In recent years, taxes from the sales of multimillion-dollar downtown skyscrapers have provided a budget boost for The City. But decreased sales this year have left San Francisco with $32 million less than planned for by city officials.
Todd Rydstrom, the director of budget and analysis for the Controller’s Office, said the high revenues from previous years had”basically” bailed out The City.
“We knew it was not sustainable, but it helped out,” Rydstrom said.
With The City facing a major projected budget deficit for next fiscal year, Mayor Gavin Newsom asked city departments in November to make budget cuts of up to 13 percent.
On Tuesday, the City Controller’s Office released a report that put the projected shortfall for next fiscal year at approximately $305 million, $33 million less than what was projected a few weeks ago.
The savings came from the departmental cost-cutting, as well as well-performing hotel, sales, property and business taxes, according to the Controller’s Office.
The “good news” however, is tempered by less-than-expected property transfer tax revenue. The City budgeted to receive $123.5 million from the sales of real estate in San Francisco, but have now adjusted that figure and expect to bring in $91.6 million.
Every time property changes hands in San Francisco, The City assesses a tax on the transfer, and the rates vary depending on how much the property costs. For properties worth more than $1 million, a tax of 0.75 percent is assessed, according to the City Controller’s Office.
During the last three years, city coffers were replenished with $392.06 million in tax revenue. Multiple high-profile building sales — including the Bank of America building at 555 California St., San Francisco’s largest office space — kept feeding money into The City.
But the once-hot markets that led to many high-priced buildings being repeatedly sold in a single year have cooled. Investors are holding tight to their money because loan rates to buy commercial property have increased, city officials and real estate experts said.
Last year, The City took in $143.98 million in taxes on 11,028 transactions, up from $131.28 million the previous year, according to a City Controller’s Office report released at the beginning of this week.