title
CC - ACTION ITEM: (1) Discussion to Potentially Adopt a Position, or take no Position on Measure A, the Citizens’-Initiated Los Angeles County Affordable Housing, Homelessness Services and Affordable Housing Transactions and Use Tax Ordinance, which will Appear on the November 5, 2024 Ballot; and (2) Direction to the City Manager as Deemed Appropriate.
body
Meeting Date: September 23, 2024
Contact Person/Dept.: Shelly Wolfberg/City Manager’s Office
Phone Number: (310) 253-6000
Fiscal Impact: Yes [] No [X] General Fund: Yes [] No []
Attachments: Yes [X] No []
Public Notification: (E-Mail) Los Angeles County Supervisor Holly J. Mitchell; Meetings and Agendas - City Council ; Advisory Committee on Housing and Homelessness; Landlord Tenant Mediation Board; LA County Homeless Initiative Director; Culver City Chamber of Commerce President and Chief Executive Officer; Culver City Downtown Business Association Executive Director; and Westside Cities Council of Governments Executive Director (09/17/2024)
Department Approval: John M. Nachbar, City Manager’s Office (09/17/2024) _____________________________________________________________________
RECOMMENDATION
Staff recommends the City Council (1) consider taking a support, oppose, or neutral position, on Measure A: The Citizens’ Initiated Los Angeles County Affordable Housing, Homelessness Services and Affordable Housing Transactions and Use Tax Ordinance, which will appear on the November 5, 2024 General Election ballot; and (2) provide direction to the City Manager as deemed appropriate.
BACKGROUND/DISCUSSION
On June 25, 2024, the Los Angeles County Board of Supervisors voted to place an initiative on the November 5, 2024, General Election ballot that would repeal and replace Measure H, the County’s 0.25% sales tax for homeless services which is set to expire in 2027. The new initiative, Measure A, is a 0.50% sales tax for affordable housing production/preservation and homeless services, is a permanent tax with no sunset provision.
The effective sales tax rate in a specific California location consists of three parts: the state sales and use tax rate, the local sales and use tax rate, and any district transactions and use tax rate(s) in effect. The current base statewide California sales tax rate is 7.25% as shown below.
Some areas in California have effective sales tax rates that exceed the statewide rate of 7.25% as a result of voter-approved district taxes imposed by certain counties, cities or other local jurisdictions. Some areas in California do not impose district taxes while other areas have multiple district taxes in effect. District taxes (technically referred to as “transactions and use taxes”) differs slightly from the Bradley-Burns 1% tax in that it is allocated to the location where purchased goods are first put into use or are delivered, rather than the location of where sales are negotiated. For purposes of simplifying this report’s discussion, the base statewide rate plus any effective district tax rate will be referred to as the “effective sales tax rate”.
For all of Los Angeles County, the base effective sales tax rate is currently 9.50%. The
additional 2.25% on top of the statewide rate comes from the following voter-approved
district taxes:
The City of Culver City has also approved two sales measures, Measure C, a 0.25% tax and Measure CC, 0.50% tax, both to support general City services. The total effective tax rate in Culver City is therefore 10.25%.
For Los Angeles County cities the maximum total effective sales tax rate currently cannot exceed 10.25% and is comprised of: the statewide base sales and use tax rate, the county-wide district transactions and use taxes, and any local city district transactions and use taxes. There are numerous cities whose effective sales tax rate is set at the 10.25% maximum including:
• Alhambra
• Arcadia
• Azusa
• Baldwin Park
• Bell Gardens
• Bellflower
• Burbank
• Carson
• City of Commerce
• Compton
• Covina
• Cudahy
• Culver City
• Duarte
• Gardena
• Glendale
• Glendora
• Pasadena
• Pico Rivera
• Pomona
• San Fernando
• San Gabriel
• Santa Fe Springs
• Santa Monica
• Sierra Madre
• Signal Hill
• South El Monte
• South Gate
• South Pasadena
• Vernon
• West Hollywood
• Whittier
The cities of Compton, Lynwood, Pico Rivera, Santa Monica, and South Gate do not pay
into Measure H as they were already at the maximum rate of 10.25% when Measure H
passed.
Changes in State Law
In 2023, Assembly Bill 1679 (Santiago) - Transactions and use district taxes: County of Los Angeles: homelessness (“AB 1679”) passed in the State Legislature and became law on January 1, 2024. This bill allows Los Angeles County (“County”) to impose a district tax up to 0.5% that exceeds the 10.25% cap if the County adopts an ordinance proposing the tax by any applicable voting approval requirement, including by citizen’s initiative, voters approve it, and it replaces the tax currently imposed by Measure H in Los Angeles County.
The bill requires all revenue from the tax to be dedicated to addressing and preventing homelessness. The bill specifies that a transactions and use tax established pursuant to
its provisions would not be considered for purposes of the 10.25% combined rate statutory limitation. The bill states the intent of the Legislature that any transactions and use tax adopted pursuant to these provisions include robust oversight and accountability
provisions. The bill would repeal this authorization on December 31, 2028, if an ordinance proposing the tax has not been approved by that date. This bill was a gut and amend of a horse racing bill introduced by Assemblymember Santiago, whereby the original contents were replaced with entirely new provisions.
Measure A
On May 7, 2024, the Los Angeles County Registrar’s Office (the “Registrar”) received 393,293 signatures for a petition on a Los Angeles County Homelessness Services and Affordable Housing Ordinance. On June 18, 2024, the Registrar issued a certificate that the required number of signatures had been obtained to place Measure A on the November 5, 2024, ballot. On June 25, 2024, the Board then confirmed the validity of Measure A for it to be placed on the ballot.
