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city council: July 23, 1991
i-A
JUL 2 ';l i9;1
Santa Monica, Californ1a ~
STAFF REPORT
TO: Mayor and City Council
FROM: City Staff
SUBJECT: FIRST READING OF ORDINANCES INCREASING THE REAL PROPERTY
TRANSFER AND TRANSIENT OCCUPANCY TAXES AND AUTHORIZATION
FOR CITY MANAGER TO NEGOTIATE AND EXECUTE AN AGREEMENT
WITH LOS ANGELES COUNTY TO COLLECT TAX RECEIPTS
Introduction
During deliberations on the City's FY1991-92 Budget, the city
Council added twenty police positions, approved additional
funding for improvements to Palisades Park, determined that these
additional costs were to be financed by increasing the Real
Property Transfer and/or Transient Occupancy Taxes, and directed
staff to return to Council to indicate in what proportion the
additional costs should be distributed between these two revenue
sources.
This staff report is to transmit to the city Council the attached
ordinances increasing both taxes, however staff recommends that
these additional costs be financed by an increase in the Real
Property Transfer Tax and that the Transient Occpancy Tax not be
increased.
It is further recommended that the tax increase
ordinance(s) selected be introduced for first reading, and that
the City Manager be authorized to negotiate and execute an
agreement with Los Angeles County to collect the City's Real
Property Transfer Tax receipts.
I-A
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JUl 2 J :991
Background
Currently, the City's Transient Occupancy Tax rate is 12% and the
value.
Real Property Transfer Tax rate is $.55/$1,000 of property sale
Comparison tax rates for those cities in the general
Westside/South Bay area and other selected California cities
which are tourist destinations are as follows:
City
Transient
Occupancy
Tax Rate
Real
Property
Transfer
Tax Rate
(per $1,000
Sales Value)
General Westside/South Bay Area
11%
$
.55
Beverly Hills
Culver City
El Segundo
Hawthorne
Inglewood
Long Beach
Los Angeles
Manhattan Beach
Redondo Beach
West Hollywood
Los Angeles County
(Marina del Rey)
12%
4.50
8%
.55
8%
12%
10%
12.5%
8.5%
10.0%
12.0%
12.0%
.55
.55
.55
4.50
.55
1.10
.55
1.10
other Selected California cities
Anaheim
Monterey
Newport Beach
Palm Springs
San Diego
San Francisco
Santa Barbara
11.0%
10.0%
9.0%
10.0%
9.0%
11. 0%
10.0%
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Comment
-City budget was
adopted as of
7/16/91. Staff
will return to
Council recom-
mending a 12%
TOT tax rate.
-city Budget not
adopted as of
7/16/91.
The current Los Angeles Transient Occupancy Tax rate of 12.5%
appears to be the highest in the state, whereas the Los Angeles
Real Property Transfer Tax rate of $4.50/$1,000 of property sale
value is significantly less than the $9.50 tax rate in the city
of Oakland which is believed to be the highest in the state.
Cost Increase and Alternate Financinq Sources
Staff has determined that the annual cost of adding twenty Police
positions (17 officers and 3 sergeants), associated support costs
in the city Attorney's Office and Police Department, and
improvements to Palisades Park is $2.0 million. Attached is a
schedule detailing these costs.
To finance these additional costs, the City Council determined
that either or both of the Real Property Transfer and Transient
Occupancy Taxes be increased. The city council also directed
staff to return to the Council and indicate how the additional
costs should be distributed between these two revenue sources.
staff does not recommend that the Transient Occupancy Tax (TOT)
rate be increased. It has been the City's practice to maintain
tax rates at or somewhat lower than those in surrounding
jurisdictions in order to provide a competitive advantage to the
City's businesses in the region's economy. This practice is one
of the reasons the city has been able to weather the current
recession in a relatively strong fiscal condition. To increase
the TOT tax rate up to or in excess of the current Los Angeles
tax rate of 12.5% would eliminate this competitive advantage.
Further, potentially having the highest TOT tax rate in the state
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would be counter productive to maintaining city revenues which
are required to continue the high level of public services
provided to City residents.
