Redevelopment fallout: Lawmakers impose big new taxes

Revolutionary War -- fife and drumMarch 5, 2013

By Katy Grimes

SACRAMENTO — SB 391 is the California Stamp Act.

The original Stamp Act was imposed in 1765 and helped spark the American Revolution against British tyranny. According to History.org, “The new tax was imposed on all American colonists and required them to pay a tax on every piece of printed paper they used.”

British King George III is long gone. But state Sen. Mark DeSaulnier, D-Contra Costa, author of SB 391, seems to be following in his footsteps. DeSaulnier says his new bill will create a permanent funding source for affordable housing.

SB 391, titled the California Homes and Jobs Act of 2013, is legislation “that will create jobs while building affordable places for Californians to live,” DeSaulnier’s website said. “Senate Bill 391 will get California building again to create 29,000 jobs annually and help businesses attract and retain the talent that fuels California’s economy.”

According to DeSaulnier, SB 391 would:

* Put a small ($75) recordation fee on real estate transactions, excluding home sales. This fee will generate an estimated $500 million in state seed money each year without creating new debt. It would be used to leverage an additional $2.78 billion in federal and local funding and bank loans annually.

* Deploy these dollars in California communities through a successful private/public partnership model.

* Build safe and affordable single-family homes and apartments for Californians in need, including families, seniors, veterans and people with disabilities.

* Reduce homelessness, resulting in significant savings to taxpayers and reducing strain on our health and criminal justice systems.

Tax royalists

SB 391 is a re-do of last year’s SB 1220, authored by DeSaulnier and Sen. President Pro Tem Darrell Steinberg, D-Sacramento. SB 1220 failed to get enough votes in the Senate.

SB 391 would impose a $75 “fee” — really a tax — on every document recorded, unless it is recorded in connection with a sale. According to the County Recorder Association’s opposition last year to SB 1220, the $75 tax would mean more than 300 document types would be subject to the tax, including mining claims, homestead declarations, refinance mortgages, reconveyance documents for paying off a loan, powers of attorney, lien releases, affidavits and a host of other documents requiring legal recording with the state.

The similarity to the 1765 Stamp Act is clear.

The tax royalists in the Legislature also expect to enjoy spending a large new revenue stream. “It is estimated that this bill will generate an average of $525 million per year for the [Housing Opportunity and Market Stabilization] Trust Fund, ranging from $300 million per year in low-volume years to $750 million per year in high-volume years,” the bill analysis for SB 1220 said.

“The author calls this the ‘Homes and Jobs Act.’ Unfortunately, SB 391 will provide little of either,” said David Wolfe, legislative director for the Howard Jarvis Taxpayers Association. “A $75 recording fee on a multitude of real estate documents to provide affordable housing is nothing more than wealth redistribution. It is a clear and inappropriate tax increase to target existing property owners with new fees when the real estate market is just emerging out of the depths of recession. If affordable housing is an important priority to the Legislature, we suggest it be funded out of our record $102 billion General Fund.”

The redevelopment connection

The analysis for SB 1220 explained: “Until 2011, the Community Redevelopment Law required redevelopment agencies to set aside 20 percent of all tax increment revenue to increase, improve, and preserve the community’s supply of low and moderate income housing available at an affordable housing cost.  In fiscal year 2009/10, redevelopment agencies deposited $1.075 billion of property tax increment revenues into their Low and Moderate-Income Housing Funds.  With the elimination of redevelopment agencies, this source of funding for affordable housing is no longer available.”

Wasn’t the plan behind the elimination of redevelopment agencies to cut state spending to help balance the state budget?

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For a deeper understanding of what was involved in “increasing, improving and preserving the community’s supply of affordable low and moderate income housing,” the SB 1220 analysis tells where and how redevelopment money was spent:

“Current law establishes a number of programs at the Department of Housing and Community Development (HCD) and the California Housing Finance Agency (CalHFA) to make housing more affordable to California families and individuals, including the following mainline programs:

“Multifamily Housing Program, which funds the new construction, rehabilitation, and preservation of permanent and transitional rental homes for lower income households through loans to local governments, non-profit developers, and for-profit developers.

