The Santa Monica City Council decided this week to raise nearly $2 million needed to hire 20 police officers by more than tripling the real estate transfer tax but not raising the tax on hotel rooms.
After 4 1/2 hours of debate and public input, the council voted 5 to 2 early Wednesday morning for the tax increase. Councilmen Herb Katz and Robert T. Holbrook dissented, saying they wanted the city manager to re-examine the budget and look at possible cuts.
Property owners will pay an additional $3 on each $1,000 in real estate sold, a 268% increase. The tax is now $1.10 per $1,000.
Sellers of a $500,000 home, for example, will pay $2,050, up from $550. The increase will take effect Oct. 15.
Mayor Judy Abdo said that although the tax will hurt residents who want to sell their property, it made more sense to tax those who have the money to pay.
"There are people who are going to take losses and that's an unfortunate fact," Abdo said. But for many property owners, "the amount of money that they are making is far beyond what they ever dreamed they would make."
Although the tax increase is designed to fund 20 additional police positions, the $1.3 million that will be raised in this fiscal year will be used to improve Palisades Park.
Because of the lengthy recruiting and training process, it is doubtful that the new police officers will be hired before the fiscal year ends in June. In the event the city can hire officers before then, the funds will come from the police budget, City Manager John Jalili said.
Jalili had presented a balanced budget proposal to the council last month, but members decided to hire additional police officers. Jalili was directed to raise the additional money by increasing either or both the real estate transfer tax or the transient occupancy tax, which is collected on every hotel room rented.
Jalili recommended against increasing the current 12% transient occupancy tax to or above the 12.5% charged in Los Angeles because it would eliminate the city's competitive advantage in the region's economy.
City staff suggested a boost to 13% if the council raised the tax, but the increase would have generated only $400,000 more a year for the city.
Representatives of the hotel industry told the council that any increase in the bed tax would further hurt ailing occupancy rates and cost the city tourism revenue.
Even if the bed tax had been increased, the real estate transfer tax still would have jumped $2.46 per $1,000.
The current tax of $1.10 per $1,000 is evenly split between the city and county.
However, if a city increases the tax, the county keeps the entire $1.10.
At the new tax rate of $4.10 per $1,000, sellers of a $500,000 home will pay taxes of $550 to the county and $1,500 to the city.