May 31—Residents of Santa Fe Suites and their friends gathered recently for a community barbecue.
Some sang and chatted over burgers while others worked the grill outside the motel-turned-apartment complex.
The income-restricted complex has been lauded as a model for helping people out of homelessness and as a badly needed source of affordable housing in a city where homeownership has become out of reach for most workers and rent costs are steeply rising.
Addressing what many people cite as an affordable housing crisis has been a high priority for the city of Santa Fe, which recently released a draft of its five-year housing plan and last year proposed a 3% excise tax on the value of home sales over $1 million to create a revenue stream for affordable housing initiatives. Supporters have estimated the tax could generate as much as $6 million a year.
Despite wide voter approval in November — with 73% of voters casting ballots in favor of the measure — the tax was declared unlawful by a District Court judge last week, just days before it was scheduled to take effect.
City officials say the legal defeat does not change their intention to move forward with affordable housing efforts, but it raises questions about where the money will come from.
"The commitment to continuing to work on this is strong," Mayor Alan Webber said.
The five-year housing plan names ending chronic homelessness and making homebuying and renting more affordable as its key priorities.
Some of the goals include building more "safe outdoor spaces" in the city, such as Pallet Shelter communities; offering aid to people facing eviction; developing a centralized "housing navigation hub" to help residents find shelter or permanent housing; constructing 350 affordable housing units available for homebuyers; subsidizing 150 home purchases; and creating a $500,000 funding stream for rental assistance and other programs.
Much of the city's funding for housing aid comes from the Affordable Housing Trust Fund, which has received $3 million annually from the city's general fund for the past several years. The excise tax on the sale of high-end homes was proposed as a way to generate money for the trust fund.
Immediately after the judge's decision striking down the tax May 22, city officials said they were highly likely to appeal the ruling and that the next step would be for the City Council to discuss whether and how to file an appeal.
The council met in a closed session at its meeting Wednesday to discuss pending litigation, including the excise tax lawsuit, but did not take any action after reconvening.
"I can't say for sure what the members of the governing body will come to a consensus around but my hope is we'll appeal the judge's order and hopefully prevail in the appellate court," Webber said in an interview Friday.
Several councilors said they could not comment on the ongoing litigation but signaled they hoped to appeal, including Councilor Jamie Cassutt, who co-sponsored the initial ordinance on the tax.
Webber and Senior Assistant City Attorney Marcos Martinez said last week it was their understanding that filing a notice of an appeal would automatically lead to a stay, or postponement, of the judge's ruling, which would allow the city to begin collecting the tax.
Webber said Friday that was not, in fact, the case. The parties to the lawsuit met May 24 for an expedited hearing requested by the plaintiffs in which Judge Bryan Biedscheid clarified the tax cannot go into effect unless the ruling is overturned by a higher court.
That leaves the revenue for the trust fund in limbo for what could be years, depending on whether the civil case drags on.
In the meantime, city staff members are recommending the council approve a $3 million one-time transfer into the trust fund.
The proposed transfer was on a list of recommendations the mayor and city staff presented to councilors at a special meeting Tuesday to discuss millions of dollars in potential one-time spending.
Several councilors appeared confused by the request and asked whether that was on top of money the council had approved for the Affordable Housing Trust Fund in the fiscal year 2025 budget, which was passed in early May.
Assistant Finance Director Alexis Lotero said the money had not been a part of the budget and needed to be specifically appropriated with a one-time request.
In a Thursday interview, Lotero and Budget Officer Andy Hopkins said the expenditure was in the budget but that the $3 million transfer from the general fund needed to be done as a one-time subsidy.
"It was thought, until the judge screwed up our plans, that the $3 million would be a bridge" until the excise tax began to generate revenue for the fund, Hopkins said.
The lawsuit challenging the tax was filed by Realtors in October. Hopkins and Lotero said the possibility the city could lose the case was not seriously factored into the budget process.
"Our direction was really that they were pretty confident that they would prevail," Lotero said, noting the decision to put a one-time allocation in the trust fund was made "at the highest level."
The trust fund currently has about $24 million, Hopkins said, but most of that is already committed to ongoing projects.
If the City Council decided to reject the one-time funding request, the trust fund's overall budget would have to be reduced, Lotero said.
Several councilors said they had not been aware they would still need to put money into the trust fund after the budget was approved.
"It wasn't outright communicated to us that it was an action that needed to be taken," Councilor Michael Garcia said.
Councilor Pilar Faulkner also said she was unaware of that process.
"If we didn't know for sure whether we were going to be getting the excise tax, I think we should have put it in the budget just as a safeguard, especially if we already knew there was a lawsuit pending," she said.
Faulkner and Garcia, who engaged in a strained back-and-forth with Affordable Housing Director Alexandra Ladd about the city's "fee-in-lieu" program for developers at Wednesday's City Council meeting, said they would like the program to be restructured as one way to generate more affordable housing in the city.
The program allows developers to pay a fee, which goes into the Affordable Housing Trust Fund, rather than build a certain number of units offered at rates considered affordable. Neither Faulkner nor Garcia said they want to get rid of the program but said they believe it could be improved.
"It serves a purpose, but right now it's not doing as much as we need it to," Faulkner said.
Cassutt said she is hopeful the ruling on the excise tax will not affect the city's long-term plans. A variety of policy solutions will be needed to increase affordable housing in the city, she added, including updates to the city's Land Use Code.
Regardless of what happens with the excise tax, she said she is "extremely committed" to funding the Affordable Housing Trust Fund in future years.
"It is just too important to be left alone," Cassutt said.
