Last month, Los Angeles city officials approved a nearly $2 billion plan to solve its homelessness crisis by building more housing with support services for residents over the next decade.
Now the question is: how is the city going to pay for this?
The city’s budget analysts have narrowed their top funding ideas to nine. Several proposals involve new taxes and fees that would require voter approval. Among them is a plan to tax the sales and cultivation of medical marijuana at 15 percent, which would generate about $16.7 million a year. More revenue could come if the state decides to legalize recreational pot and the city decides to tax that too.
The idea that would create the most funds is a proposed $1 billion bond issue which would need the backing of two-thirds of voters to pass. The city would pay back the loan back investors over 30 years through property taxes. The cost to home owners? That would add about $51 to the tax bill for a $328,000 home in Los Angeles.
What all the proposals have in common is that they would be new funding sources. L.A. Chief Administrative Officer Miguel Santana told council members Wednesday that's the only way the city can provide enough housing for city's homeless population, which has climbed 12 percent in two years.
"Even as our economy improves, we do not anticipate to have an additional $1.78 billion over the next 10 years to dedicate for this purpose," Santana said.
What's also clear is that, given the size of the city's homelessness crisis, a combination of resources is needed.
A couple proposals need only the approval of the Council and the mayor. Among them: a one-time payment that developers would make on new project, which would go toward building below-market-rate housing. This so-called "housing linkage" fee will be the subject of a $500,000 study that the city is planning to undertake this year.
Another idea is requiring developers to build housing for lower-income residents, and if they don't want to, they could pay a fee instead.
"In turn the city would be able to take those fees and develop affordable housing elsewhere," said Sharon Tso, the chief legislative analyst.
It's unknown how much the fee would generate, but council member Mike Bonin, whose Westside district includes Venice, expressed concern over the idea.
"I'd be very reluctant to see an in-lieu fee that would get people out of building affordable housing in the coastal zone and the wealthier areas of town," Bonin said. "I think we need to have affordable housing everywhere."
Advocates for the business community and the homeless alike told council members Wednesday that whatever they choose, they should act now.
“Go big, go big and go together,” said Chris Ko of the United Way. “[Homelessness] is the top issue that voters want to see the city take action on.”
Here are some other ideas before the city:
- Real estate document fee: Fees would be charged on things like financing statements and discharges of mortgages. State law caps such fees at $225. Estimated revenue is $30 million.
- Raising the tax on real estate sales: This so-called "documentary transfer" tax is already made at time of a property sale. City staff is suggesting raising the current rate from $2.25 to $4.50 for every $500 of the sales price. Doing so could make the city an additional $167 million a year.
- City sales tax: Adding 0.25 percent to the sales tax would net about $122 million, according to a 2012 study done for the city.
- Parcel tax: Instead of taxing a property on its assessed value, the city would tax a property, or parcel, at a fixed amount. If you assess $10 per parcel, the estimated annual revenue would be $7.8 million.
- Billboard tax: A 12 percent tax on billboards could generate $24 million for the city. But budget analysts acknowledge that this is a "volatile" revenue source because it's dependent on advertising sales, which ebb and flow.