San Jose lawmakers approve new tax for primary ballot

A hotly contested real property transfer tax will be placed on the March 2020 ballot, but it wasn’t easy getting there. Several lawmakers reignited a debate Tuesday around putting the measure on the ballot before settling on a draft.

In a 8-3 vote, the councilors approved the ballot draft language for next year’s primary election, but the move was met with disagreement from many councilmembers who expressed concerns about residents being overtaxed and the tax revenue streaming into the city’s general fund, which can be used for any purpose.

Councilmembers Johnny Khamis, Dev Davis and Sergio Jimenez dissented.

“There’s no question that homelessness and housing supply are our biggest issues in San Jose and all of the Bay Area,” Davis said. “I won’t be voting for it today because this measure is revenue that would go straight to the general fund. There is no guarantee that this money will ever be spent on homelessness and housing, or that these items will continue to be the focus for this revenue over time and with other councils.”

Khamis agreed, adding that it’s “dishonest” to call it a tax for housing when it’s a general tax and that the only way to increase affordability is for the city to reduce the cost of construction, find new land to develop on and use existing funds.

But Councilmember Sylvia Arenas rebutted many of her colleagues’ concerns about the measure being a general tax, adding that recent polling showed voters favored the potential tax. “This is what is palatable to them, which is most important, so it doesn’t matter whether we want a specific tax or general tax,” Arenas added. “From the polling, this is what they’re willing to approve.”

The potential ballot draft will include strong accountability and transparency measures, requiring a 60-day notice and a two-thirds council vote before lawmakers shift funding, and creating a citizens oversight committee. In addition, the draft will include exemptions for property sales valued under $2 million based on inflation.

The exemption was recommended by Mayor Sam Liccardo and Councilmembers Pam Foley and Lan Diep, who said first time home-buyers will be protected from a potential “barrier entry” into the housing market. But Vice Mayor Chappie Jones raised concerns that the potential tax is not actually targeting the “wealthy” demographic it’s supposed to, as many of his constituents live in homes valued at more than $2 million but are retired or living on fixed incomes.

“This is not a tax on wealthy residents. These are elderly people who’ve worked hard, saved a lot of their savings in their home and they’re counting on that,” Jones said. “If they have to sell their house, it’s not just this transfer tax but it’s also other taxes, commissions and fees that will eat up their life savings.”

While city officials said nearly 98 percent of all homeowners would not be affected by the tax, Jones said 42 out of the 229 San Jose homes valued at $2 million or more that sold last year were in his district.

But the mayor said home prices have been decreasing by 10 percent over the last year. Councilmember Raul Peralez added that selling a home over the $2 million threshold will not “make or break” a person’s retirement considering the tax will be evenly split between the buyer and seller, decreasing the burden on the property owner.

Still, Khamis said taxpayers are growing weary of new taxes and called on the city to use funds offered by big tech companies.

But Councilmember Maya Esparza said those funds won’t help solve all of San Jose’s problems, considering they’ll be distributed to multiple cities, and even to the state. Liccardo agreed, saying that while the city beefed up resources in emergency response and fire department, it lacks the nearly $40 million in funds from the loss if its redevelopment agency, which was devoted to building affordable housing.

The new tax can generate up to $70 million a year, according to housing officials.

“One thing we have not improved is the state of homelessness in our city, or the lack of affordable housing,” Liccardo said. “We are continuing to fail to meet our goals in part because for many years we had the assistance of redevelopment. That money went away, and as a result we have struggled mightily. We need more funding to address these crises that we face. ”

Esparza asked city officials to make the new ballot measure available in multiple languages and to ensure all residents are informed before voting.

New fees for landlords who violate rental laws 

Also on Tuesday, the City Council voted unanimously to implement new fees for landlords who violate the city’s rental laws, including just cause eviction, rent control and the Ellis Act.

Jimenez was absent for the vote.

In the past, a court would mandate a fee of up to $10,000 to landlords who violated these laws, but housing officials said they hope to cut out that process through the city-mandated fines. The city however can still pursue any civil or criminal proceedings for the same violations.

Several property owners said the tax places an undue burden on “mom and pop” landlords, potentially forcing them out of the market. But housing officials said the fees will ensure landlords comply with the updated San Jose tenant protections, and can be helpful to resolving disputes between tenants and landlords before any legal action is taken.

Violations are separated into two categories: Curable, which means they can be resolved and fees can potentially be waived, or non-curable, classified as potentially criminal and more severe. Violators will be able to contest any citation.

“What we’re hoping is that they will continue to communicate with us and with their landlord and fix the problem,” said Housing Director Jacky Morales-Ferrand.

A list of the new fines can be found here.

The new citations go into effect in Spring 2020.

Contact Nadia Lopez at [email protected] or follow @n_llopez on Twitter.

Editor’s Note: A previous version of this article incorrectly reported a quote from San Jose Mayor Sam Liccardo who said home prices have been decreasing by 10 percent over the last year. We regret the error.