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REVIEW AND DISCUSS FINDINGS REGARDING A VACANT COMMERCIAL PROPERTY TAX AND PROVIDE RECOMMENDATION TO CITY COUNCIL
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RECOMMENDATION
Staff recommends that the Committee review findings and discuss a Vacant Commercial Property Tax and consider forwarding a recommendation for staff action to the City Council.
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Summary
Unimproved and unmaintained vacant commercial buildings throughout the city contribute to blight and provide attractive nuisances for loiterers and unhoused individuals. This in turn contributes to a risk to public health and safety, as evidenced by numerous fires that have occurred in commercial vacant structures every year throughout the city.
As the Stockton Police Department and City Council contemplate changes to the Stockton Municipal Code (SMC) to encourage commercial property owners to maintain and keep their vacant buildings in good repair, a companion to this effort could be the establishment of a Vacant Property Tax.
DISCUSSION
Background
There is anecdotal evidence that unimproved and unmaintained vacant commercial buildings throughout the city contribute to blight and provide attractive nuisances for loiterers and unhoused individuals. This in turn contributes to a risk to public health and safety, as evidenced by numerous fires that have occurred in commercial vacant structures every year throughout the city.
Many commercial property owners do not live in the City of Stockton, and appear to be apathetic to the safety risks and economic detriment that these neglected buildings represent.
As the Stockton Police Department and City Council contemplate changes to the SMC to encourage commercial property owners to maintain and keep their vacant buildings in good repair, a companion to this effort for consideration could be a Vacant Property Tax. A vacancy tax is broadly defined as a tax on empty or vacant properties or units, it can apply to both residential and commercial property. For the purposes of this report, discussion is limited to a vacant commercial property tax.
A number of U.S. cities have implemented such a tax for varying reasons with a range of parameters, including Washington D.C. (2011) and Oakland (2019). The City of Sacramento is also considering the adoption of a vacant commercial property tax targeting the owners of empty lots and commercial storefronts and has considered polling voters for their thoughts. The Cities of Los Angeles, Santa Cruz and Richmond have also considered vacancy property taxes but have not moved forward yet.
District of Columbia’s "Fiscal Year 2011 Budget Support Act of 2010" (Attachment B) created two property tax rates for vacant commercial/residential properties (Class 3) and blighted properties (Class 4). Class 3, vacant properties are taxed at $5.00 per $100 of assessed value, and Class 4 blighted properties are taxed at $10.00 per $100 of assessed value.
City of Oakland’s Vacant Property Tax (Measure W) was adopted in November 2018 (Attachment A) and has adopted additional modifications since passage. Measure W establishes an annual property tax of $3,000 or $6,000, based on property type, the City deems to be vacant. A property is deemed “vacant” if it is in use less than fifty (50) days in a calendar year and does not qualify for any exemptions. Tax revenue supports and funds homelessness programs and services, affordable housing, Code Enforcement, and clean-up of blighted properties and illegal dumping.
Present Situation
The purpose of this agenda item is to seek direction from the Council Legislation/ Environmental Committee and to determine if staff should commit resources to this effort, since it could be an extensive and arduous process.
For the City of Stockton, the intent of a Vacancy Property Tax would be to encourage vacant property owners - otherwise apathetic to their building’s condition or economic detriment - to either sell the property to an investor who wants to develop it or develop it themselves. There are pros and cons to this initiative, and a full investigation into whether such a tax would be a beneficial tool to incentivize development in the City is necessary.
A Vacant Property Tax would need to be brought before Stockton voters. The item cannot go to a special election. The initiative must be placed on the ballot during a regularly scheduled general election, which will next be held in November 2026. As a special tax, the measure would need to pass by a two-thirds vote of the City’s registered voters. As of the last report by the County Registrar of Voters to the Secretary of State, a two-thirds majority would require 90,285 votes in the affirmative.
FINANCIAL SUMMARY
In 2024, the current cost estimate for placing a measure on the general election ballot ranges from $50,000 - $80,000. There will be additional associated costs, such as staff time incurred, the use of consultants to conduct a feasibility study, and informational mailings distributed to voters. The cost of the ballot measure is expected to increase by the 2026 election year.
Attachment A - City of Oakland - Measure W Vacant Property Tax Ordinance
Attachment B - Washington D.C. - Vacant Property Disincentivization Act of 2010