“Joe Serna, Jr. Farmworker Housing Program, which funds the development of ownership or rental homes for agricultural workers through grants to local governments and non-profit organizations.

“Emergency Housing Assistance Program, which funds emergency shelters and transitional homes for homeless individuals and  families through grants to counties and non-profit entities for rehabilitation, renovation, expansion, site acquisition, and equipment.

“CalHome Program, which funds downpayment assistance, home rehabilitation, counseling, self-help mortgage assistance programs, and technical assistance for self-help and shared housing through grants and loans.

“California Homebuyer Downpayment Assistance Program, which aids first-time homebuyers with down payment and/or closing costs.”

But it’s also worth remembering that redevelopment commonly used eminent domain to seize the property of middle-class homeowners and businesses, then give that property to wealthy developers. Jose’s Muffler Shop was bulldozed, Jose given a fraction of what his property was worth, to build a Big Box store.

Gov. Jerry Brown’s decision in February 2011 to kill redevelopment in California was met with significant resistance from redevelopment agencies and California lawmakers. But it’s like a whack-a-mole game. Every time something is cut from the budget, it pops up under a new name, with a new funding source.

County Recorders oppose tax increase

The County Recorders Association of California Legislative Committee is opposing this bill, just as it opposed SB 1220. According to the County Recorders, the current recording fees vary by county.

“Purchasing a home is often one of the biggest financial decisions people will make in their lifetimes,” said Kammi Foot, Inyo County Recorder. “For the average Californian, there are several documents that may need to be recorded after they purchase their home. Imposing a $75.00 fee on each document would add to the already substantial expense. The Legislature should carefully weigh the significant financial burden that that this fee would place on ordinary Californians.”

SB 391 would weaken the integrity of the land records system, the cornerstone of our free enterprise system, Foote said. “Any impediment or disincentive to record documents would diminish the public’s ability to prove certainty of title.”

Foote explained mining claims are a great example of how this bill would negatively affect the public. “To hold a claim for mineral rights located on public land, the claimant is required to record certain notices annually. If a person cannot afford to record this document every year, they lose their claim. An increase of the fee from $14.00 to $89.00 is an increase of over 600 percent.

“SB 391 requires County Recorders to collect fees for a function their office does not perform,” Foote added. “If a Californian cannot afford to pay a recording fee, they may lose the ability to prove ownership to their own property, one of the mainstays of our free enterprise system.”

Is it a jobs bill? Where did DeSaulnier get 29,000 jobs?

DeSaulnier’s website claimed, “California business and housing advocates join forces to get California building again.” And, “Sen. Mark DeSaulnier’s SB 391 [would] create 29,000 jobs annually and build affordable homes for Californians.”

SB 391, Section 1, (i) of the bill reads, “Many economists agree that the state’s higher than average unemployment rate is due in large part to massive shrinkage in the construction industry from 2005 to 2009, including losses of nearly 700,000 construction-related jobs, a 60-percent decline in construction spending, and an 83-percent reduction in residential permits. Restoration of a healthy construction sector will significantly reduce the state’s unemployment rate.”

SB 391 “will create jobs while building affordable places for Californians to live, and get California building again to create 29,000 jobs annually and help businesses attract and retain the talent that fuels Californias economy,” DeSaulnier claims on his website.

But it was just such artificial inflation of the housing market by federal, state and local programs that produced the mid-2000s bubble, which burst and damaged much of the California economy.

There is no formal legislative analysis of SB 391 yet. But one Senate staffer, who asked to remain anonymous, told me the 29,000 jobs apparently are a “loose assumption” and “not scientific,” and was provided by the California Department of Housing and Community Development.

The bill language requires that “the fees, after deduction of any actual and necessary administrative costs incurred by the county recorder in carrying out this section, shall be sent quarterly to the Department of Housing and Community Development for deposit.”

Federal funding

Apparently another significant aspect of the motivation for SB 391 “is the billions in federal and private funding needed for affordable home construction,” said Gary Toebben, president and CEO of the Los Angeles Area Chamber of Commerce, on DeSaulnier’s website.

