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Lawsuit Seeks to Void Transfer Tax Hike

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By Jorge Casuso

January 18, 2023 -- The City Council on Tuesday will take up a lawsuit in closed session that seeks to void the transfer tax hike approved by Santa Monica voters in November.

The lawsuit filed January 9 in Los Angeles Superior Court against the City and School District claims that Measure GS violates the California Constitution's “single-subject” rule because it generates funding for two separate purposes.

Sponsored by former mayor Sue Himmelrich, the measure -- which was approved with 53.49 percent of the vote -- provides an estimated $50 million a year for affordable housing programs and education.

The lawsuit filed by the California Business Roundtable claims GS "is invalid" because under the California Constitution "[a]n initiative measure embracing more than one subject may not be submitted to the electors or have any effect."

"An initiative ordinance that violates section 8(d) or article II, is void in its entirety," the lawsuit argues. "Thus, the new tax imposed by Measure GS is void and must not be imposed or collected."

According to the lawsuit, "this requirement has been held to apply to local initiative measures, like Measure GS."

The money generated by GS -- which hikes the transfer tax by $56 per $1,000 for properties that sell for $8 million or more -- requires the money raised "to be allocated to two different government programs," the lawsuit states.

Under the measure, the first 20 percent of the funds raised goes to fund local schools and the other 80 percent to fund homelessness prevention and affordable housing projects.

"On the one hand, the initiative provides increased funding for general K-12 public education, provided by the Santa Monica-Malibu Unified School District," the lawsuit states.

"On the other hand, the initiative provides increased funding for a new comprehensive affordable housing program."

If Measure GS goes into effect as planned by March 1, "great and irreparable harm will result to members of the plaintiff, and to many other Santa Monica property owners desiring to sell or transfer their real property," the lawsuit argues.

"Moreover, the citizens of Santa Monica (and Malibu) may be harmed if the unlawful revenue source is relied on to incur debt, or long-term financial commitments by the City or the school district beneficiaries."

According to the lawsuit, the California Business Roundtable is "a non-partisan organization comprised of the senior executive leadership of the major employers of businesses throughout the state -- with a combined workforce of more than half a million employees.

"Roundtable members own and occasionally transfer real property located in the city of Santa Monica."

The California Business Roundtable was a co-sponsor of the campaign to defeat Measure GS, which raised a total of $503,000, according to the campaign finance disclosure statement covering the period through December 22.

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