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SR 07-26-2016 8A Ci ty Council Report City Council Meeting : July 26, 2016 Agenda Item: 8.A 1 of 4 To: Mayor and City Council From: Joseph Lawrence, Assistant City Attorney , City Attorney's Office Andy Agle, Director Subject: Revenue and Advisory Measures for the November 2016 Ballot and Repeal Resolution Number 10977 (CCS) Recommended Action Staff recommends that the City Council : 1. Adopt the attached resolution placing measures on the November 8, 2016 ballot (Attachment B) that would: a. repeal Resolution Number 10977 (CCS ), which was adopted July 12, 2016 b. allow voters to express their preference th at if a transaction and use tax increase is adopted, funds should be used to support public school programs and affordable housing; c. increase the transaction and use tax by one -half percent to a total of one percent; d. authorize certain members of the Counc il to submit arguments and rebuttals concerning the measure; and e. direct the City Attorney to prepare an impartial analysis of the measure. Executive Summary At its meeting of July 12, 2016 , the City Council adopted an ordinance increasing the curren t transfer and use tax by one -half percent. The increase, once effective, would bring the tax to a total of one percent. At that meeting, the City Council also adopted Resolution No. 10977(CCS), which placed the ordinance on the November 2016 ballot for approval by the voters. The ordinance would only take effect if approved by the voters. Unfortunately, Resolution No. 10977 (CCS) contained inadvertent errors that staff only recently discovered. Resolution 10977 (CCS) failed to include, as part of the ballot question presented to the voters, the revenue amount anticipated to be raised annually by the tax, and it also failed to include the duration of the tax. The attached resolution corrects these oversights. The new resolution repeals Resolution No. 10977 (CCS), adopted on July 12, 2016. As noted in the attached resolution, the proposed tax is anticipated to raise approximately $16 Million annually. The tax measure is without a 2 of 4 sunset date. It will remain in effect until repealed or otherwise modif ied by the voters. As with Resolution No. 10977 (CCS), the attached resolution also contains an advisory question that asks the voters for their preference on how the increased revenue is to be allocated. Background As noted in the June 28th and July 1 2th , 2016 , staff reports, each attached to this staff report, Santa Monica has a long history of supporting public schools and in supporting affordable housing. Last summer , the Council reaffirmed its commitment to: maintaining an inclusive and diverse co mmunity and learn + thrive . The proposed tax ordinance and the attached resolution further these goals. As the Council and community are well aware, despite Santa Monica’s efforts to advance affordable housing programs and to provide adequate funding for public education, state -initiated changes to redevelopment law have eliminated most of the funding the City has used to preserve and to produce affordable housing. Public school funding remains unreliable and it has been hampered by a school financing st ructure that makes school districts ultimately reliant on the health of the State of California’s budgets. The proposed tax measure seeks to provide a s table and local source of funding. The revenue raised will go to the City's General Fund. The Coun cil could use it to support schools and affordable housing, as well as any other public service funded by the General Fund, such as police, fire and library services. Discussion As noted above, the Council considered the proposed tax measure at its J une 28 th and July 12 th , 2016 , meetings. On July 12 th , the Council voted to adopt the attached ordinance, which would increase the transfer and use tax by an additional one -half percent, bringing it to a total of one percent. The Council also adopted Reso lution No. 10977 (CCS), placing the tax measure on the November 2016 ballot. The tax measure would only take effect if approved by the voters. Following the Council's July 12 th meeting, staff discovered that Resolution No. 10977 (CCS) contain ed errors. It fails to state in its ballot question the amount of revenue that 3 of 4 the tax would raise annually. It also fails to state the duration of the tax. Each is required by a recently enacted state law. The attached resolution corrects these oversights. It al so repeals Resolution No . 10977 (CCS). According to the City's Finance Department's estimates, the proposed tax is anticipated to raise approximately $16 Million annually. This amount was discussed in the July 12, 2016 , staff report. As with the current voter approved transfer and use tax, the proposed tax measure is without a sunset date. It too will remain in effect until ended by the voters. The advisory question remains the same as was adopted on July 12 th . PROPOSITION “ “: ADVISORY VOTE ONLY: If a local transactions and use tax is enacted in Santa Monica, should half its revenue be used to improve and maintain local public schools, including attracting and retaining high -quality teachers, expanding access to pre -schools, assisting at -risk stud ents, and improving school technology, arts, music, math, and science instruction; and half to help preserve and ensure housing in Santa Monica that is affordable, protect residents from displacement by rising housing costs, and reduce homelessness? The new ballot question is as follows: PROPOSITION “ “: To maintain and improve Santa Monica community services including support for preservation of affordable housing, reducing homelessness, school repair and improvement, education of Santa Monica children and students, and other general fund services, shall an ordinance be adopted to increase by one -half percent Santa Monica's transactions and use tax, subject to independent annual audits, all funds used locally, no money going to Sacramento, raising approx imately $16 million annually, until ended by the voters? 4 of 4 Financial Impacts and Budget Actions The cost of placing the measures on the ballot will be covered by the FY 2016 -17 election budget. If voters approve the transaction and use tax measure, Gene ral Fund revenues are expected to increase by approximately $16 million per year. Actual revenues in any year are affected by the general state of the economy and other factors related to purchasing of goods. Voter approval of the advisory measure would create significant new revenues to bolster the School District’s educational programs and to restore the City’s affordable housing programs. Prepared By: Joseph Lawrence, Assistant City Attorney Approved Forwarded to Council Attachments: A. Transaction and Use Tax Ordinance 7/12/2016 (Web link) B. Repealing Resolution #10977 and Submitting Tax Measure Resolution C. Advisory Measure for November 2016 Ballot Resolution 7/12/2016 (Web link) D. Potential Rev enue and Advisory Staff Report 6/28/2016 #1924 (Web Link) E. Staff Report #1997 Revenue and Advisory Measures 7/12/2016 (Web Link)