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Ballot Analysis: Prop N
By Melissa Griffin
I know the November election seems like an eternity away, but since this is a weekly column and there are 15 measures on the ballot, we should start looking at the proposed measures. In an effort to ease us all into the position of citizen legislators, I’d like to begin at the end of the ballot and work backward, which means today’s contestant is Proposition N, the property transfer tax increase.
Prop. N was proposed by Supervisor John Avalos, who, as chairman of the Budget and Finance Committee, had to tell everyone that they would not be getting a pony on Christmas morning. Under Prop. N, real estate transfers worth more than $5 million but less than $10 million would be subject to a 2 percent tax. Transfers worth more than $10 million would be assessed a 2.5 percent tax. Currently, these transactions are taxed at 1.5 percent.
According to San Francisco Chief Economist Ted Egan, if Prop. N passes, it will bring in $35 million.
But that’s a very tenuous estimate.
You see, the property transfer tax is the youngest sibling of all taxes. It’s rebellious and unpredictable, and smokes unfiltered cigarettes. OK, I made up that last part. But the rest of it is true. Egan explained that the amount of property transfer tax we’ll get in any given year is very hard to anticipate. For example, in an effort to estimate how much money Prop. N might generate, his office ran the numbers on how much extra money the proposition would have brought in had it been in place nine years ago. His analysis showed that the amount yielded would have varied between $6 million and $90 million a year. Egan’s office averaged those numbers to get the $35 million estimate.
Egan also explained that, contrary to common San Francisco ideas about where babies and money come from, the $35 million won’t be brought by a benevolent stork. Buyers won’t take on the extra expense, so owners will pass on the cost to renters. And while it won’t apply to a large number of renters, it will apply to a few important ones. (He didn’t specify which ones.) As a result, the analyst’s 20-year forecast estimates 250 private sector jobs lost per year if Prop. N passes. While those job losses would initially be offset by gains in public employment, by 2014 we would just have a loss of employment positions.
Don’t get me wrong: Prop. N is basically guaranteed to pass. San Franciscans have no sympathy for storks or the kinds of companies and people who are party to multimillion-dollar real estate deals.
But with a projected budget shortfall of $712 million next year, it’ll take a lot more than Prop. N to prevent another sad season of budget negotiations.