“Millions of Californians are caught in a perfect storm where mortgages remain out of reach, home financing is more restrictive than ever, and the foreclosure crisis has driven more people to the rental market, pushing rents to record levels,” said Shamus Roller, Executive Director of Housing California. “The California Homes and Jobs Act will build safe and affordable single-family homes and apartments for Californians in need, and provide stable living environments for families, seniors, veterans, people with disabilities and those experiencing homelessness.”

“There is an affordable homes shortage in our state, and we cannot turn our back on the millions of Californians without a stable living environment,” said DeSaulnier. “SB 391 will not only create jobs now, it will provide long-term benefits to our state.”

Stamp Act 1765But at what cost? How many jobs will the fee-tax kill? Would another real-estate bubble be popped in a few years, repeating the folly of the mid-2000s? How are poor people helped if they take out mortgages they can’t afford, then a couple of years suffer through foreclosure?

SB 391 is co-authored by state Senators Lou Correa, Jerry Hill, Mark Leno, Ted Lieu and Fran Pavley; and by Assembly members Toni Atkins, Raul Bocanegra, Tom Ammiano, Richard Bloom, Susan Bonilla, Rich Gordon, Kevin Mullin, Sharon Quirk-Silva and Norma Torres.

The 1765 Stamp Act was so onerous that it was lasted only a year before it was repealed. If passed, the California Stamp Act, SB 391, might meet a similar fate.

11 comments

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  1. Chief661
    Chief661 5 March, 2013, 14:49

    The root causes of high housing costs and loss of jobs in CA is systemic and no “feel good” bill by serial legislator “Marky Mark” DeSoiler is going to solve anything. CA is sinking in a cesspool of unfunded P/S union pensions; we have the police, fire and teachers unions, and the Sierra Club controlling the state legislature, non-elected business hating state boards like the coastal commission and CARB who dictate at whim, all of which drive up the cost of housing. CA is broke on many levels and nothing is going to fix it in the short term. It would take a mass exodus of small business and the other productive tax payers to stop this out of control government. And, oh yes, people with the will to be free of control by the “ruling class” and their ilk.

    Reply this comment
  2. Sean Morham
    Sean Morham 5 March, 2013, 15:20

    DeSaulnier’s best assets are he is a crook and a complete dips*$t. After that, it is all downhill.

    Reply this comment
  3. David Yates
    David Yates 5 March, 2013, 18:20

    I like and agree with Chief 661’s comment

    Reply this comment
  4. Dyspeptic
    Dyspeptic 5 March, 2013, 20:09

    THIS JUST IN … HUGO CHAVEZ IS DEAD! The rumor is that the CIA gave him cancer. At least some of my tax money isn’t wasted.

    Reply this comment
  5. stolson
    stolson 6 March, 2013, 08:50

    This rep. is so out of touch with reality..tax, tax, tax. They can’t eliminate unnecessary state agencies with the big salaries or even cut waste–no, just tax more. I don’t see anyone marching in Sacramento to protest taxes. The public isn’t aware of where the waste is, the ridiculous tax increases on what, and therefore, go along with whatever.
    We need more media awareness!

    Reply this comment
  6. Scott
    Scott 6 March, 2013, 13:09

    Let’s turn back the clock a bit – most redevelopment agencies dried up out of corruption and a lack of performance in general. Sure, some buildings were built by the stuff, but most of it took decades to do something like a 6 story building that the private sector would do in a year.

    Secondly, it’s either a cesspool, or a one-time-shot. Affordable apartments, ultimately, are owned by someone. This guy obviously wants single family houses built (with taxpayer money and sold below-market or something) because the rentals tend to get to be a pretty nasty neighborhood. As if moving the nasty elements out of a crappy low-income apartment and into a crappy redevelopment-built single family home with a free downpayment is somehow going to improve the neighborhood or add pride of ownership. We saw the effect of zero-down mortgages and how junked-up the houses were when the people left them behind, again, to be the taxpayers’ problem.