Measure A reads as follows:
HOMELESSNESS SERVICES AND AFFORDABLE HOUSING ORDINANCE. To require accountability and results, create affordable housing, support home ownership, provide rental assistance, increase mental health and addiction treatment, reduce and prevent homelessness; and provide services for children, families, veterans, domestic violence survivors, seniors, and disabled people experiencing homelessness; shall the measure repealing the Measure H tax and replacing it with a ½ cent sales tax, raising approximately $1,076,076,350 annually until voters decide to end it, with new audits and oversight, be adopted?
If approved by the voters in Los Angeles County, Measure A would:
• Repeal Measure H’s sales tax rate of 0.25%;
• Impose a permanent 0.5% district tax rate on all retailers in the incorporated and unincorporated area of Los Angeles County to reduce and prevent homelessness,
while providing affordable housing;
• Measure A would continue the 0.25% funding for addressing homelessness services which Measure H provides and Measure A would provide 0.25% funding to the Los Angeles County Affordable Housing Solutions Agency for constructing affordable housing.
The goal of the Measure A is to significantly reduce and prevent homelessness in Los
Angeles County by:
• Significantly increasing and accelerating the availability of affordable housing;
• Significantly increasing the availability of immediate housing and interim housing
options;
• Significantly increasing mental health treatment for people experiencing homelessness;
• Significantly increasing substance abuse treatment for people experiencing homelessness;
• Addressing large scale and individual encampments, people living in RVs and automobiles, or otherwise living in public spaces by creating connections to housing; and
• Preserving currently affordable housing
If approved, the net effect of this measure in Los Angeles County is to increase the effective sales tax rate by one-quarter percent (0.25%) on all taxable sales occurring in the cities where Measure H is currently effective, to increase the effective sales tax rate by one-half percent (0.5%) on all taxable sales occurring in the five cities where Measure H is not currently effective, and to make the increase permanent.
Based on California Department of Tax and Fee Administration records for the period September 2023 through August 2024, the half percent (0.5%) district tax is estimated to
generate approximately $1.076 billion in local government revenue in the first year. Local government expenditures are expected to increase by a similar amount as these new revenues are used for the purposes specified in the measure.
Under the allocation plan specified in the measure, net local government revenues generated by the tax (estimated at approximately $1.076 billion in the first year) must be apportioned for the following programs, as defined in the measure:
• 61.25% (approximately $656 million in the first year) to the County for Comprehensive Homelessness Services, the Local Solutions Fund, Homelessness Solutions Innovations, and Accountability, Data, and Research;
• 35.75% (approximately $383 million in the first year) to the Los Angeles County Affordable Housing Solutions Agency for Affordable Housing and Prevention; and
• 3% (approximately $32 million in the first year) to the Los Angeles County Development Authority for Local Housing Production.
The measure also allows the Board of Supervisors to change this apportionment beginning in Fiscal Year 2030-2031. Of the 61.25% apportioned to the County, at least 15% must be used for the Local Solutions Fund, estimated to be approximately $97 million countywide, which will be distributed to cities, councils of governments, and to the County on behalf of its unincorporated areas, via a formula based on the Point-in-Time (PIT) count required by the United States Department of Housing and Urban Development and/or similar measures of people experiencing homelessness, as the Board of Supervisors determines in consultation with cities within the County.
All the district tax revenues will be restricted to and must be spent on the purposes specified in the measure. In addition to the costs to collect and distribute the tax which are accounted for in the measure, certain costs will be incurred to monitor compliance. However, those costs would be met by the increased revenue associated with the measure.
Due to the passage of AB 1679, all cities in Los Angeles County will see their sales tax increase if this measure is approved by voters, regardless if they are at the maximum effective sales tax rate allowed by state law.
The impact on cities currently at the maximum effective sales tax rate of 10.25% will depend on when they reached the maximum relative to the approval of Measure H. For example, the City of Santa Monica reached the maximum prior to the passage of Measure H; therefore, their effective sales tax rate would increase ½ cent, going from 10.25% to 10.75%, should Measure A pass. Whereas West Hollywood, who increased to 10.25% after the passage of Measure H, will see a net increase of a ¼ cent, raising their effective sales tax rate to 10.5%. If Measure A passes, the new Culver City effective sales tax rate will be 10.5%.
fAt the August 8, 2024 Westside Cities Council of Governments (WSCCOG) Meeting, there was a request from Council Member John Heilman (West Hollywood) for the WSCCOG to take action and support the Initiative at the next WSCCOG Board meeting on October 10, 2024. Currently, Council Member Eriksson serves as the City Council’s Delegate and Voting Member on the WSCCOG Board, and Vice Mayor O’Brien is the Alternate Voting Member. Any City Council action on this item would inform the City’s WSCCOG Delegates when this item is considered.
FISCAL ANALYSIS
There is no fiscal impact associated with adopting a position or taking no position on Measure A.
The additional 0.25% sales tax in Culver City is estimated to generate an additional $5.7 million annually for the County. Based on the City’s analysis of the legislative text, Measure A is expected to generate approximately $97 million in Local Solutions Fund (LSF) revenues which are required to be allocated to cities via formula based on a City’s Point-In-Time (PIT) count. Based on this analysis, using the City’s 2023 PIT count, Culver City would receive approximately $330,000 annually; however, this estimated amount may change as the City’s PIT count changes. .
ATTACHMENTS
1. 2024-09-23_ATT_Measure A Legislative Text
2. 2024-09-23_ATT_AB 1679
MOTIONS
That the City Council:
1. Take a support position on Measure A, on the November 5, 2024 ballot; or
2. Take an oppose position on Measure A, on the November 5, 2024 ballot; or
3. Take a neutral position on Measure A; and/or
4. Provide other direction to the City Manager as deemed appropriate.