The buyer would pay the other half or $1,400.00.
      Using our same $400,000 example, if Measure M passes the seller will be paying $3,000.00 in city transfer taxes (plus the separate county transfer tax, $440.00 in our example) and the buyer will be paying $3,000.00 in city transfer taxes. The voters will have to determine if they believe that the additional revenue generated by a tax rate increase in the city transfer tax is best served by going to the city’s general fund to help plug what seems to be a perpetual hole in the city’s budget or would there be greater economic impact by those dollars remaining with the buyers and sellers of real estate to stimulate the economy through their purchases or by them exercising some means of good stewardship with money that will still be in their possession. So in a nutshell, Richmond already has a “real estate sales tax” and the voters get to decide on November 8, 2016 if they want to increase the “real estate sales tax” in Richmond, the only city in Contra Costa County with a SEPARATE “real estate sales tax.”

      • ritchie cook

        Everything else is now taxed at … wow is it up to 10%. Remember before the 1% transferred corporate taxes,lowered their capital gains, inheritance taxes,personal taxes and everything else they could on to the rest of us? Have we been hornswoggled!!!! Thanks for the numbers.

      • Owen

        Remember when peoplle purchase a home they finance the bulk of the money, to include the taxes that are charged interest over 30 years. The city of Richmond is trying to make Richmond more desirable, raising fees and taxes to balance the budget may chase people away from Richmond. Now there is talk of Neighborhood Parking Permits and parking meters on 23rd and San Pablo Ave.

  5. mike rose

    Mayor Butt in his latest e forum post states that the doubled transfer tax will affect “only” 4% of homeowners, as that percentage of properties are sold each year.
    He says 96% of homeowners will not be affected.
    This is misleading as this higher transfer tax rate is going to be permanent and assuming unchanged rate of sales in 12 years it is going to affect more than 50% of property owners.
    By the same token it is safe to assume that in 24 years every property owner is going to be negatively affected by extraction of thousands of dollars at the sale of the property.

  6. Tom J.

    Real estate transfer tax revenues in good times should be treated as windfalls and used to pay down debt or increase reserves, thus improving the City’s credit rating (Which, frankly, can only go up at this point. Sad truth). Budgeting for things like salaries, benefits, etc. around a highly-volatile revenue stream is financially irresponsible.

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