    How is giving a $200,000 house to someone with a $9.00 / hour job going to help anything? Why don’t we save ourselves $!90,000 and give them $10,000 toward a 2-year technical degree, and maybe they can learn to provide for themselves?

    CalHOP is a stupid failure of a program because it relies on California to borrow the money on the bond market, then loan it to the home buyer. But California is broke, and has a junk-bond credit rating, so instead of 4%, the rates are about 6.5%… so no wonder no one likes it. He’s talking about issuing small downpayment assistance loans on federal FHA mortgages, which again, have FHA insurance added-on, so the 3.7% rate or whatever is really a 5.5% interest rate payment. The person might as well just get a higher-interest (and properly-risk-adjusted) mortgage loan.

    Here’s an idea… rollback some of that 10% California income tax rate… and maybe, just maybe, the people can save their own downpayment.

    Reply this comment
  7. Bubba
    Bubba 6 March, 2013, 19:29

    Part of the reason for high housing costs here is the Cal Costal Comission, impossible regulations, multitudes of regulations imposed by local building departments, et al!
    As a contractor there is hardly a day goes by I don’t want run out of the building department screaming like my hair is on fire! Two hour waits, incompetent plan checkers, building inspectors that don’t know codes, letters saying final inspections are lacking despite having certificates of occupancy I could go on but why bore you?

    But. Hey the high speed rail between Modesto and Bakersfield is also well on its way to bankrupting the state!

    Gov Moonbeam can’t understand why people and business are fleeing!

    Reply this comment
  8. Andy
    Andy 7 March, 2013, 16:48

    As the construction sector is still hurting from the fiscal mess of 2008, I can’t see how this would be bad. It would get contractors like Scott more work as well as provide opportunities for those interested in homeownership. There is no tax. This has nothing to do with the California budget. This is a fee that helps correct the mess that greed caused in 2008. I support SB 391!

    P.S. the Stamp Act angered Americans because they didn’t have political representation. You do, and I’m sorry you disagree with who the people voted for.

    Reply this comment
  9. Andy
    Andy 7 March, 2013, 16:52

    I apologize, contractors like Bubba, not Scott.

    Reply this comment
  10. NTHEOC
    NTHEOC 8 March, 2013, 10:55

    Dyspeptic says:
    THIS JUST IN … HUGO CHAVEZ IS DEAD!
    —————————
    Again,So what do you care for dys? Chavez sold the bulk of Venezuela’s oil to the United States! I’m sure it was still not enough for the Republican pig war machine! If they were in office they would have just invaded the country for the oil all while killing children and their families along the way, your tax dollars at work.” El Comandante” Didn’t want The US influence in his region,So what! And,Chavez used his country’s vast oil wealth to launch social programs that include state-run food markets, new public housing, free health clinics and education programs. Poverty declined during Chavez’s presidency in their country. All the republican pigs do is steal oil to pad their fat wallets and screw the working people!!!!! Again, what did Chavez do to you? Or what did Sean penn do to you?????

    Reply this comment
  11. dltravers
    dltravers 9 March, 2013, 20:46

    Somewhere lost in this is that housing is pretty affordable for the first time buyer today. The goverment tried to make everyone a home buyer even if they had no money and we saw how that ended up.

    My first home was a small little place in a tough neighborhood that I fought to keep through some tough times. When the market finally turned after many years I sold and bought another and so on.

    What the government offers in this proposal is not real homeownership. There are draconian terms and conditions. You cannot sell the home for many years, you are locked into a government contract. You cannot profit like you would with a real home.

    On the other hand you would get to live in an area you never could afford. Create wealth opportunities where one can buy and own a home free and clear. How about the G giving a silent second to help you get you first home?

    This is how the Dems screw working people thru their desire to own your very soul and control you whole life. They make the descions, they tell you when you can move, how much of a car you can buy, when you are to die because they cannot afford to pay for your healthcare.

    They are the ones who built those horrible hellhole inner city projects and shove African Americans into them. Teach a man to fish or teach a man nothing. To them it felt good to do good when in reality it was pure evil.

    Reply this comment

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