April 26, 2009

Tucson's new city manager, Mike Letcher, made a big splash last week when he proposed balancing the budget by taxing one of the city's most powerful and entitled groups: renters.

The 2 percent tax on rent, Letcher said, would raise $10 million and would come on top of utility taxes that would almost certainly get passed on to residents.

So under Letcher's proposed budget, the cost of living in Tucson, particularly for renters, is going to get pricier during a recession when many people's incomes are stagnant or falling.

What does the tax mean to the typical Tucson renter?

Well, the average rent for an apartment in Tucson is $636 a month, said Bob Kaplan, a broker with Picor Commercial Real Estate. So, renters who pay that much can expect to kick back about $150 more a year to the city.

Maybe that's a small sum over the course of a year, but for some renters it's money that could go toward groceries, bus fare or clothes.

"The real issue is whether these people can afford it, and whether that is going to put more stress on low-income tenants," Kaplan said.

Tucson has a lot of renters — nearly half its households — and, for most of them, rent is a huge part of their monthly expenses.

"They are picking on a group of people that don't have much say and much clout," landlord Jim Hostetler said. "It's really regressive, and, of course, now I have to collect it."

Hostetler is referring to the city's plan to have landlords get special business licenses, and then collect the tax for the city. It's amazing, really: The city has even managed to make landlords into sympathetic victims.

Some City Council Democrats — Regina Romero, Rodney Glassman and Karin Uhlich — have been kicking around the idea of a rental tax since last year.

The 2 percent tax — along with the other tax and fee increases — was outlined in a February report that former City Manager Mike Hein put together to propose ways for the city to bridge an estimated $80 million budget shortfall.

But Hein included only $5 million in tax and fee increases in his budget proposal.

Letcher took those ideas and maxed them out.

While she wouldn't come out and say that she supported the proposed rent tax, Uhlich, who led the charge to fire Hein, sounded, well, pretty supportive.

She said most other cities already charge a rental tax, there are limited ways to raise money otherwise, and she doesn't want to cut services to balance the budget.

"We are not balancing it on the sacrifices of one particular group, but making sure that what we are asking is for each segment of the community to contribute a fair share," Uhlich said.

It's interesting to hear Uhlich suggest renters aren't contributing their fair share to the city, considering housing costs are significantly higher for renters than homeowners.

U.S. Census Bureau numbers from 2005 through 2007 — before the housing crisis hit — show that in more than 40 percent of Tucson's renting households, the monthly rent check equaled at least 35 percent of their monthly income.

Meanwhile, only about 19 percent of Tucson homeowners with mortgages during that time had their housing costs equal at least 35 percent of their monthly income.

It was less than a year ago that Uhlich was crusading against raising bus fares because, in part, it would hurt people on limited incomes.

"The city manager's proposal to raise all Sun Tran/Van Tran fares could hurt our residents," she wrote in a guest opinion in the Star in June. "Mass transit saves families and seniors money."

Well, considering most bus riders probably rent, it's nice to know they can take those quarters they're saving on fares and plunk them down for this new tax.

Josh Brodesky writes a weekly column on real estate. He's at 573-4178 or jbrodesky@azstarnet.com.