Transfer tax on the sale of most commercial property in San Francisco will increase if voters approve Proposition W.
If approved, Prop W will increase the transfer tax rate by 0.25% for sales valued above $5 million (increase from $10/$500 in purchase price to $11.25/$500) and above $10 million (increase from $12.50/$500 in purchase price to $13.75/$500).
The proposition would also create a new transfer tax threshold for sales valued at or above $25 million ($15/$500), for a transfer tax rate of 3%. There would be no change in the calculation of transfer taxes for properties sold in San Francisco for less than $5 million. The Controller estimates that such increase in transfer tax could generate average annual revenues of $45 million, but reminds voters that revenue from transfer tax “is the City’s most volatile revenue source, and estimates based on prior years’ activity may not be predictive of future revenues.”[1]
Prop W provides no effective date, but the State Elections Code provides that “if a majority of the votes on a proposed ordinance are in its favor, the ordinance shall be considered as adopted on the date the vote is declared by the board of supervisors, and shall go into effect 10 days after that date.”[2] Further, the election results must be declared by Resolution of the Board of Supervisors no later than the fourth Friday following Election Day, which would be December 2, 2016.[3]
In all, if Proposition W is passed, it is likely to go into effect on or prior to December 12, 2016.
No one likes to see a closing date slip, an unexpected delay this year could be costly in San Francisco, particularly for sellers who by custom generally pay transfer tax in San Francisco County.
The City’s Department of Elections website lists Supervisor Kim as the proponent argument author for Prop W, and the San Francisco Apartment Association as the opponent argument author.
[1] City and County of San Francisco Voter Information Pamphlet & Sample Ballot, page 227
[2] Cal. Elections Code Section 9122; San Francisco Elections Code Section 380.
[3] Cal. Election Code Section 10263.