However, should the city council
wish to generate additional revenues from this source, attached
for first reading is an ordinance increasing the City's TOT rate
from 12.0% to 13.0% effective October 1, 1991.
This tax rate
change would increase revenues by $.4 million for FY1991-92. It
has been the practice of the city to have a delayed
implementation date for TOT rate increases to allow hotel and
motel operators to fulfill prior commitments for Summer lodging
without having to change the terms of those commitments.
In place of increasing the TOT rate, staff recommends that the
Real Property Transfer Tax rate be increased to $3.14/$1,000 of
property sale value.
The projected impact of this tax rate increase on the sale of a
$500,000 property is as follows. The tax payment is the legal
responsibility of the property seller.
Current
Proposed
$ 500,000
7 1,000
500
x 1.10
$ 550
$ 500,000
x
: 1,000
500
4.24*
2,120 of which $1,570
goes to city of
Santa Monica,
and $550 goes
to Los Angeles
County. **
of which $275
goes to City
of Santa Monica,
and $275 goes to
Los Angeles County.
$
* $1.10 for Los Angeles County + $3.14 for City of Santa Monica.
** The law specifies that if a City's tax rate is increased above
$.55/$1,000 of property sale value, the City's previous share
of the total $1.10/$1,000 of property sale value reverts to
the County.
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Hence, the proposed tax rate increase represents an increase from
.11% to .42% of the sale value of $500,000. If selected, this
revised Real Property Transfer Tax rate will be lower than the
rate being charged by the cities of Los Angeles and Culver city.
Attached for first reading is an ordinance which will affect this
tax rate increase and implement other necessary procedural
changes.
Implementation of the Real Property Transfer Tax Rate Increase
Payment of the Real Property Transfer Tax is due upon the sale of
any real property in the city of Santa Monica. currently, the
Los Angeles County Registrar-Recorder collects the $1.10/$1,000
of property sale value transfer tax upon the filing of each new
deed and simply forwards the City's share ($.55/$1,000 of
property sale value) to the city. However, staff have been
informed that the County Registrar-Recorder will charge (by
crediting against actual tax receipts) a nominal fee per deed
filing if the City establishes a revised tax rate. staff
believes contracting with the County Registrar-Recorder is the
most efficient method of collecting these tax receipts. It is
therefore necessary to authorize the City Manager to negotiate
and execute an appropriate tax collection agreement with Los
Angeles County.
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Budqet/Financial Impact
Increasing the City's Real Property Transfer Tax rate to
$3.14/$1,000 of property sale value will increase FY1991-92
revenues by approximately $1.5 million as the implementing
ordinance and a tax collection agreement with the County
Registrar-Recorder will not be in force until approximately the
end of September, 1991. Should the city Council also decide to
increase the Transient Occupancy Tax from 12% to 13%, FY1991-92
revenues will be increased by $.4 million, and it will only be
necessary to increase the Real Property Transfer Tax rate to
$2.46/$1,000 of property sale value to generate the remaining
$1.1 million for FY1991-92.
Since expenditures related to the additional Police positions and
associated support costs will not occur until FY1992-93 due to
the length of time it takes to recruit and train new officers,
FY1991-92 tax receipts will be used to help finance one-time
capital improvements to Palisades Park. The adopted FY1991-92
city budget will be revised to reflect these revenue and
expenditure increases.
Recommendation
It is recommended that:
1) The FY1991-92 budget be amended to reflect additional
revenues of $1.5 million and a $1.5 million capital
expenditure for improvements to Palisades Park;
2) The attached ordinance(s) be introduced for first reading;
and
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3) The City Manager be authorized to negotiate and execute an
agreement with Los Angeles County to collect the city's Real
Property Tax receipts.
Prepared by: John Jalili, City Manager
Robert M. Myers, city Attorney
Mike Dennis, Director of Finance
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ADDITIONAL CITY COUNCIL APPROVED COSTS OF JUNE 25, 1991
o Additional Police positions*
- Salaries
$ 831,100
- Employee Benefits, Special pays/
Allowances, Worker's Compensation
Costs
542,100
- Supplies and Expenses
(Uniforms, Protective Clothing, etc.)
