Page 467 - FY 2022-23 Proposed Budget

Because of this link, an active, rising real estate market results in strong future
growth in Property Tax revenue. Due to the immediate receipt of Documentary
Transfer Tax and the long process of reassessment, billing, and receipt of
Property Tax, this cause and effect is delayed, with Property Tax responding
up to two years after changes in Documentary Transfer Tax.

As you can see from the chart, Documentary Transfer Tax fell by more than
60% around the beginning of the great recession. Secured Property Tax,
however, maintained strong growth for two more years before falling off in
2010. Then, once the real estate market recovered, Property Tax regained its
previous rate of growth.

Documentary Transfer Tax and Secured Property Tax
Growth

$350,000,000 12%
$300,000,000 10%
$250,000,000 8%
$200,000,000 6%
$150,000,000 4%
$100,000,000 2%
$50,000,000 0%
$- -2%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Property Tax Growth (%) Documentary Transfer Tax

Looking to the pandemic, we see a divergence of these two sources over the
past two fiscal years. Documentary Transfer Tax has pushed up to all-time
highs during the pandemic, with both home prices and sales volumes growing.
But Property Tax has not yet responded, growing just under 6% in 2021 and
just over 4% in 2022. Based on the pattern from the last economic recovery,
we would expect Property Tax to have a strong year in 2023. Projecting
extraordinary growth in the City’s largest revenue source comes with
significant risk however. Accordingly, our estimate for 2023 is a more
moderate 4.3%.

Projecting Documentary Transfer Tax is even more difficult, given its historical
volatility and transactional nature. While trend analysis of the last few years
would seem to indicate another record year, a 10 to 20 percent drop in the
number of real estate transactions could result in a reduction of as much as

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