Quick Take
Keven Cook urges a “no” vote on the city of Santa Cruz’s Measure C, arguing it’s riddled with three major transfer tax loopholes that benefit investors and developers. He says the measure’s $1.8 million lower threshold, $200,000 cap and condo conversion exemption allow high-value and repeat property sales to largely escape taxation. Cook contends Measure C’s flaws undermine its laudable housing goals and should be rewritten without loopholes before voters approve it.
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A couple of years ago, I attended a meeting at the police station organized by Mayor Fred Keeley to discuss an affordable housing ballot measure. Although many of us simply wanted a real estate transfer tax, a paid consultant told us that the way to go would be a bond measure plus a parcel tax and no transfer tax.
We left the meeting disappointed.
A year later, I attended a meeting at the library organized by the mayor. We were told that in order to get the realtors to not oppose the measure, it should be a transfer tax plus a parcel tax. Realtors dislike transfer taxes, we were told, so the organizers put loopholes into the transfer tax to appease the realtors.
It took me a while to figure out the implications of the loopholes. But I’m listing them here to explain to readers the three Measure C transfer tax loopholes as I see them.
The first Measure C transfer tax loophole is the lower threshold of $1.8 million for the transfer tax to kick in. The lower threshold was intended to be a one-time-only deal to help homeowners selling their primary residence, but I’ve been told that can’t be done because people can use multiple identities. Under Measure C, investors who repeatedly buy and sell properties under $1.8 million would pay no transfer taxes.
Is that the goal?
When the realtors wrote their own measure they raised it to $4 million to further benefit themselves.
In my view, the lower threshold should be removed so that all transactions pay at least a small transfer tax, with exceptions for sellers currently excluded under Measure C, such as between family members.
The second tax loophole is the upper limit. The upper limit is set at $200,000. That means if your building sells for $13 million or $25 million, the fee is still $200,000. So, any transaction over $13 million is essentially transfer tax free. This loophole is for developers and owners of large commercial properties.
The assessor’s office doesn’t release values of commercial property to the public. So, we don’t know the value of large properties in our area, such as the Rittenhouse building on Pacific Avenue, the Old Wrigley Building, Seaside Company’s Boardwalk, new Seaside Company arena or La Bahia Hotel & Spa. Are any worth more than $13 million?
For example, in 2021 the University of California regents purchased an apartment building on Western Drive for $117 million. Under Measure C, $104 million of the transaction would be transfer tax free. Using the maximum 2% tax rate in the measure, (.02 x $104 million), we would have $2.08 million that would not be collected by the city.
The third Measure C transfer tax loophole is the conversion of apartment buildings to individually owned units/condos. After the Clocktower Center project is built, the market rate units can be sold off one at a time, and if the sales price for each unit is below $1.8 million, there will be no transfer taxes.
The affordable units can also be sold, but at a defined affordable price, and no transfer taxes will be paid. This is true for any of the large apartment buildings going up in the city.
The realtors, as we know, responded to Measure C by writing their own measure (Measure B) with larger loopholes. I wondered why the authors of Measure C didn’t then respond and work to remove the loopholes.
Turns out, according to supporters of Measure C, it was too late. The measure had already been submitted to the city clerk and signatures were already being gathered on petitions.
That is not a good enough reason for me to overlook these clear flaws – or to vote for it.
If supporters had worked to close the loopholes in the transfer tax, they would have enough money to avoid the parcel tax.
Measure C has laudable goals, but serious flaws. It needs to be re-written and redone.
We want a transfer tax measure with no loopholes. This will last for 20 years, so we better get it right.
Keven Cook graduated from UC Davis with an electrical engineering degree and moved to Santa Cruz in 1990. He worked in Silicon Valley for 20 years and then studied horticulture at Cabrillo College. His favorite hobby is gardening.