Editorial, 09/10/2007 - Councilors cool jets, build tax-boost backing

So did the City Council intentionally take its time toying with the idea of a real-estate transfer tax, or was its nap-now, rush-later approach merely a manifestation of municipal inertia?

The notion of taxing the sale of real property in this high-cost community of housing speculation is a good one — and it’s been brought up from time to time.

This is not a great time: Home sales are down by about a third. The real-estate industry, which might have swallowed a transaction tax during boom times — when the council should have acted — might understandably campaign hard against it now. Opponents could well call attention to the unseemliness of trying to stampede Santa Feans into it.

Properly considered, and perhaps phased in, the idea still might not totally turn off real-estate people — many of whom recognize the municipal need to keep up with growth and development.

Santa Fe’s approach to the tax has tended to be one of soaking the rich. That’ll usually get politicians plenty of votes to join, or remain aboard, the council — especially when the beneficiaries of the revenue might be folks who can’t afford a house here; affordable housing in the main tax pitch. A better one, judging from some cities’ experience, might be open-space purchases.

Two years ago, there was a proposal to tag the tax on homes selling for $300,000 and more: $1,375 at that price, and moving up around $2,500 for those in the $400,000 range.

Today, the talk is of exempting homes under the half-million-dollar mark, which leaves plenty of taxable sales.

For our cash-strapped City Hall, it could be a bonanza, even though the real-estate boom ain’t what it was. And it beats boosting property tax, which penalizes Grandma and Grandpa for living in the up-valued, but not-for-sale family home.

So let’s do it, says the council’s Finance Committee — and we’ve got to act quickly: Such a tax would have to be approved by city voters, and the logical time to do that would be the March 4 council elections. There are all kinds of formal-notice provisions for staging a tax election, so the full council would have to approve the move at next Wednesday’s meeting.

But there are other obstacles to the easy money:

The New Mexico Legislature, whose members might not mind enacting their own transfer tax, would have to approve it. This, in theory, could be done during the Legislature’s 30-day session at the start of next year. En realidad, what are the chances?

If our senators and representatives don’t quash it on spite alone, at least some of them might raise eyebrows over the $500,000-and-up business: Aren’t there some equal-protection arguments against taxing one class of people — at least in such blatant fashion?

A graduated rate might accomplish the same thing — but why, some lawmakers are likely to ask, are we letting sellers of $499,000 homes off the hook?

We like the idea of a transfer tax, especially to the extent that it serves as an “impact fee” compensating taxpayers citywide who carry the burden of growth and development. And the idea even has — or is that had? — support from the Santa Fe Chamber of Commerce, whose leaders recognize the need for revenue.

Re-cultivating the chamber’s support and cultivating that of the real estate industry could take time, especially in these times of slow sales and tight mortgage money. Business would be impacted by the tax whether the buyer or the seller would pay it — another point likely to take up debating time.

The council really doesn’t have time for the thorough thinking this proposal demands. It’s probably too late, too, for a general-obligation bond issue.

We’re pretty sure Santa Feans would rally ’round a well-considered, widely aired proposal for raising revenue. But our leaders should clearly spell out just what our most pressing needs are — and their costs.

Facing their fellow citizens with a post-Labor Day rush job could backfire on the council — at least some of whose members will be up for election in March.

A council majority should take a deep collective breath — and begin the careful preparation it’ll take to win community support for financial reinforcements.