With seemingly impossible budgetary issues facing the City of San Carlos, it may be time to start thinking outside the box with regard to tax revenue. The one thing that we can all agree on is that we all pay plenty to live here, and the thought of San Carlos residents paying additional sales and/or parcel taxes is not appealing to the majority. What if there were a way to generate additional tax revenue from those who are moving into San Carlos? A city transfer tax on real estate transactions would do just that.
Many cities have chosen this option and been successful. The nearest city to San Carlos to succeed with this measure is the City of San Mateo. Currently, any real estate transaction requires a payment of $5.50 per $1,000 transferred. On a $1,000,000 purchase, the city transfer tax would be $1,000,000/1,000 = 1,000. 1,000 x $5.50 = $5,500. With 250 transactions a year, the additional revenue is $1,375,000 (assuming that $1,000,000 is the average sales price).
In the City of San Mateo, the default is to have the buyer and seller split the city transfer tax. However, this is negotiable and depending on how the city transfer tax is written, the presumption could stay with the buyer for the full amount.
Nobody is in favor of new taxes, however, the city transfer tax may be a viable option for the sole reason that it pushes a majority of the expense to those who are not already living here. Any worry about possible effects on real estate valuations in San Carlos are negligible. Having sold many properties in San Mateo, I can tell you that the city transfer tax has never played a role in what buyers are offering on homes. In fact, for many, it’s an afterthought.
The financial crisis in San Carlos is a serious one. Even with the proposed drastic cuts to fire, police and city staff, the City of San Carlos is still going to fall short of a budget that makes sense going forward.