City of Culver City, California
Agenda Item Report
Meeting Date: 07/12/2010 Item Number: A-2
CITY COUNCIL AGENDA ITEM: Discussion and Direction Regarding
Recommendation to Place a Ballot Measure on the November 2, 2010 Ballot to
Increase the City’s Transient Occupancy Tax Rate from 12% to 14% and
Authorization of a Consultant to Assist City Staff with Educational Program Related
Thereto.
Contact Person/Dept.: Jeff Muir/Finance Phone Number: (310) 253-5865
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [] Attachments: []
Commission Action Required: Yes [] No [] Date: _______________
Public Notification: (E-Mail) Meetings and Agendas – City Council (06/xx/10)
Department Approval:
Jeff Muir (06/30/10)
City Attorney Approval:
Carol Schwab (by H. Baker) (07/08/10)
Chief Financial Officer Approval:
Jeff Muir (06/30/10)
City Manager Approval:
P. Lamont Ewell (07/08/10)
RECOMMENDATION:
Staff recommends the City Council provide direction to staff to bring back the
necessary items for City Council action in order to place a measure on the
November 2, 2010 ballot to increase the City’s Transient Occupancy Tax (TOT) rate
from 12% to 14% and authorize a public education process about the measure.
BACKGROUND:
California Revenue and Taxation Code (Section 7280) authorizes the legislative
body of any city or county in the State of California to levy a tax on the privilege of
occupying a room, hotel room or other lodging establishment for a period of 30 days
or less. This tax is commonly referred to as a "transient occupancy tax" or "hotel
tax."
The City of Culver City's TOT was originally adopted at 4% as a general tax in 1964
by Ordinance No. CS-498. Over the years it was gradually increased, the last being
in 1989 when it went from 10% to the current 12%. The previous increases to the
tax rate were approved by the City Council prior to the current legal requirement that
all new taxes or tax increases must be approved by the voters. The City's TOT is
established in Sections 11.02.100 through 11.02.160 of the Culver City Municipal
Code (CCMC).
City of Culver City, California
Agenda Item Report
DISCUSSION:
Staff recommends the City Council consider a ballot measure to increase the City's
transient occupancy tax from 12% to 14%. The TOT is charged only to persons who
occupy hotel/motel rooms in the City and transmitted to the City by those who collect
room charges. Therefore, this increase would impact only those that stay in the
hotel/motel rooms - mainly visitors and travelers. There will be no impact on
residents unless they utilize hotel accommodations in the City. The TOT is only
applied to hotel and motel rooms; it is not applied to any other facilities and services
offered by the hotels such as catering, banquet, food, spa, etc. If approved by
voters, the estimated increase in TOT revenue would be $237,000 during the
upcoming 2010-2011 Fiscal Year, as the increase would only be in effect for half of
the fiscal year. The annual increase for future years is estimated at $475,000.
Additional TOT revenue may be used for any purpose, such as to support
government operations and services, including public safety, street and
infrastructure improvements and to support other city services.
Benefits of considering an increase in the TOT rate include placement of a larger
portion of the tax burden to provide city services and maintenance on transient
travelers and visitors to the community who utilize City assets such as parks, streets,
and emergency services. Residents would benefit from this method of spreading the
costs of services over a larger tax base, and those visiting our community would pay
a proportionate share of the cost to provide the high level of services enjoyed in
Culver City. From 2002 through 2008, there have been 53 California city and county
TOT measures to establish, increase or expand the TOT that have been successful.
Staff is not aware of any concrete evidence that an increase in the TOT has a
negative impact on hotel bookings. The proposed increase puts Culver City at the
same rate as its surrounding cities.
City Rate
Beverly Hills 14.0%
Los Angeles 14.0%
Santa Monica 14.0%
West Hollywood 12.5%*
(*Note: West Hollywood also has a
1.5% TOT rate that goes directly to
their Visitors Bureau, making the total
rate paid a customer 14%)
The adopted Fiscal Year 2010-2011 budget was the first of a two-year plan to close
the structural deficit in Culver City’s General Fund. There is a remaining deficit
amount estimated at $2 million that must still be addressed. The City Manager’s
recommendation was that negotiations immediately begin with the City’s employee
bargaining groups to eliminate the deficit through compensation or benefit
concessions. It was also recommended that the City Council consider an increase
to the TOT rate as part of the strategy, as it would greatly assist the City in securing City of Culver City, California
Agenda Item Report
its financial future going forward. The final alternative was to consider further
position and service reductions.
The TOT cannot be increased without a vote of the people due to State law (Prop.
218). The current TOT is considered a general tax because the City has discretion
on how the proceeds are spent. It is recommended that the City retain this
discretion with the proposed increase. As a general tax, a majority vote of Culver
City voters is required to increase the TOT. If the additional tax proceeds were
dedicated to a specific purpose (only public safety, only street improvement, etc.), it
would be considered a special tax and a two-thirds majority vote would then be
required.
In order to meet the County’s deadline and also provide adequate time for proper
execution and delivery of the documents, the City Council must take formal action to
place this measure on the ballot and consolidate the election with the County by July
26, 2010. Staff is seeking City Council approval of the recommendation to move
forward with this item so that the necessary items can be brought back for approval
by this date.
If the City Council approves this item moving forward, staff is also recommending the
use of a consultant to assist with a public education program for the ballot measure.
It is very important that the public understand what they are being asked to vote on,
especially when it comes to tax measures. State law permits cities to provide
impartial educational campaigns for ballot measures that they place on the ballot for
voter consideration. Staff is proposing a budget not-to-exceed $25,000 to include
the usage of a consultant with expertise in the development and implementation of
an impartial educational campaign. Funding for such services was included in the
Fiscal Year 2009/2010 budget and would be re-appropriated in the Fiscal Year
2010/2011 budget. Should the City Council determine not to use the services of a
consultant, City staff will have to be responsible for creating the educational
materials, and it is estimated there will be up to $15,000 in printing and mailing
costs.
FISCAL ANALYSIS:
The estimated cost to consolidate the election with Los Angeles County has been
requested from the County and is expected to be received by the time of the July 12,
2010 meeting. This was not included in the Fiscal Year 2010/2011 budget and will
need to be added. The total not-to-exceed budget request for professional
assistance with an impartial educational campaign is $25,000. An additional
$15,000 is recommended for printing and mailing costs. The amount of $40,000
was included in the Fiscal Year 2009-2010 budget for this purpose, and will be re-
appropriated in Fiscal Year 2010-2011.
City of Culver City, California
Agenda Item Report
ATTACHMENTS:
None.
MOTION:
That the City Council:
1) Direct staff to bring back the necessary items for City Council action in order to
place a measure on the November 2, 2010 ballot to increase the City’s Transient
Occupancy Tax rate from 12% to 14%,
AND
2) Authorize the use of a consultant to develop and implement an impartial public
education program.
OR
3) Direct staff to not pursue an increase to the City’s Transient Occupancy Tax rate.