75,500
- Capital outlay
(Police vehicles and assessories,
portable radios, etc.)
o Associated Support Costs**
One additional City Attorney position
137,900
103,300
Three additional Police Records
Management section positions
Capital Improvements to Palisades Park***
127,100
o
183,000
Total
$2,000,000
* 17 Police Officers and 3 Sergeants
** position allocations and costs to be finalized for FY1992-93
budget.
*** These additional funds will be combined with reallocated
capital improvement funds already included in the FY1991-92
budget to finance various improvements to palisades Park.
CMD:7/23/91
(polpos)
CA:RMM:rmd1283/hpca1/pc
city council Meeting 7-23-91
Santa Monica, California
ORDINANCE NUMBER
(City Council Series)
AN ORDINANCE OF THE CITY COUNCIL OF THE
CITY OF SANTA MONICA AMENDING SANTA MONICA MUNICIPAL
CODE SECTIONS 61000, 61002 AND 61008, AND
ADDING SECTION 61010 TO THE SANTA MONICA MUNICIPAL CODE
THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES ORDAIN AS
FOLLOWS:
SECTION 1.
Santa Monica Municipal Code Section 61000 is
amended to read as follows:
SECTION
61000.
Title.
This
Ordinance shall be known as the "Real
Property Transfer Tax Ordinance of the
Ci ty of Santa Monica. rI
It is adopted
pursuant to the authority contained in
Part 6.7 (commencing with section 11901)
of Division 2 of the Revenue and Taxation
Code of the state of California and other
authority held as a charter city.
SECTION 2. Santa Monica Municipal Code Section 61001 is
amended to read as follows:
SECTION 61001. Transfers Affected
and Amount of Tax. Effective September
15, 1991, there is hereby imposed on each
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deed, instrument, or writing by which any
lands, tenements, or other real ty sold
within the city of Santa Monica shall be
granted, assigned, transferred or
otherwise conveyed to, or vested in, the
purchaser or purchasers, or any other
person or persons, by his or her or their
direction, when the consideration or
value of the interest or property
conveyed (exclusive of the value of any
lien or encumbrance remaining thereon at
the time of sale) exceeds $100.00, a tax
at the rate of $3.14 for each $1,000.00
of property sale value or fractional part
thereof.
SECTION 3. Santa Monica Municipal Code Section 61008 is
amended to read as follows:
SECTION 61008. Agreement with
County Recorder. The County Recorder
shall administer this Ordinance in
conformity with the provisions of Part
6.7 of Division 2 of the Revenue and
Taxation Code and the provisions of any
county ordinance adopted thereto. The
City Manager of the city of Santa Monica
is authorized to negotiate and enter into
a contract with the County of Los Angeles
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or one of its officials for the
administration of this Ordinance and
payment to the County for its costs of
administration.
SECTION 4. section 61010 is hereby added to the Santa
Monica Municipal Code to read as follows:
SECTION 61010. Authority of
Finance Director.
(a) The Direct of Finance is
hereby designated as the officer of the
city responsible for maintaining
relations with the County of Los Angeles
for the purpose of administering the tax
imposed under this Ordinance and
receiving and accounting for the funds
collected thereunder.
(b) If the County of Los Angeles
does not collect the tax due under this
Ordinance, then the Director of Finance
shall have the power and duty to enforce
all of the provisions of this Ordinance.
In such case, the City tax is due prior
to any recordation with the County of Los
Angeles of any written instrument subject
to the tax and the Director of Finance
may make an assessment for taxes not paid
and make refunds.
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SECTION 5.
Any provision of the Santa Monica Municipal
Code or appendices thereto inconsistent with the provisions of
this ordinance, to the extent of such inconsistencies and no
further, are hereby repealed or modified to that extent necessary
to affect the provisions of this Ordinance.
SECTION 6. If any section, subsection, sentence, clause,
or phrase of this Ordinance is for any reason held to be invalid
or unconstitutional by a decision of any court of any competent
jurisdiction, such decision shall not affect the validity of the
remaining portions of this Ordinance.
The city council hereby
declares that it would have passed this Ordinance, and each and
.."
every section, subsection, sentence, clause, or phrase not
declared invalid or unconstitutional without regard to whether
any portion of the Ordinance would be subsequently declared
invalid or unconstitutional.
