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Tuesday November 3, 2020 — California General Election
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County

City and County of San Francisco
Proposition I - Majority Approval Required

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Election Results

Passing

235,884 votes yes (57.55%)

173,984 votes no (42.45%)

Shall the City permanently increase the transfer tax rate on sales and leases of 35 years or more of real estate, to 5.50% on those transactions of $10 million to $25 million, and to 6.00% on those transactions of $25 million or more, for an estimated average revenue of $196 million a year?

What is this proposal?

Pros & Cons — Unbiased explanation with arguments for and against

Information provided by League of Women Voters of San Francisco

The Question

Shall the City permanently double the transfer tax rate on sales and leases of 35 years or more on real estate transactions with a value of $10 million to $25 million, and transactions with a value of $25 million or more for an estimated average revenue of $196 million a year?

Note: This Pro/Con information is also available in Chinese and Spanish.

The Situation

The City collects a transfer tax on certain sales as well as leases of 35 years or more of residential and commercial real estate in San Francisco. The tax rate usually depends on the real estate’s sale price. The current transfer tax rates are:

 

Sale Price of Real Estate

Current Tax Rate

More than $100 and less than or equal to $250,000

0.50%

More than $250,000 and less than $1,000,000

0.68%

At least $1,000,000 and less than $5,000,000

0.75%

At least $5,000,000 and less than $10,000,000

2.25%

At least $10,000,000 and less than $25,000,000

2.75%

At least $25,000,000

3.00% 

 

If property is sold to the City, the transfer tax does not apply. If property is sold to qualified affordable housing nonprofits, the transfer tax rate is no greater than 0.75%.

 

State law limits the amount of revenue, including tax revenue, the City can spend each year. State law authorizes San Francisco voters to approve increases to this limit for a maximum of four years.

 

The money collected from this tax goes into the City’s General Fund.

The Proposal

Proposition I would increase the transfer tax rate on certain sales as well as leases of 35 years or more of real estate with a price of at least $10 million. For property with a sale price of less than $10 million, the current transfer tax rate would not change. The proposed transfer tax rates are:

 

Sale Price of Real Estate

Proposed Tax Rate

More than $100 and less than or equal to $250,000

0.50% (no change)

More than $250,000 and less than $1,000,000

0.68% (no change)

At least $1,000,000 and less than $5,000,000

0.75% (no change)

At least $5,000,000 and less than $10,000,000

2.25% (no change)

At least $10,000,000 and less than $25,000,000

5.50%

At least $25,000,000

6.00%

 

The transfer tax rate increase would not apply if property is sold to the City or to qualified affordable housing nonprofits.

 

If the measure passes, the new tax rates would go into effect on January 21, 2021.

 

Pursuant to applicable laws, Proposition I would also increase the state’s limit on the City’s annual tax revenue spending by the amount of additional taxes collected under the proposed rate increases. The increased limit would last for four years from November 3, 2020.

 

A “YES” Vote Means: If you vote “yes,” you want to double the transfer tax rate on sales and leases of 35 years or more of real estate with a value of at least $10 million.

 

A “NO” Vote Means: If you vote “no,” you do not want to make these changes.

 

Fiscal effect

Controller's statement: sfelections.sfgov.org/sites/default/files/Documents/candidates/2020Nov/Prop%20I%20-%20Transfer%20Tax.pdf

Supporters say

 At a time when the City faces a projected deficit of between $1.1 billion and $1.7 billion over the next two years, this progressive tax measure will generate much-needed emergency funds.

 The Board of Supervisors unanimously passed a resolution making emergency rent relief and permanently affordable housing a top priority for new revenue. This measure will enable health workers and other essential service providers to live and work in the City.

 The tax increase is only on sales and leases having a value of $10 million or more and will not impact homeowners, renters, or small business owners.

 Proposition I raises revenue from those who can afford to pay. It is asking the wealthy to pay their fair share.

Opponents say

The money raised by this tax will go into the General Fund and there is no oversight of how it is to be spent.

