By CLARK MASON
THE PRESS DEMOCRAT
With little fanfare or discussion, Sebastopol has become the latest city in Sonoma County to lower a tax charged on most real estate
The City Council introduced an ordinance that will reduce by hundreds of dollars the amount it tacks onto the sale of an average home.
In a tacit acknowledgement that they may have been charging too much, several cities in Sonoma County have recently reduced their documentary transfer tax rates.
Sebastopol, which for years has been levying more than three times the amount specified by state law, follows Cloverdale and Cotati, which have revised their rates downward to conform to the Revenue and Taxation Code.
City officials say that property owners who think they were overcharged under the old rate shouldn’t necessarily expect a refund.
But one of them, Linda Williams, a retired teacher who bought her Cotati home in 1997, said she intends to pursue a refund.
“I’m a single person who struggles to keep things together,” she said.
She paid about $250,000 for her house, and Cotati would have collected $750 on the property transfer tax rate the city had in place at the time, rather than $275 specified by state law and the amount that reflects Cotati’s recently revised rate.
That extra $475, she said, is worth fighting for.
“I just retired from teaching with not a lot of expendable income,” she said. “If there’s a way to get a refund, or get an adjustment of some sort, I’m definitely interested.”
Cotati City Manager Dianne Thompson said property owners can contact her office if they are seeking a refund, but did not explain what would happen from there.
“We’re working on it on a case-by-case basis,” she said.
A property owner can file a claim against Sebastopol, but the city plans to defend what it’s been charging for the past two decades, said City Attorney Larry McLaughlin.
“We’re sticking with our ordinance as adopted back in 1991,” McLaughlin said. “It was a valid ordinance, it was not challenged and in our opinion it’s way too late to challenge now in terms of validity.”
Cloverdale officials admit no wrongdoing and say they are simply going with a more conservative approach to interpreting tax code.
The documentary transfer tax rate is something all counties and most cities in California impose when a property changes hands. There are exceptions, including transfers that are a gift between spouses, or between individuals and their revocable trusts.
Typically, the buyer pays the transfer tax, but that can vary and sometimes the seller pays it if agreed to in the property transaction.
“It’s negotiated on a case-by-case basis,” said Ray Leonard, administration manager in the Sonoma County Recorder’s Office.
The state Revenue and Taxation Code sets the documentary transfer tax for counties at a standard $1.10 per $1,000 of sales price. Cities also can impose a fee, but according to the code, are restricted to half the county rate, or 55 cents per $1,000. It is credited against the county tax.
The rules are different for charter cities, such as Santa Rosa and Petaluma — the only two in Sonoma County — which levy larger tax rates.
According to state tax code guidelines, non-charter cities are supposed to split the proceeds with the county, so that the total amount charged on the property transfer remains $1.10 per $1,000, according to Leonard.
In the three Sonoma County cities that hasn’t been the case.
Cloverdale since 1993 has charged an additional $1.10 per $1,000 beyond what the county charges, resulting in a total tax of $2.20 per $1,000 value. On a $300,000 home that means the total tax was $660, rather than $330.
Cotati for years charged an additional $1.90 per $1,000, which boosted the total tax on property transfers there to $3 per $1,000.
Instead of paying $330 on the sale of a $300,000 home, a Cotati homebuyer paid $900.
In Sebastopol, the total transfer tax has been $3.10 per $1,000, because Sebastopol charged a separate city rate of $2 per $1,000 beyond the county rate.
On a $300,000 home sale, that boosted the transfer tax on the home to $930, instead of $330.
The Sebastopol City Council last month had to adjust its general fund to reflect the $70,000 annual dip in revenue it will experience from reducing the tax rate.
“It’s a bit of a bind we are in now. Our budget is extremely thin,” said Sebastopol Vice-mayor Mike Kyes. “Certainly we need to follow the rules.”
You can reach Staff Writer Clark Mason at 521-5214 or firstname.lastname@example.org.