SOUTH LAKE TAHOE, Calif. – Councilmembers made two small changes to an informational report on the citizen-initiated vacancy tax ballot measure before approving the report at their meeting Tuesday night, June 18.

Council directed staff to prepare the report at their May 7 meeting, giving preparers little over a month to prepare it in time for presentation according to California Election Code 9212.

“I will say that this has been a difficult task that we have been assigned,” City Attorney Heather Stroud opened her presentation with. She said that was in part due to the lack of data from similar cities with similar vacancy taxes.

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The 43 page report, prepared by staff with the assistance of consultant HDL, breaks down what impacts the vacancy tax might have fiscally, on housing, its implementation costs, privacy matters, as well as many others factors. The report also provides a legal analysis summarizing an ongoing lawsuit against the San Francisco Vacancy Tax, but notes there is currently no binding appellate case law in California regarding the authority of local government to adopt vacancy taxes.

“These are somewhat novel legal issues,” she expressed to council.

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The legal analysis also addresses concerns from the Lake Tahoe Taxpayers Association that it creates a special tax district.

Public commenters on both sides pointed out flaws with the report, which Mayor Cody Bass noted, “to me shows that it was done—in a way—the way we wanted it to be done, because it’s not necessarily supposed to appease to either side.”

Some of the issues raised by the community pertained to assumptions made by the staff and consultant. “There are many assumptions in this report and,” Steve Teshara with Keep Community First Coalition and Tahoe Chamber said to council, “there’s very little to back up why the assumptions were made.”

The report states on page three, “In order to address the issues requested by City Council, it is important to note that some assumptions were necessary…” It was something City Attorney Heather Stroud reminded as she presented the report and mentioned back at the May 7 meeting during initiation talks. Assumptions had to be made due to lack of data.

Some of these assumptions, highlighted throughout the report, include how the number of vacant properties were calculated.

Preparers used property tax data, examining mailing addresses compared to parcel addresses as well as voter data to find 7,714 potentially vacant properties. That’s over 500 more than the Vacancy Tax proponent’s estimate of 7,150, using census data.

Hypotheticals and assumptions were made throughout the report based on these numbers, including assuming 30-60% of these potentially vacant properties would be subject to the tax and that 60% would comply by paying the tax. Based on these numbers, preparers calculated permanent residency would increase anywhere from 540 to 1,543 residencies.

These numbers provided the basis for fiscal impact calculations. The report outlines the vacancy tax could generate around $4.16 million to $8.33 million in revenue the first year and almost $10-20 million in the second year, according to those assumptions.

Other assumptions made included how the tax funds would be distributed between the parameters of housing, roads, and transit, which the initiative earmarks funds for, but does not direct in what proportions.

Bass said there are many assumptions in the report and listed the unknowns, including what future councils could do for enforcement, and the amount of full-time residents it would create. “To me,” he expressed, “trying to go through and nitpick this because of that basis is not what we should try to do.”

Other councilmembers agreed.

“I refuse to nitpick this to death because it is based on assumptions,” Councilmember Tamara Wallace said and added, “The assumptions are garbage because there wasn’t a whole lot of information to be had.”

Councilmember Scott Robbins said, “There are assumptions made that I would disagree with and I’m sure that the assumptions I would make would be disagreed with by others and I think the city did a pretty good job, given the difficult task handed to them to make this report as impartial as possible.”

Robbins did bring up two corrections and adjustments to the report, which commenters also raised. One concerned the description of the Lease to Locals incentive on page six, where it had stated is a $10,000 per year incentive. Robbins noted, with confirmation from staff, the incentive is actually $2,000-$10,000 depending on the amount of renters. They also concluded it isn’t per year and the incentive is only provided the first year a property owner decides to rent a property long-term.

The other change requested the report include that owners may occupy their homes for more than 182 days as an option under the measure, in addition to the four options presented which included:

• 1. sell the vacant unit
• 2. reduce the number of days vacant to below the 182 days by renting out for intermediate term (30 days or longer)
• 3. landlords could lower rents to attract full-time tenants to vacant units, though the opportunity cost of lost rental income might exceed the tax
• 4. pay tax

Councilmember decided instead of adding another option, to strike the “by renting out for intermediate term (30 days or longer),” so it reads “reduce the number of days vacant to below the 182 days.”

