The Los Angeles City Council voted Tuesday to study the effects of doubling the city’s tax on property sales and increasing a tax on private parking lots.
The council acted on the recommendation of City Administrative Officer Miguel Santana, who said the increases are needed because the city is on pace to spend more money than it takes in for years to come.
In a report to Mayor Antonio Villaraigosa and the council, Santana said city revenues are projected to grow 2.5 percent over the next four years, while spending – mainly from employee salaries, pensions, healthcare and workers’ compensation – are predicted to rise faster at 3.9 percent.
The city is facing a structural budget deficit between $200 million and $250 million for the 2013-14 fiscal year.
Without the tax increases, Santana said city officials would likely be forced to shrink the size of the police and fire departments, which have largely been spared from severe budget cuts in recent years.
Santana recommended that the council ask voters in March to approve doubling the documentary transfer tax, which property owners pay when they sell a home or building, from $4.50 to $9.50 per every $1,000 of a property’s value. Raising the tax would generate an additional $100 million or so per year for the city, based on current home sales.
He also recommended asking voters to raise the parking occupancy tax from 10 percent to 15 percent of parking charges, a move budget analysts estimate would raise an additional $45 million above what the city collects per year.
The Beverly Hills/Greater Los Angeles Association of Realtors opposes raising the tax on home sales, saying it would harm the recovery of the city’s fragile housing sector.
“Home buyers have a choice. They can go across the border to Glendale or Burbank or West Hollywood and get the same home in an area where there are good sidewalks and better services,” said James Ward Litz, government affairs director of the Realtor group. “We don’t want Los Angeles to be at a competitive disadvantage from surrounding communities.
Litz said the association is prepared to wage a campaign against the tax increase. The group this week sent out 100,000 pieces of mail urging residents to ask their council members to keep the measure off the ballot.