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SR-061797-10A supp SUPPL e ""'AlT 7'0 to-A EPWM CP RG WELFARE WPD Council Meeting June 17,1997 Santa Monica, California JUN 1 7 1997. SUPPLEMENTAL STAFF REPORT TO Mayor and City Council FROM City Staff RE DISCUSSion of Opllons for Reducing the Financial Impact on Non- Profit OrganizatIOns from the FY 1995-96 Street ResurfaCing Project INTRODUCTION On May 27, 1997 after concluding the public heanng, Council requested that staff Investigate options for reducing the financial Impact on non-profit organizations for the FY 1995-96 Street Assessment Dlstnct and evaluate vanous possible eligibility cntena, including the 'welfare exemption", for granting of full or partial assessment waivers to non-profit property owners Four options and various eligibility cntena are presented In thiS supplemental staff report DISCUSSION A number of oplions are available for waiving all or a portion of assessment costs for non-profit property owners The City Council can consider the follOWing opllons If It Wishes to reduce the financial Impact on non-profits from assessment charges A diSCUSSion of possible eligibility crltena for appllcalion of these options IS presented later In thiS report SUPPLE~NT TO to..A JUN 1 7 1997 T\^~\"" ~ l'Q)Jl. A. I, ) ) ~) r- --... f f!' ~"\ I . .,.."". , . ,.>i~\.{ :jl'-;(~l),,_: ~...-. , . , ..... ~ ....r- ,.~ i Option A Option B Reduce the assessment cost to eligible non-profits so that they match the costs charged to residential property owners This option would result In charges bemg assessed only for Sidewalk, curb, and parkway work No charges would be assessed for alleys, streets, gutters, or curb ramps Although this option would entail minimal administrative difficulty, some of the affected non-profits would see their charges reduced to $0 and others would stili face substantial assessments Fully waive the assessment cost to eligible non-profits The City's current assessment policies were developed and approved after the passage of Proposition 13, as It had become Impossible for streets, Sidewalks, curbs, gutters. and alleys to be adequately maintained In the face of greatly reduced property tax revenues Smce most non-profit property owners have been exempted from the payment of property taxes since before the passage of ProposItion 13, the change In the City assessment policy, which took place In 1979, placed a new burden on non-profits which may serve to actually nullify the concept of a property tax exemption A full waiver of assessments would therefore be consistent With the Spirit of long-standing state and federal regulations granting special tax status to non-profits 2 Option C Reduce the Interest rate charged to non-profits for time payment of assessments and/or extend the payment term for non-profits These approaches would Increase administrative costs to the City and therefore constitute a less cost-efficient method to reduce the finanCial Impact on non-profits than a partial or full waiver of total costs as IS discussed In opllons A and B Option D Grant a "finanCial hardship' waiver (full or partial) for non-profits No method for defining and venfYlng what would constitute a ;'flnanclal hardship" eXists and thiS option would also be difficult to administer Staff examined two possible cntena for eligibility of non-profits for partial reduction or full exemption of assessment costs The first IS to use the 'welfare exemption" from the payment of property tax ReligiOUS organizations, hospitals, and educational Institutions who own their property and apply for the exemption annually are eligible for a welfare exemplion A "welfare exemption" IS granted by and registered with the Los Angeles County Tax Assessors office Currently, the City receives the Tax Assessor's Information via computer disk tWice per year The County Assessor places exemptions Into seven (7) different categones These categones are speCifiC to the type of exemption the parcel IS receiving ThiS 3 Information IS then downloaded Into the City's automated permitting system In an attempt to determine which properties In the City have received an exemption, Information Systems DIVISion staff sorted parcels that received any type of exemption on their property taxes ThiS Information was cross referenced With the FY 1995-96 street assessment dlstnct parcels to determine which parcels possessed a "welfare exemption " Staff determined that, according to the Tax Assessor's data, only 3 parcels In the FY 1995-96 assessment district receive any type of exemption ThiS was far below the number of organizations that staff believed might be receiving the exemption Staff then contacted the Los Angeles County Tax Assessor's office to determine If there could be errors In their database The Assessor's office Informed staff that much of the data provided to the City might not be current The lack of accuracy In the data IS due in part to a backlog of Information at the Assessor's office Including the dividing and/or combining of parcels and the volume of property owners seeking exemplions Staff has determined that there IS no accurate method for the City to determine which parcels have a "welfare exemplion" based on the defiCiencies In the Assessor's database It appears that the only feasible method of determining exempted parcels would be for parcel owners to provide proof/documentation to the City If the Council desires to use the "welfare exemplion" as a means of determining the eligibility for waivers from assessment charges, then staff would need to develop a waiver 4 application and certification process for those Impacted property owners Such a process could be completed within 60 days of final Council action on the FY 1995-96 Street Resurfacing Assessment district The second possible eligibility crltena IS exemption from City business license taxes as outlined In Santa Monica Municipal Code Section 6 04 190 ThiS exemption crltena apphes to entIties "organized under California law for chantable purposes" and "from which profit IS not denved, either directly or Indirectly by any person" The Code seclion reqUires that before the exemption can be granted, the non-profit entity must provided satisfactory documentation to the Finance Director venfYlng their non-profit status Any organization that can produce such documentation becomes exempt so virtually all non-profit organlzalions that own property In the City can be presumed to qualify for exemption Staff beheves that thiS cnterla IS the preferred approach from the standpOint of ease of administration and consistency With eXisting City practices and poliCies A process to determine eligibility under thiS criteria could be completed Within 60 days 5 BUDGET/FINANCIAL IMPACT It IS not possible to arnve at more than an approximate estimate for the financial Impact from Implementation of any of the above options However, staff estimates that a full waiver of assessment costs for eligible non-profits would Increase the costs of the FY 1995-96 Street Resurfacing project to the City by $100,000 or less RECOMMENDATION Staff recommends that Council adopt a policy to fully waive the assessment cost to eligible non-profits (Opllon B) as described above uSing the provIsions of MuniCipal Code Section 6 04 190 as the eligibility cnterla and direct staff take any necessary acllon to return to the City Council In order to confirm assessments for the FY 1995-96 Street Resurfacing Project Prepared by Craig PerkinS, Director of Environmental and PubliC Works Management Roger Gorke, Senior Administrative Analyst, EPWM 6