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    22.    
City Council Regular
Meeting Date: 06/23/2020  

SUBJECT:
CONSIDER PLACEMENT OF BALLOT MEASURE TO INCREASE IN THE CITY’S TRANSIENT OCCUPANCY TAX ON THE NOVEMBER BALLOT FOR VOTER APPROVAL
RECOMMENDATION:
It is recommended that the City Council provide staff with direction as to whether to place a proposed increase in the City’s Transient Occupancy Tax on the November ballot for voter approval, and if so, to specify the amount of the increase.
BACKGROUND/ANALYSIS:
The Fiscal Year (FY) 2019-20 adopted budget for Transient Occupancy Tax (TOT) revenue was $1.3 million, but the City anticipates a shortfall of $300,000 or 22% due to the COVID-19 pandemic. The City projected a $100,000 shortfall for FY 2020-21 resulting in a budgeted revenue of $1.4 million. The City has experienced stagnant sales tax revenue and declining development revenue in the past few years while continuing to compete with increasing expenditures. An increase in the TOT rate will help the City diversify its revenue stream.

The City currently imposes a 10% TOT on individuals occupying hotels and motels within the city.  The City’s TOT rate is relatively low compared to several nearby jurisdictions.  For example, the cities of Los Angeles and Diamond Bar impose TOT at the rate of 14%, Los Angeles County at 12%, Riverside at 13%, Chino at 8% and Ontario at 11.75%. The cities of Yorba Linda, Pomona, Corona and Orange all currently impose TOT at the rate of 10%. 
 
Based on the budgeted revenue of $1.4 million a year, staff estimates that for each 1% increase in TOT the city will collect an additional $140,000 in annual General Fund revenues. 
 
If the Council would like to place a TOT increase on the November 3, 2020, ballot, it would need to adopt the necessary documents by August 7, 2020. As a general tax (meaning it is deposited into the City’s general fund and can be used for any lawful local government purpose) any proposed increase in the TOT would require approval by a majority of the electorate pursuant to Proposition 218 (California Constitution, Article XIII C). In order to place a general tax increase on the ballot, a resolution proposing the tax must first be approved by a two-third vote of all members of the City Council; that is, four of the five Council Members. (Gov’t Code § 53724.)  
 
ENVIRONMENTAL (CEQA) REVIEW:
This proposed action is exempt from review under the California Environmental Quality Act (California Public Resources Code   §§ 21000, et seq.; "CEQA") and CEQA regulations (14 California Code Regulations §§15000, et. seq.) because it establishes rules and procedures to implement government funding mechanisms: does not involve any commitment to a specific project which could result in a potentially significant physical impact on the environment; and constitutes an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. Accordingly, this action does not constitute a "project" that requires environmental review (see specifically 14 CCR § 15378(b)(4-5)).
FISCAL IMPACT:
The recommendation to increase the TOT rate will result in a revenue increase as discussed above. The cost of placing it on the ballot is $111,400 (excluding any public information outreach costs).
REVIEWED BY OTHERS:
This item has been reviewed by the Finance Director and the City Clerk.
 

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