The staff agenda report on the item cites case law that states the purpose of the report is to provide the electorate with the opportunity to make an informed decision on the proposed initiative.

“I think this report fails,” Steve Teshara with Keep Community First Coalition and Tahoe Chamber said in regards to that purpose. He expressed to council concerns with the tax oversight committee, litigation, and the vacancy tax overall. “I think this puts a black label on the city for a longtime to come.” He introduced others from the coalition, Sharon Kerrigan, Duane Wallace, and Jerry Bindel, who raised further concerns.

Kerrigan followed by remarking on the report’s estimations on implementation and enforcement, considered a bureaucratic nightmare by David Jinkens who commented before. Her comments were similar, “One of the critical ways in which this 9212 report really completely misses the mark is in the likely massive bureaucracy that it’s going to take to set it up, administer and enforce.”

The report summarizes using city staff implementation or a third party vendor, using figures from Oakland’s contracted vendor, SCI Consulting Group. The report states the vendor uses 5-6 people to administer responses from 4,000 property owners. Kerrigan said if we have almost 17,000 units, “that sounds to me like four times the number of staff that would be needed,” she said, compared to Oakland.

The report reveals staff implementation costs at almost $1 million the first year and over $600,000 in ongoing years. For an idea on vendor costs, in her presentation to council, City Director of Finance, Olga Tikhomirova, said Oakland contracted SCI for an amount not to exceed $1.27 million over a three year period.

“These costs are conservative estimates and most likely on the low end of the scale,” Tikhomirova said and explained costs really depend on the administrative methods selected, the level of compliance and level of enforcement chosen.

Bindel raised concerns about where the start-up costs will come from since the vacancy tax period doesn’t start until 2026 and the tax revenue likely won’t come in until 2027. “Will the vital programs of the city such as police, fire, rescue, parks and recreation, pothole repair, and yes, even our existing housing programs be cut to pay for this vacancy tax bureaucracy?”

Proponent and one of the organizers of the vacancy tax, Nick Speal, requested the economic boost from increased residencies and their retail spending be included in the report. He, as well as Councilmember Robbins, calculated it could provide an estimated $27 million in spending at local businesses.

They extrapolated these numbers based off the report’s projected impacts to sales tax calculations from the boosted residencies. Census data incorporated in the report places retail sales per property at $17,386. Multiplying this number by upper end of projected residencies, 1,543, provides a number near $27 million. The report estimates sales tax revenue could increase between $235,000 to $670,000 annually.

“Just like the vacancy tax, this sales tax ‘bonus’ helps meet community needs without raising taxes on locals. It simply comes from business growth alone,” Nick Speal said in a release from Locals for Affordable Housing, who organized the initiative.  

In the release, co-founder of Locals for Affordable Housing, Amelia Richmond said, “The vacancy tax is a major win for local businesses, providing both more workers and more year-round customers, and we’re glad to see that reflected in the City’s impartial analysis,” and added, “When 44% of all housing units sit vacant most of the year, our businesses take the hit. By incentivizing more use of the housing we already have, there are more year-round customers to eat, drink and shop at local shops and restaurants on a daily basis. Not to mention, more housing for local employees.” 

Bindel pointed out in his comments, echoed by Mayor Bass, that the vacancy tax measure could reduce the spending capabilities of those paying the vacancy tax, and could potentially offset the those retail and sales tax gains.

On the legal front, while many have pushed council to pursue a writ of mandate challenging the measure in court and potentially removing it from the ballot, City Attorney Stroud said in her legal breakdown that courts typically disfavor this pre-election tactic. She said at the meeting that courts prefer challenges be brought after people vote.

Although both proponents and opponents voiced dissatisfaction with the report, some found a silver lining. “I agree that the report doesn’t meet everyone’s needs,” Councilmember Cristi Creegan said, noting, “It’s a great conversation starter.” She said she appreciated one commenter’s note on that and added it’s an opportunity for people to read the finding, take what they want from it, and pursue further information.

“You can make your own assumptions and challenge the report,” she said, “I really like it from that perspective.”

The public may access a copy on the City of South Lake Tahoe’s election website.