Council considers effects of raising levy on property sales
Andrew Edwards, Staff Writer
Posted: 06/27/2010 09:51:17 PM PDT

SAN BERNARDINO – Attempts to solve a $24 million deficit could soon give the City Council a chance to decide if a higher tax on real property sales makes sense.

The question for the council – and maybe San Bernardino voters – is whether the tax will help the city solve its budget problems while blocking absentee landlords from the city, or if it will just impede recovery in the city’s housing market.

“We have a host of absentee landlords and investors that dominate our city’s landscape of property,” Mayor Pat Morris said. “It would probably affect them the greatest. The downside is, of course, they are liable to pass that on to their renters, so it is a mixed opportunity.”

The tax in question is formally called a real estate transfer tax, and is basically a sales tax for real property. The current rate in San Bernardino is $1.10 per $1,000 of sales price. That amount is split evenly between San Bernardino County and City Hall.

An increase in that tax, as proposed in April by City Manager Charles McNeely, would raise the city’s share from 55 cents to $5.

A tax increase of that magnitude could result in nearly $1.6 million in new revenue for the city during the fiscal year that begins Thursday, McNeely projected.

When first presented, the real estate tax seemed to get the most traction among a council that was hesitant to accept other tax options. The council quickly rejected a proposal to broaden San Bernardino’s utility tax.

The council may have a chance to vote on whether to put the tax on the November ballot during its next scheduled budget meeting, which is set for Wednesday. Budget talks tend to be a drawn-out process in San Bernardino, and the council has until Aug. 6 to decide if this or any other tax proposals should have a place on the November ballot.

The Inland Valleys Association of Realtors is already finding a role as a source of organized opposition to the tax.

Ryan Smith, the group’s government affairs director, spoke against the proposal during a City Council meeting and reiterated his views by telephone on Thursday.

“It’s still a really, really, really tough market out there,” Smith said. “On a $200,000 house, that (tax increase) is going to be $1,000, and I think that’s going to be a huge burden on someone buying properties.”

Smith acknowledged that city leaders in San Bernardino and other towns often are concerned about absentee landlords, but added that someone buying an investment property is not necessarily an irresponsible person.

An investor may buy a foreclosed house and make repairs that others with less access to cash would not be able to do, Smith said. Such an investor could then sell or rent a house that would otherwise be vacant.

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