San Francisco’s transfer tax is already among the highest in the country. If it is increased, businesses could choose to move elsewhere. Already approved market rate building may never be built, exacerbating our housing shortage.

The taxes could be passed on to small businesses and renters who are struggling to stay afloat during the COVID-19 crisis.

The City will not be able to rely on the funds raised by this measure because doubling the transfer tax on transactions over $10 million could lead to unpredictable tax avoidance strategies according to the Controller.

Details — Official information

YES vote means

A "YES" Vote Means: If you vote "yes," you want to increase the transfer tax rate on sales as well as leases of 35 years or more of real estate with a price of at least $10 million.

NO vote means

A "NO" Vote Means: If you vote "no," you do not want to make these changes.

Summary

Ballot Simplification Committee

The Way It Is Now: The City collects a transfer tax on certain sales as well as leases of 35 years or more of residential and commercial real estate in San Francisco. The tax rate usually depends on the real estate’s sale price. The current transfer tax rates are:

Sale Price of Real Estate                                                    Current Tax Rate

More than $100 and less than or equal to $250,000     0.50%

More than $250,000 and less than $1,000,000             0.68%

At least $1,000,000 and less than $5,000,000              0.75%

At least $5,000,000 and less than $10,000,000            2.25%

At least $10,000,000 and less than $25,000,000          2.75%

At least $25,000,000                                                         3.00%

If property is sold to the City, the transfer tax does not apply. If property is sold to qualified affordable housing nonprofits, the transfer tax rate is no greater than 0.75%.

State law limits the amount of revenue, including tax revenue, the City can spend each year. State law authorizes San Francisco voters to approve increases to this limit for a maximum of four years.

The money collected from this tax goes into the City’s General Fund.

The Proposal: Proposition I would increase the transfer tax rate on certain sales as well as leases of 35 years or more of real estate with a price of at least $10 million. For property with a sale price of less than $10 million, the current tax rate would not change. The proposed tax rates are:

Sale Price of Real Estate                                                    Proposed Tax Rate

More than $100 and less than or equal to $250,000     0.50% (no change)

More than $250,000 and less than $1,000,000             0.68% (no change)

At least $1,000,000 and less than $5,000,000              0.75% (no change)

At least $5,000,000 and less than $10,000,000            2.25% (no change)

At least $10,000,000 and less than $25,000,000          5.50%

At least $25,000,000                                                         6.00%

The transfer tax rate increase would not apply if property is sold to the City or to qualified affordable housing nonprofits.

Proposition I would also increase the state’s limit on the City’s annual tax revenue spending by the amount of additional taxes collected under the proposed rate increases. The increased limit would last for four years.

Financial effect

City Controller Ben Rosenfield

The proposed ordinance would increase the real property transfer tax assessed on transfers in excess of $10 million and would, in my opinion, generate significant but volatile additional revenues for government services.

The ordinance would increase the property transfer tax rate on transactions valued between $10 million and less than $25 million from 2.75% to 5.5%, and the rate on transactions valued at $25 million and above from 3% to 6%. Applying these tax rates and current estimated property values to transactions that occurred during the most recent economic cycle (from 2008 to 2020), annual revenue resulting from this proposition would have ranged from a low of $13 million to a high of $346 million, with an average of $196 million. However, doubling the tax rate on these transactions would likely lead to a variety of tax avoidance behaviors that are difficult to project in both form and timing. Changes in sales prices, volume, and transaction form, as well as effects on new construction, could affect both transfer tax and property tax revenues.

While we estimate that the proposed ordinance may result in average additional revenue of $196 million per year, it is important to note this is the City’s most volatile revenue source and estimates based on prior years’ activity may not be predictive of future revenues. The proposed tax measure would further increase the volatility of this source.

Published Arguments — Arguments for and against

More information

News (3)

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Who supports or opposes this measure?

Yes on Proposition I

Organizations (3)

Elected & Appointed Officials (0)
No on Proposition I

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Elected & Appointed Officials (0)

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