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9 Ways Los Angeles Could Pay For Its Plan to End Homelessness

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A new bond, developer fees, and a tax on marijuana are among the potential revenue sources being considered by the city

It will cost $1.85 billion over 10 years to end homelessness in Los Angeles (supposedly)—a noble goal with a enormous pricetag. The LA City Council has been brainstorming new sources of revenue to put towards the Herculean effort and this week, according to the Daily News, they unveiled an assortment of potential new taxes and fees that might end up generating the funds to get tens of thousands of homeless residents off the streets. Everything from a new bond issue to a tax on marijuana is on the table.

In total, the City Council has come up with nine potential revenue sources to fund the homelessness effort. In a report released this week, they out four new fees, five new taxes, and one potential bond measure as the best options for raising the funds.

Here are the nine ideas they're proposing:

A New Bond

A General Obligation bond is singled out as the biggest revenue generator among the nine ideas. $1.1 to 1.8 billion would be raised from property tax revenues to be set aside for affordable rental housing, permanent supportive housing, and helping working families buy their first homes.

According to the City Council, the cost to homeowners would look something like this:

"For a bond issued over a 10-year period and paid over 30 years, the average tax would be $51.35 on a $327,900 home (median assessed value of a single-family home in 2015)."

It could be a tough sell to the public though. A new bond would require two-thirds approval from voters, per California's crazy strict state law, and city officials admit other tax measures on the ballot "could decrease the electorate's appetite for a tax increase."

Taxes

Marijuana Tax

The city expects it could raise $16.7 million annually from a 15 percent tax on the sale and cultivation of marijuana. This sum is certainly not enough to make a dent in the $1.85 billion the city needs to end homelessness, but it would provide funding for supportive services like hygiene facilities, safe parking, vouchers, and homelessness prevention and outreach.

The tax would require a vote and a two-thirds majority vote to approve the funding to be specifically allocated to the homelessness effort.

Sales and Use Tax

Angelenos might be voting on yet another sales tax increase in November (in addition to Metro's huge proposal for transit expansion), this time for the homelessness effort. A .25 percent increase could generate $122 million annually.

Competition from other tax-raising ballot measures might hurt this one at the ballot box, though. The sales tax in LA has a cap of 2 percent, and the City Council believes it has the leeway to raise it by up to 1 percent if it wants to. But all the tax increases vying for approval have to fit under that 2 percent cap, so competition for sales tax increases could be fierce this year.

A two-thirds majority would have to approve the funding being specifically allocated to the homelessness effort.

Billboard Tax

A 12 percent tax on billboards could generate $24 million annually. That money would be used for both permanent supportive housing and supportive services. City officials are a little wary of this tax, calling billboard taxes a "volatile revenue source" since they depend on the unpredictable sales volume of billboards.

Once again, it's subject to voter approval and needs a two-thirds majority to allocate revenue specifically towards homelessness.

Parcel Tax

Rather than tax a home based on its assessed value, a new property tax would be set at a fixed amount, either per parcel, per room, or per square footage. A $10 tax on each parcel could bring in $7.8 million annually. A new parcel tax is subject to voter approval and needs a two-thirds approval to allocate the revenue specifically towards homelessness.

Documentary Transfer Tax

This is a tax that is collected during the sale of real estate. Basically, for every dollar a home is worth, the city collects a percentage at the time of sale. Currently, the city brings in $2.25 in taxes for every $500 of sales value. The city wants to increase that by an additionally $0.55 per $500 sales value in order to generate $167 million annually for homelessness. City Council concedes this is another volatile income source, as the revenue it brings in depends on the strength of home sales.

The tax is subject to voter approval and needs a two-thirds approval to allocate revenue specifically towards homelessness.

Fees

Housing Linkage Fee

The city expects it could generate $38 to $112 million annually for affordable housing by instituting a fee on new real estate developments. The exact fees they would charge are up in the air, but the report cites previous studies that supported fees of "$20,000 and $80,000 per market rate residential unit and $20 and $50 per square foot of commercial development." The city plans on spending $500,000 to study the feasibility of the plan.

The City Council and mayor would approve and enact the fees.

Inclusionary Zoning Fee

This would be a fee paid by developers should they choose not to include affordable housing in their developments. No numbers have been floated about how much the fee would be or how much revenue it could bring in.

Document Recording Fee

Charging a fee on all real estate documents recorded in the city could bring in $30 million annually. The fee would have to be approved by voters by a two-thirds majority.