SOUTH LAKE TAHOE, Calif. – In early May this year, the City Council of South Lake Tahoe directed the staff to prepare an impact report on the Vacancy Tax initiative. In June, according to the California Elections Code 9212, the city then published the impact report, available on the City of South Lake Tahoe website.

It details the effects on fiscal impact, infrastructure, land use, and regional housing needs, along with legal analysis and addressing privacy concerns, implementation costs, impacts on real estate, and the best method to determine vacancies.

Fiscal impacts

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The impact report was prepared by the City’s consultant, HdL Companies, which performs audits for public agencies. HdL identified 8,229 potentially vacant residential properties, which were then narrowed down to 7,714 potentially vacant residential properties by cross-referencing voter data.

For the first-year hypothetical annual revenues, the estimates range from bringing in $4.16 million to $8.33 million, while subsequent years’ annual revenues range between $10 million to $20 million. These are based on the assumption that 30% to 60% of the potentially vacant properties would be subject to the tax and that the taxes are paid on 60% of the properties, rather than the property being sold, rented, or occupied to avoid the tax.

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If 540 to 1,543 properties were transitioned into permanent residency or long-term leases in order to avoid the tax, the sales tax revenue impact that HdL stated ranges from $235,000 to $670,000 annually.

The 9212 report states, “Overall, City staff estimates the overall fiscal impact from vacancy tax to be positive.”

Implementation costs

HdL worked with the City of South Lake Tahoe’s finance department to research and analyze the implementation cost estimates, which involved discussions with various city departments and the SCI Consulting Group, the contractor for the City of Oakland’s vacant property tax.

The estimate for the annual ongoing costs to administer the measure with city staff would be $527,800 and the Vacancy Tax Oversight Committee cost to be $80,400. An additional $378,200 would be needed for startup costs, which would cover the committee formation, as well as the process development for the measure, including creating a financial database infrastructure, web development, ordinance implementation, and legal counsel.

Of the first-year estimates, these costs all together represent approximately 12% to 24% of the estimated annual revenue. Of the subsequent years’ estimates, minus startup costs, this represents 3% to 6% of the estimated annual revenue.

According to SCI Consulting Group, the contractor for implementation and maintenance of the vacancy tax in Oakland, the implementation stage incurs a higher overhead cost than the regular tax would have. At least 5 to 6 people from SCI staff are dedicated to administering responses from 4,000 property owners on an ongoing basis.

Legal analysis and privacy concerns

The 9212 report details both a legal analysis of the San Francisco lawsuit against their vacancy tax and the Lake Tahoe Taxpayers Association Materials that were presented earlier this year.

Regarding the San Francisco lawsuit on privacy and whether or not the measure is unconstitutional, the lawsuit is still ongoing and is set to be heard for summary judgement on October 31, with cross-motions on both sides. No official judgement has been made.

For the Lake Tahoe Taxpayers Association Materials, the report acknowledges that there was an assertion that the initiative creates a “special tax district” consisting of only vacant homes—which the Taxpayers “assert that the Local Agency Formation Commission must approve the formation of the special tax district and that it must be created with the approval of two-thirds of the voters in that district.” However, the measure is structured as an excise tax and would not require a special district.

As far as privacy impacts, HdL surmised that “there is some likelihood of notices being sent to old addresses or other mailing issues that could disclose information to other than the intended recipient.” The City of South Lake Tahoe would also need to store information on the occupancy of a property, which would need to be treated as sensitive personal information and require safeguards to avoid unnecessary disclosures, according to HdL.

The legal issues regarding privacy impacts, such as the ones outlined in the San Francisco lawsuit, have not yet been ruled on by the court.

How to determine vacancies

From HdL and discussions with SCI Consulting Group, there were 10 possible ways to determine vacancies, none of which involved surveillance of the property by the city. The ten ways that were noted were: Contacting all residential properties and asking for vacancy or occupancy information, using utility records, comparing utility usage on suspected vacancy properties against average utility usage, using landlords’ business license rental gross receipts information, using county data for exemption value, using building permits data, verifying data reported by community members, using vacancy data from the U.S. Postal Service (USPS), using blight records from code compliance, and tying property records to meters database.

Of these, the most useful methods determined were contacting residential properties, using utility records, and using county data. However, the South Lake Tahoe Public Utilities District indicated that their policy is not to release customers’ utility use for privacy reasons—which means the city would likely need to coordinate with STPUD and other utilities if this method was used.

The report did not suggest verification of data reported by community members or USPS postal workers observing and reporting an apparent vacancy as useful methods for determining vacancies.

Effects on land use, housing, and meeting regional housing needs

Though land use is hotly contested in the Basin, the report states, “The Initiative will likely have no effect on the use of land, since the land use will continue as residential for existing residential properties.”

However, the impact on providing more housing lies in the behavior of property owners who have potentially vacant properties. As previously stated, they may decide to sell, rent, occupy, or pay the tax on their property. The 9212 report states that if property owners do choose to rent their properties as a response, it could increase the supply of moderate-income and above moderate-income housing, but “at a level that cannot be determined with existing data.”

Funds from the initiative are presumed to be used to support the strategies that the city put forward in the 2022 – 2027 Housing Element and 2023 – 2028 Strategic Plan. The measure itself puts forth the potential housing-related uses of funds, which the report says are “in general alignment with the Housing Element and Strategic Plan.”

The report goes on to say that there are no stated parameters for a minimum or maximum share, as the allocation decision is left to City Council with input from the Vacancy Tax oversight Committee—the measure also states that the special fund could be used for roadworks and related infrastructure, transit projects and related infrastructure, and the administrative costs of the tax. For the purposes of the report though, they assume “some portion of the tax revenue would be directed to the… housing programs.”

Several major housing programs are in need of funding, including the New Construction Program (which supports affordable housing construction), which uses local funding as leverage to compete for grants; multifamily and special needs housing acquisition and rehab programs, which similarly use local funding as leverage for grants; the rental/deposit assistance program which has yet to launch; and the rehabilitation loan program/homebuyer assistance program, which as of the report’s findings in June, had no funding.

If revenue after subtracting implementation costs was equally split between housing, roads, and transit, the housing program would have a range of $1.06 million to $2.44 million in the first year. In subsequent years, deducting ongoing implementation costs and continuing to assume an equal split of funds, a range of $3.13 million to $6.46 million would be available for housing programs.

The funding could “help the City to meet its [regional housing needs allocation] goals. Likewise, having an ongoing revenue source for the other housing programs would increase the City’s ability to implement these programs and could have a positive impact on the City’s ability to increase the availability of housing.”

Effects of transportation infrastructure

Assuming an even split of funds as outlined in the earlier section, the report states that the additional revenue could be used to scale up efforts on road repair and micro-transit. According to the report, since the passage of Measure S in 2020, South Lake Tahoe has spent an average of $2.4 million per year on road repair. The first year of the tax’s largest estimates could cover this price and scale up in subsequent years.

Eli Ramos is a reporter for Tahoe Daily Tribune. They are part of the 2024–26 cohort of California Local News Fellows through UC Berkeley.