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Council explores real-estate-excise-tax idea but staff warns funds are generally restricted to capital projects
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Summary
Councilmember McCartney proposed researching a higher real-estate-excise tax (REET) to raise revenue when homes sell; staff cautioned that REET funds are typically restricted to capital projects and not available for ongoing public-safety operations, though recent state changes may allow limited flexibility requiring further legal review.
During the June 12 work session, Councilmember McCartney proposed researching whether increasing the real-estate-excise tax (REET) could raise meaningful revenue for the city while shifting the immediate tax incidence away from current homeowners and toward transactions when property is sold.
City staff responded that the REET is traditionally tied to capital-improvement projects (CIP) and cannot generally be used for ongoing operational expenses such as public-safety payroll or recurring jail costs. Staff noted there have been recent changes to state law that create some flexibility for how REET revenues can be used, but the council would need legal and fiscal analysis to confirm whether the city could apply REET revenues to operations in the way suggested.
Councilmember McCartney asked staff to research whether the city can change its REET rate and, if so, what revenue that would generate given recent local sales and transfers; staff said they would check the new rules, consult MRSC and bring back a legal and revenue analysis to the governance meeting. No decision was made; the council agreed that staff should return with written guidance on statutory constraints and revenue estimates before any further policy action.
