Measure RE - November 3, 2020

A real estate transfer tax is a one-time fee imposed when a property is sold.

Transfer tax rules and rates vary widely by state, county and city. The County of Los Angeles assesses a Documentary Transfer Tax on the consideration or value of the interest or real property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time of sale) exceeds $100 at the rate of $0.55 per $500 or fraction part thereof. In addition, Culver City imposes an additional rate.

Either the seller or buyer may pay the real estate transfer tax during the real estate transfer or sale. If it is not paid, the seller and buyer are jointly and severally liable to the City for the payment of the tax.

The real estate transfer tax rate in Culver City was a flat 0.45% (or $4.50 per $1,000 valuation) applied to all real property transfers and sales, regardless of price paid.

Because the City’s General Fund relies heavily on revenues such as shopping, tourism, hotels, dining/entertainment and the economic success of local businesses, the City is faced with a proposed FY 2020/2021 budget deficit of $16 million. Despite efforts to drastically reduce General Fund expenditures, no one knows how long the impacts of COVID-19 will continue to plague the City; because of this uncertainty, the proposed revenue estimates for FY 2020/2021 could vary from actual revenues received.

The Culver City City Council voted to place Measure RE on the November 3, 2020 ballot as a revenue measure that could help towards closing the gap in the City's finances.

It is estimated that Measure RE would generate approximately $6,000,000 per year. That revenue would go into the City's General Fund to use for any valid municipal purpose. The General Fund can be used for any valid municipal purpose such as: maintaining essential services; deferred maintenance on streets, parks and facilities like the Veterans Memorial Building; addressing homelessness in Culver City; after-school and senior services; and economic recovery from the COVID-19 pandemic.

Measure RE establishes a marginal tax rate with four brackets, based on sales price or value, for the City's real estate transfer tax:

1) 0.45% on amounts of $1,499,999 or less. (Same as current rate)
2) 1.5% on amounts from $1,500,000 to $2,999,999.
3) 3.0% on amounts from $3,000,000 to $9,999,999.
4) 4.0% on amounts $10,000,000 and above.

A “marginal” tax rate means each bracket of a transaction is taxed at a different rate. For example, on a sale of $11,000,000, the first $1,499,999 would be taxed at the 0.45% first bracket rate. Next, the amount from $1,500,000 to $2,999,999 would be taxed at the 1.5% second bracket rate. The amount from $3,000,000 to $9,999,999 would be taxed at the 3% third bracket rate. Then, any amount from $10,000,000 and over would be taxed at the 4% fourth bracket rate. The amount of tax for each sales price bracket would be added together for the total tax due.

• With the voter approval of Measure RE, approximately 70% of property sales remain at the current 0.45% rate because their property sale price is under $1,500,000. (In calendar year 2019, approximately 73% of all property sales in Culver City were under $1.5 million.) Therefore, Measure RE would affect approximately 30% of all property sales, mostly luxury and commercial properties.

• Even if Measure RE passes, the 0.45% flat rate would still apply for:

• • Property sales under $1,500,000,

  • Transfers or sales of 100% of deed-restricted affordable housing, and

  • The first transfer of newly-constructed multi-family housing.

• If approved, Measure RE would adjust the thresholds for the four tax rate brackets every five years, based on the Consumer Price Index, so that as prices adjust with inflation, properties would be taxed at sale at the current rates. The tax rates (0.45%, 1.5%, 3.0%, and 4.0%) will stay the same over time.

Yes, Culver City's real estate transfer tax applies to all property sales, including residential and commercial.

Property conveyed by inheritance may be exempt from the real estate transfer tax. See the County of Los Angeles's "Notice of Exempt Transactions Under the Documentary Transfer Tax" document for a list of more exemptions. You may also contact the County Recorder's Office staff at (562) 462-2125 if you have any further questions about exemptions.

Measure RE is a "general tax," not a "special tax," and may be used for any valid municipal purpose. General tax revenues are deposited into the City's General Fund and do not go to the County or State. Because it is a general tax, Measure RE requires a simple majority voter approval ("50 percent plus one") to pass in the November 3, 2020 election.

Like other City revenues, real estate transfer tax revenue is subject to annual independent audits, ensuring full accountability and transparency.

Measure RE goes into effect on April 1, 2021.  This tax will be collected by the County of Los Angeles.