Heated Debate on Whether City Should Tax Luxury Homes to
Fund Affordable Housing Comes to Close Tuesday as Voters Head to Polls

 
The New Mexican

 

Voters in Santa Fe’s special election Tuesday get to fill in one oval on a paper ballot. Either they favor subsidizing city housing programs by taxing expensive homes or they don’t.

Willard Chilcott and Sialia Rieke cast early ballots within five minutes of one another last week at City Hall – one on each side.

For Chilcott, an 81-year-old retired businessman who lives on Hyde Park Road, the decision was easy.

“I’m totally against it,” he said. “I’m sick and tired of being taxed by all government agencies – federal, state and our liberal City Council. It’s a liberal agenda: soak the rich, which seems to be fashionable these days.”

Chilcott voted against the real-estate transfer tax.

But just before he slid his ballot into the counting machine, 35-year-old Santa Fe native Rieke cast her ballot in support of the measure.

Rieke, who sports a small stud under her lower lip, walked to City Hall that morning from the home she rents in the South Capitol neighborhood where she had lived as a child.

“I feel really strongly about this issue,” she said, “because it’s really sad to grow up in a place and then know that you will never have a chance of owning a home there. It’s an issue that is about locals and about trying to get local people to live in their own city.”

On election day, the scene will be repeated all over the city as voters decide whether buyers of homes costing more than $750,000 must pay a tax to help support affordable housing initiatives in the community. As of Friday, at least 1,000 people had already cast their ballots. They appear to be deeply divided, just like Chilcott and Rieke.

While stereotyping people or pigeonholing them into voting blocs is always hazardous, there will be those who can’t resist seeing Chilcott and Rieke as representative of ways the issue polarizes city residents: younger versus older, richer versus poorer, conservative versus liberal, or dare say, natives versus transplants.

Chilcott said he agrees with the theory that most of the votes against the tax will come from the city’s east side, including his neighborhood “up on Hyde Park Road,” although he was not sure whether his home would fall above or below the tax threshold when and if he sells it.

“Nobody knows what the market is going to be,” he said. “At present everything has gone down. Those that pretend to know, they don’t know.”

Rieke says that in her lifetime she has seen “affordable housing” get pushed to the south side of the city, an area where she does not want to live. She does not even recognize that side of town as part of Santa Fe, she said, because “it didn’t exist when I was growing up.”

Where and how much?

If voters approve, buyers of luxury homes will have to pay a tax of 1 percent on the amount of the sale price that exceeds $750,000.

Because the measure applies only to the most expensive properties, it would primarily affect the city’s east side and, at least for the foreseeable future, isn’t likely to be triggered by sales on the south and west sides.

The New Mexican analyzed real-estate industry data from the past 12 months to get an idea of how much revenue the tax would raise. Based on sales reported to the Multiple Listing Service, the city would have collected about $553,000 on taxes levied on 104 homes. The database doesn’t include all property sales, so this estimate might be low.

Of the home sales to which the tax could have been applied, 96 percent were east of St. Francis Drive, with slightly more south of the Santa Fe River than north of it. None were in the city’s southwest quadrant, where the highest reported home sale price during that time period was $675,000.

The amount of revenue that could be collected yearly depends on fluctuations in the housing market. When city officials put together a report about the impact of the tax in September, they estimated it would bring in about $1.2 million between July 2009 and June 2010.

Since then, however, the overall economic decline led them to refine that estimate to something like $600,000 in expected revenue during the first year the tax is in place.

Housing transfer-tax proposals have been floated by the City Council before but never made it to the election stage.

Backers say the city’s high median home prices have been out of reach for many working families for years. In 2004, the state Legislature granted authority for cities to impose such a tax, also called a point-of-sale tax because it’s not a recurring levy like a property tax.

The current proposal took several years to reach the ballot. In 2006, the proposed tax would have applied to homes sold for more than $319,000, but that measure didn’t have enough support from the council. In September of 2007, councilors voted 4-3 against a tax proposal with a threshold of $500,000.

