Wednesday, April 29, 2009

City Manager Updates Council on Parcel Transfer Tax

How does a week go by so fast?

I was meaning to write about this topic last week, but all of sudden I lost track of the days and poof a week goes by. During last week’s City Council Meeting Michele Ellson from over at
The Island sent me an email regarding the City Manager’s report on the transfer tax.The interim city manager Ann Marie Gallant reported the transfer tax is projected to bring in $2.6 Million this year. The big news it is less than the $4.1Million they estimated at the beginning of the year.

The City Manager stated that as bad as that is, it's also a good thing because the lack of Parcel Transfer Tax means we're not seeing as many homes go into foreclosure. And she also said we are not seeing the property tax amount declines many other cities are likely to face this year, which are in the order of 15, 18, and 19 percent.

It is not very surprising that the new estimate has been significantly reduced. January, February and March sales were very slow and April is not looking much better. The City Manager is correct that foreclosures have been slower in Alameda, but they need to plan for an additional wave if Alt-A loan resets and REO properties begin to flood the market.

Math has not always been my strongest subject, but the report of an increase in year-over-year increase is a bit fake-out. Yes it is an increase from the prior year, double the revenue, but if they projected $4.1 million and are now expecting 2.6M isn't that the real decline for the budget, not the year-over-year?

My favorite comment during the discussion cam from Council Member Lena Tam “An unexpected draconian decline in the real estate market in October of last year . . .” I love the use of the word draconian, but the decline started back in March of 2008 and October just happen to be the one of two up months during the period.

Link to Larger Chart

The Council Members did make a point to remind voters that if they not pass measure P the problem would have been twice as worst. Instead of doubling the Parcel Transfer Tax they would have seen decline of $800-$900,000.

I think that the revised $2.6 Million may be on the optimistic side given that sales have not seen a bump at all. To hit the new target Alameda would need to see nearly $217 Million in property sales. The Multiple Listing Service recorded $19.5 Million in sales for the first three months of 2009. The good news is that April is shaping up to be a good month with over $13 Million in sales with two days left in the month. For what I can assess from the sales pattern that puts the Island on track for total sales between $78 and $137 Million.

At $137 Million that would bring in a little more than $1.6 Million in revenue. Just a small warning about reading the numbers, the Multiple Listing Service is good to get a handle on this, but the MLS does not record all sales, especially commercial property. But frankly I do not see another $70 Million in sales unless the market makes a dramatic shift.

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