This ordinance would raise the tax paid to the city when properties worth $5 million or more change owners.
The Board of Supervisors voted 10-1 to put this initiative on the ballot. Voting for: John Avalos, President London Breed, David Campos, Malia Cohen, Jane Kim, Eric Mar, Aaron Peskin, Katy Tang, Scott Wiener and Norman Yee. Voting against: Mark Farrell.
|Most of the new revenue, from Proposition W’s passage, would likely come from the sales or transfers of high-end office buildings in downtown San Francisco. Photo by Noah Arroyo / San Francisco Public Press|
Why is this on the ballot?
The supporters of Proposition W argue that San Francisco’s real estate boom has garnered big profits for property owners, and that this tax would simply take a portion of those gains to cover the costs of vital services — such as eliminating tuition for students at City College of San Francisco.
Opponents counter that the additional tax revenue could be spent on anything, and they imply that City Hall should spend smarter instead of asking for more money.
What would it do and at what cost?
If voters passed Proposition W, then the city’s property transfer tax rates would rise for real estate with assessed values greater than $5 million.
The property transfer tax is applied for every $500 of assessed value. For example, under the current tax rate a property worth $25 million would be taxed at $12.50 for each $500 of assessed value, resulting in a tax of $625,000.
In San Francisco, this tax is progressive; the greater the property’s assessed value, the higher the tax rate. Proposition W would change those rates in the following ways:
|PROPERTY VALUE||OLD TRANSFER TAX RATE||NEW RATE|
At the proposed new rate — $13.75 — the transfer tax bill on that $25 million building would rise to $750,000, an additional $125,000 for City Hall.
The tax burden would be borne primarily by the owners of high-end office buildings downtown, according to June estimates from the San Francisco Controller’s Office. That is because 80 percent of the revenue would come from transfers of properties worth more than $25 million, and few homes are worth that much.
The remaining 20 percent of the city’s projected revenue would come from properties with assessed values of $5 million to $25 million, which would include apartment complexes.
The tax burden would also be felt by the businesses and residents in those buildings, if the property owner chose to pass on some of the tax.
The measure’s proponents have suggested this tax revenue would be used to help homeless families, build more affordable housing or lower the cost of attending City College. But the money would go into the general fund, where it could be used for any public purpose.
The city controller has estimated that although Proposition W would generate an annual average of $44 million, based on transactions from the previous economic cycle, its overall effect on the size of San Francisco’s economy would be “slightly negative.”
Meanwhile, the new tax rates would cause the private sector to shrink slightly over the next 20 years, as rents increased and deterred tenant businesses from staying or setting up shop, the controller projects. City Hall would presumably use its new revenue to hire additional public-sector workers, offsetting private-sector losses. But because the private jobs would have had “higher productivity,” the office said, the local economy would experience a net loss.
The transfer tax “is the City’s most volatile revenue source,” the controller wrote, “and estimates based on prior years’ activity may not be predictive of future revenues.”
(An August estimate by the controller put that figure at $45 million, but the office’s staff has clarified with the San Francisco Public Press that this was a rounding error.)
Who officially proposed it?
Supervisors Jane Kim, David Campos, Aaron Peskin, Eric Mar, John Avalos and Norman Yee.
Kim wrote the official proponent argument.
Who officially opposes it?
The San Francisco Apartment Association.
Vote needed to pass
Simple majority — 50 percent plus one
Effective date if passed
Follow the money
One committee is spending money to support Proposition W: “Yes on Prop W, Fair Share for Free City College and Stronger SF Services.”
Follow the money at the San Francisco Ethics Commission: all Proposition W filings.
Endorsements: our methodology
The Public Press chose to count endorsements from organizations that backed multiple candidates or ballot measures, and that made those endorsements available online. We did not count endorsements from individuals.
If you think we missed an important organization, please tell us. We’d love to hear from you.
Tracked endorsements by organization
Written by: Noah Arroyo
Published: Sept. 30, 2016