REPORT TO COUNCIL
SUBJECT
Title
Receive Real Property Transfer Tax Polling Results for Consideration of Placing a Ballot Measure on the November 2024 General Election
Report
BACKGROUND
In 2021, the City Council sponsored a study issue to explore a 2022 General Election ballot measure to modify the City’s Real Property Transfer Tax (RPTT) (FIN 21-01). Council held a study session on April 26, 2022, where staff presented a variety of potential tax structures and estimated impacts to RPTT revenue to Council. The City retained the services of polling consultants to conduct voter opinion polling on potential revenue ballot measures to increase the City’s RPTT rate and structure. On July 12, 2022, Council reviewed the polling results and directed staff to return with potential draft ballot measure language and actions needed to place a ballot measure on the November 2022 ballot (RTC 22-0732). Direction was given to proceed with the flat (non-tiered) $7.50/$1,000 of sales price tax structure with an exemption threshold of $4 million and provide options for regular adjustments of the threshold based on a real property-based index or rating. On July 26, 2022, the Council considered but failed to pass a motion to move forward with the ballot measure (RTC 22-0773).
On November 28, 2023, the City Council directed staff to present information and options for consideration to place an RPTT measure on the November 2024 ballot (RTC 23-1089).
On January 23, 2024, the City Council appropriated funding for polling consultant costs provided direction to proceed with public polling (RTC 24-0184).
EXISTING POLICY
Council Policy, Chapter 7, Planning and Management, Policy B.1.1 - The City will maintain a diversified and stable revenue base, not overly dependent on any land use or external funding source.
Council Policy, Chapter 7, Planning and Management, Policy B.1.4 - When considering a new tax or revenue source or an increase in an existing tax or revenue source, the following criteria should be considered:
• Community/Voter Acceptance
• Competitiveness with surrounding communities
• Efficiency of revenue collection and enforcement
• Effectiveness in generating sufficient revenues in the short and long-term to justify its establishment
• Enhancement of revenue diversity to promote stability and provide protection from downturns in business cycles
• Equity/Fairness in distribution of the revenue burden on various segments of the community
ENVIRONMENTAL REVIEW
This action is exempt from review under the California Environmental Act (CEQA) in that it involves fiscal and administrative activities that will not result in direct or indirect changes to the environment, and which do not commit the City to any specific project that may result in a potentially significant impact on the environment. (CEQA Guidelines, Section 15378(b)(4) and (b)(5).)
DISCUSSION
The City retained the services of Fairbank, Maslin, Maullin, Metz & Associates (FM3) to conduct voter opinion polling on potential revenue ballot measures to increase the City’s Real Property Transfer Tax (RPTT) rate and structure.
Sunnyvale voters who are likely to vote in November 2024 were polled via online and telephone survey methods. A total sample of 444 respondents were surveyed, 53% online and 47% via phone. The entire sample was asked about a flat RPTT tax structure imposing a rate of 0.75% on sales over $4 million and exempting real property sales of less than $4 million. The sample was selected and weighted to be consistent with the demographic profile of registered Sunnyvale voters for gender, age, household income and ethnicity. Based on the sample size the poll had a margin of error of approximately 4.9% for the overall sample (95% confidence level).
Real Property Transfer Tax
The proposed increase of the City’s Real Property Transfer Tax would be a general tax as it is being imposed for general governmental purposes and would require approval by a simple majority of voters. A draft ballot question was created to test voter opinion on levying a tax in the amount of $7.50 per one thousand dollars in value transferred, exempting all transfers less than $4 million. Based on historical data, this tax would generate an estimated $6.1 million annually in General Fund revenue.
Only charter cities may modify their RPTT rate. If the City begins to levy its own RPTT, Santa Clara County will continue to collect $1.10/$1,000 of the sales price on all property transfers, but the $0.55/$1,000 that the City currently receives will be retained by the County, even for transfers that are exempt from the City’s tax.
The polling results showed a 67% initial approval rating for an RPTT measure. After respondents heard arguments supporting the measure, their approval rating rose to 72%, and then dropped to 63% after hearing opposition arguments.
The top line results of the tax measure polling are included as Attachment 1. For tracking purposes, likely voters were also polled about a number of City programs and priorities which were also asked in. Additionally, based on Council direction, section 8 of the survey included questions related to potential provisions of the measure, such as tax expiration, exemptions, and cost of living adjustments.
Election Timing
To place any measure on the November 2024 ballot, Council must take action on or before the July 30, 2024, Council meeting. Once the Measure is placed on the ballot, there would be a 14-day period to provide written arguments for or against the measure, followed by a 10-day period for rebuttal arguments. Election day is November 5, 2024, and if approved by the voters, results would likely be ratified and approved by Council on December 10, 2024.
The City is currently in process to launch a second poll on a potential library bond measure. Moving both RPTT and the library would place two measures on the ballot. Prior to making that decision, Council may wish to consider a third poll to see how multiple measures might be received by the voters.
FISCAL IMPACT
Polling services were funded from the 2024 Real Property Transfer Tax Measure Project Budget (836750) which was appropriated as part of Budget Modification No. 11 approved by Council in January 2024. The cost to place this Measure on the ballot is estimated by the Registrar of Voters to be $117,887. The FY 2024/25 Recommended Budget includes the cost for up to two potential ballot measures in Project 835020 - Sunnyvale Biennial Elections.
Preparing and distributing public education materials for a ballot measure would be funded from this same project budget; however, staff has not yet assessed what would be appropriate for education or the estimated cost. Any such education and outreach would require a budget modification to add additional funding. Should Council direct staff to move forward with placing the Measure on the ballot, staff will more fully assess this issue and return to Council with a budget modification to cover the costs of public education materials related to the Measure.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the NOVA Workforce Services reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
ALTERNATIVES
1. Direct staff to return to Council with actions necessary to place a ballot measure on the November 2024 ballot to levy a City Real Property Transfer Tax of $7.50/$1,000 for sales over $4 million.
3. Direct staff to return to Council with actions necessary to place a ballot measure on the November 2024 ballot with an alternative tax rate or structure.
4. Do not direct staff to return to Council with actions necessary to place a ballot measure on the November 2024 ballot to levy the City Real Property Transfer Tax.
5. Take no action pending the results of the library poll.
6. Provide alternative direction to staff.
STAFF RECOMMENDATION
Recommendation
Staff recommends Alternative 5 - take no action pending the results of the library poll.
Action is not needed at this time for Council to place this item on the November 2024 ballot. Staff is scheduled to return to Council at the end of May with the results of polling for a potential general obligation bond to replace the main library. Staff believes that Council should be fully informed with the results of both polls before taking an action to place neither, one, or both of the potential ballot measures on the November 2024 election.
Staff
Prepared by: Dennis Jaw, Assistant Director of Finance
Reviewed by: Tim Kirby, Director, Finance
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Kent Steffens, City Manager
ATTACHMENTS
1. FM3 Summary of Polling Results