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Calling it a necessary measure to pay for high-cost projects on a limited budget, the city of Mountain View is asking voters this November to pass a ballot measure that would help pay for a new public safety building and other top priorities.
Measure G, a city-initiated tax measure, would raise the property transfer tax on all residential and commercial properties that sell for more than $6 million.
The measure is expected to add about $9.5 million annually to the city’s coffers to help pay for capital improvements projects and other needs.
Currently, Mountain View’s property transfer tax is $3.30 per $1,000. Measure G would increase this up to $15 per $1,000 for property sales that exceed $6 million.
Proponents for Measure G say the tax measure is necessary to fund infrastructure and capital improvement projects, as the city is facing a projected budget deficit and declining revenues.
But opponents to Measure G have expressed concerns about how the money will be spent. In August, a group called Mountain View Residents for a Bright Future was formed in opposition to Measure G, stating that its passage was a “blank check” for the city.
Since then, the city has clarified its spending priorities, which has led the opposition group to publicly state that it would back Measure G.
On Sept. 10, the City Council approved its spending priorities for Measure G. It plans to allocate the largest share of the tax revenue to a new public safety building (35%-40%), closely followed by parks, open space and biodiversity initiatives (30%-35%), affordable housing (20%-25%) and other government services (5%-15%). This includes road maintenance and bicycle and pedestrian safety improvements, among other things.
If there is a revenue windfall that exceeds $12 million, then the spending priorities would be adjusted so that the public safety building would not be overfunded. Similarly, if there is a shortfall, there would be a public hearing to consider a reallocation of the tax revenue.
The City Council could amend or repeal the property transfer tax with an affirmative vote from five members. The City Council also plans to review the spending allocations for Measure G after 10 years.
Since 1973, Mountain View has adopted five ballot initiatives to increase revenue. The two most recent tax measures, a business license tax and cannabis sales tax, both passed in 2018. Information about the business license tax and the projects it has funded are on the city website. The city says it has plans to create a similar data portal for Measure G if it passes.
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Let’s think ahead. A key point is buried deep in the rebuttal to the argument in favor of Measure G. In my own words, since the tax rate being approved by the measure doesn’t have an expiration date, in time, the higher rate will come to apply to *all* home sales. Voters would react differently to this measure if the higher tax rate (4.5x the current rate!) were to apply to home sales above $2m, instead of above $6m. So, how long would it take for a house valued at $2m today to appreciate to $6m? It depends on the rate of appreciation, which will almost certainly be higher than the inflation rate. Assuming 6% annual appreciation, a house valued at $2m today would be valued at $6m in 19 years. (A 5% rate stretches this to 23 years; a 4% rate to 28 years.) Is the City’s vision that revenue from the transfer tax will slowly grow to 4.5x what it is today (after inflation) as the number of house sales affected by the higher tax rate approaches 100%? Because that’s what will happen. I’d feel a lot better about Measure G if the $6m tax threshold in the measure were indexed to inflation or if the higher tax rate had a sunset date. Since neither is the case, I’ll probably vote against it.
Beyond the fact that this measure will affect more and more households over time, there is another fundamental flaw: the tax rate is not marginal. That means a single dollar increase in sales price can increase the tax by about $80,000! That is an incredibly distortive effect and will no doubt have unintended consequences to the housing market. The need for the funding provided by this tax might be important, but Mountain View leaders should come back with a better proposal than this.