SECTION 7. The Mayor shall sign and the City Clerk shall
attest to the passage of this Ordinance. The City Clerk shall
cause the same to be published once in the official newspaper
within 15 days after its adoption. This Ordinance shall become
effective after 30 days from its adoption.
APPROVED AS TO FORM:
~~-""'~~_.-P-~.< ,~....... - .....l '-"
....~~~~"'\.~~
,
, K
ROBERT M. MYERS
City Attorney
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CA:RMM:rmd1288/hpca1/pc
city council Meeting
Santa Monica, California
ORDINANCE NUMBER
(City Council Series)
AN ORDINANCE OF THE CITY COUNCIL OF THE
CITY OF SANTA MONICA AMENDING SANTA MONICA MUNICIPAL
CODE SECTION 6601 TO INCREASE BY ONE PERCENT
THE TRANSIENT OCCUPANCY TAX OF THE CITY
AND REPEALING SANTA MONICA MUNICIPAL
CODE SECTION 6601A
THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES ORDAIN AS
FOLLOWS:
SECTION 1.
Santa Monica Municipal Code Section 6601 is
amended to read as follows:
SECTION 6601. Tax. On and after
the effective date of this Ordinance,
there is hereby imposed and levied on
each and every transient, as defined in
Section 6600(a), a tax equivalent to
thirteen percent (13%) of the total
amount paid for room rental by or for any
such transient to any hotel; which said
tax
shall
be
collected
from
such
transient at the time and in the manner
hereinafter provided. Said tax is levied
for revenue purposes and is necessary for
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the usual financial operation of the City
of Santa Monica.
SECTION 2.
hereby repealed.
Santa Monica Municipal Code Section 6601A is
SECTION 3. Any provision of the Santa Monica Municipal
Code or appendices thereto inconsistent with the provisions of
this Ordinance, to the extent of such inconsistencies and no
further, are hereby repealed or modified to that extent necessary
to affect the provisions of this Ordinance.
SECTION 4. If any section, subsection, sentence, clause,
or phrase of this Ordinance is for any reason held to be invalid
or unconstitutional by a decision of any court of any competent
jurisdiction, such decision shall not affect the validity of the
remaining portions of this Ordinance. The city Council hereby
declares that it would have passed this Ordinance, and each and
every section, subsection, sentence, clause, or phrase not
declared invalid or unconstitutional without regard to whether
any portion of the Ordinance would be subsequently declared
invalid or unconstitutional.
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SECTION 5. The Mayor shall sign and the city Clerk shall
attest to the passage of this Ordinance. The city Clerk shall
cause the same to be published once in the official newspaper
within 15 days after its adoption. This Ordinance shall become
effective after 30 days from its adoption.
APPROVED AS TO FORM:
r~~'.r~r-"<~ :
-" ~...~ =...... _..-~_. ......~~
ROBERT M. MYERS
City Attorney
..-
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l1/d F/J
July 167 1991
To Whom It May Concern:
I understand the Santa Monlca C~ty Council ~s considering
a 2% increase in the bed tax wlthin the city.
I strongly object to thls move. Th~s tax (TOT or Transit
Occupancy Tax) increased from 8% in 1987 to its present
12% figure.
During the year 1991 I w~11 stay at The Hotel Santa Monica
approximately 100 lllghts. This hotel serves my bedding
needs very well for a figure of about $25 a night. I work
in Santa Monica and often must stay in the area.
Therefore I w111 pay about $2500 for this shelter during
the year. At the present 12% rate that would be $300
in bed tax. Now there are plans for me to pay $50 more.
Enough is enough. en July 15 sales tax in the state went
up to 8 1/4% and was levled on such items as snack foods,
bottled water and newspapers. The average man has been
hit enough.
I suggest the Clty Counell take a hard look at the need
for this revenue. Or perhaps the Council can look to
tax something that 15 not a necessi'
Thank you for your conSloeratlon of t llS matter.
Slncere1y,
~y~~
D1Ck Balos
The Printing Palace
513 Wilshire Blvd.
Santa Monica, CA 90401
(213) 451-5151