CITY WOULD HAVE LESS TAX PROPERTY SELLERS WOULD SAVE MORE THAN $1,000.

Byline: Harrison Sheppard Staff Writer

Property buyers and sellers in a new San Fernando Valley city would save more than $1,000 on the sale of an average home because the new city would not have the authority to impose certain taxes, officials said Wednesday.

On a median Valley home priced at $263,000, for example, the buyer or seller would save $1,183 because the Valley city would not be able to impose a documentary transfer tax on the purchase as Los Angeles does. The seller usually pays the tax.

Secessionists cited the savings - so far the only known tax cut if the Valley becomes a city - as another reason to support a separate Valley city.

Getting rid of the tax ``will encourage people to buy real estate, whether it's a home or for their business, in the Valley,'' said Richard Close, chairman of Valley Voters Organized Toward Empowerment, and a real estate attorney. ``They won't have to pay this extremely high tax.''

Some officials said it could hurt the new Valley city, as well as Los Angeles, which would lose about $31 million in revenue. Los Angeles County could be out $4.3 million a year because - while it can continue imposing its own version of the tax - it would have to split that with the Valley city.

Los Angeles city officials said the Local Agency Formation Commission, the agency overseeing secession, needs to figure out a way to avoid a $31 million loss to the city if voters approve creation of a new Valley city. LAFCO will decide whether to submit the issue to voters, possibly as soon as November.

Under state law, secession has to be ``revenue neutral'' - not harmful to the existing city. City officials refused to recommend how that should be done.

``LAFCO needs to craft conditions that keep the city (financially) whole and allow it to provide services,'' said Tim McOsker, chief of staff to Mayor James Hahn.

But LAFCO's executive director, Larry Calemine, said it is uncertain if LAFCO is legally required to address this particular tax shortfall.

``We're researching the code now to see if it needs to be addressed, or if in fact it is just plain lost to the city of L.A.,'' Calemine said.

If that is the case, then hypothetically, the Valley city's ``alimony'' to Los Angeles would be reduced by $31 million from the current estimate of $65 million a year, he said.

The alimony, also called a revenue neutrality payment, is the amount the Valley city pays to prevent financial harm to Los Angeles.

According to a LAFCO report, state law allows charter cities to impose a documentary transfer tax, which the city of Los Angeles set at $4.50 per $1,000 of assessed value on the property sold. State law also allows the county of Los Angeles to impose a tax of $1.10 per $1,000 in addition to the city amount.

But as a general law city, the Valley would only be allowed to receive half of the county's $1.10.

Other actions LAFCO took Wednesday included:

--Cutting the Cahuenga Pass area out of the boundaries of the proposed Valley city and instead placing it in the proposed Hollywood city. The area, roughly from Universal City south to Mulholland Drive, was listed in both cityhood applications, but LAFCO decided to leave it in Hollywood, having heard no objections from Valley secessionists.

--Giving Valley secessionists an extra month, until April 5, to submit five proposed names for the new Valley city. LAFCO is not certain yet whether it will place three or five names on the ballot in November.

--Deciding to perform a three-pronged financial study of the Hollywood cityhood proposal because eight neighborhoods have petitioned to be excluded from the Hollywood city and remain in Los Angeles.