When she reintroduced the idea last May, Councilor Rebecca Wurzburger set an even higher threshold – $650,000 – and called it a “workforce housing” initiative. Then, in a last minute change before setting the election, the council bumped up the cap to its current level of $750,000.

The median home price in the city recently has been $350,000.

Advocacy and opposition

Throughout the debate over the idea, Santa Feans of every stripe visited City Hall to weigh in. Public hearings on the topic often stretched on for hours.

In a particularly memorable exchange, Mayor David Coss and a local Realtor sparred over whether the tax was rooted in communism, as she asserted, or in a spirit of neighborly, Christian love, as he did.

The real-estate industry has since mounted a well-financed campaign against the tax. According to reports filed last week, organizers spent nearly as much money during this election cycle as Coss did during his successful 2006 election campaign.

Most of the $140,000 raised by the political action committee called Santa Fe Housing Opportunity Partnership came from outside the city. The National Association of Realtors contributed $70,000 and the Realtors Association of New Mexico contributed $69,500.

Mary Trupo, public issues director at the National Association of Realtors, said the issue was new to her. “We don’t really get involved with state and local issues,” she said in response to an initial inquiry, adding in a follow-up call that, “We look at issues that we feel are a hindrance or could be detrimental to the real-estate industry and are becoming more active on a state and local level. However, we only do it when our members ask us to.”

In 2008, when Arizona voters faced a ballot issue that would restrict new taxes on real estate, the association pitched in there, although Trupo declined to say to what degree.

Trupo said the national association is largely opposed to taxes because of their “trickle down” effect on home prices.

“Especially in today’s market where there is so much instability, anything – large or small – that has a negative implication on housing” is disturbing, she said.

Neither the national association nor the local association provided evidence of how top-tier transfer taxes would affect overall housing prices.

The Realtor-supported partnership was responsible for at least five glossy ads that were mailed to city voters during the weeks leading up to the election.

On another front, the local Realtors association and two Santa Fe families filed a lawsuit against the city challenging the ordinance that ordered the election, arguing that the proposed tax is unfair and unlawful. That District Court case is on hold until after the election.

Not all the city’s real-estate professionals are on the side of their industry trade groups. Marsha Wolf of Western Equities, and Tom and Elise Noble, for example, have been active in a pro-tax alliance made up of mostly local nonprofit groups.

Elise Noble has testified at several city hearings and spent time talking to others about the proposals. She’s astonished, she said, that many are not aware of the tax proposal or have a serious level of misunderstanding about what it would mean and how much it would cost buyers.

“People are just not aware of how little it is,” she said. “Emotionally, our sympathies are with people on the fringe. And I would be surprised if many people were distressed at what the tax would be on a property that sells for a $1 million.” (The tax would be $2,500.)

Noble hasn’t been popular with the industry group for her stance, but she continues her lobbying. She and her husband donated money to United for Affordable Housing, which has spent about $12,000 on a campaign supporting the proposal, according to the most recent report filed with the city clerk.

“I guess I feel that if I open my mouth about it in private and support it, that if I am in a position to make a difference by saying publicly what I have said privately,” she said. “I have a responsibility to do that.”

The alliance, which includes labor unions, advocates for the homeless and the state Conference of Churches, has argued that many longtime Santa Fe families are watching their children move to other cities where home prices are cheaper. Many of the city’s public-safety, medical and teaching professionals live outside Santa Fe.

All sides expect Tuesday’s election results could be close. City Council District 3, home to some of the city’s lowest-paid workers and least-expensive housing, also has the lowest number of registered voters. Districts 1 and 2, which include neighborhoods that are most likely to be affected by the tax if the measure passes, have the highest number of registered voters.

However, some of the highest-priced homes in the city are owned by people who live and vote elsewhere. That could also be a factor in the outcome of the election.

Turnout for special elections in Santa Fe is usually low – fewer than 2,000 residents voted in a 2006 special election that resulted in a gross-receipts tax increase – but this election appears to be bucking that trend.