SR 07-12-2016 8B
Ci ty Council
Report
City Council Meeting : July 12, 2016
Agenda Item: 8.B
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To: Mayor and City Council
From: Andy Agle, Director , Housing and Economic Development
Gigi Decavalles -Hughes, Director
Subject: Revenue and Advisory Measures for the November 2016 Ballot
Recommended Action
Staff recommends that the City Council:
1. Adopt the attached ordinance enacting an increase in the transaction s and use
tax to one percent, subject to a vote of the electorate at the November 8, 2016
election (Attachment A); and
2. Adopt the attached resolution placing measures on the November 8, 2016 bal lot
(Attachment B) that would:
a. allow voters to express their preference that if a transaction and use
tax increase is adopted, funds should be used to support public school
programs and affordable housing ;
b. set the transaction and use tax at one percent;
c. authorize certain members of the Council to submit arguments and
rebuttals concerning the measure; and
d. direct the City Attorney to prepare an imp artial analysis of the measure.
Executive Summary
Advancing the Council’s strategic goals related to main taining an inclusive and diverse
community and learn + thrive is dependent upon a robust affordable housing program
and high -quality public schools. In response, Council directed staff to prepare two ballot
measures for consideration on the November 8, 20 16 ballot. The first measure would
allow voters to express their preference that increased General Fund revenues
associated with an increase in the transaction and use tax be used for affordable
housing and local public schools. The second measure would supplement General
Fund revenues through an increase in the transaction and use tax.
Background
Santa Monica’s long history of supporting equity, opportunity, affordability, and
inclusivity includes a series of voter -approved initiatives to support affordable housing
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and public schools . In August 20 1 5, Council reaffirmed its commitment to those values
with the selection of two of its five top strategic goals: maintaining an inclusive and
diverse community and learn + thrive . Despite strong communi ty support, Santa
Monica’s efforts to advance affordable housing programs and public education have
been hampered by changes at the state level. State -initiated changes include the
elimination of the Santa Monica Redevelopment Agency, which provided most local
funding for the preservation and production of affordable housing. Public school funding
has been hampered by reduced state fund ing , as well as a school financing structure
that makes school districts ultimately reliant on the health of the State of
California’s budgets .
Council conducted policy discussions on August 25, 2015 (Attachment C ) and
January 12, 2016 (Attachment D ) re garding how to restore funding for local priorities
related to affordable housing and local schools. At its J une 28, 2 016 meeting
(Attachment E ), Council considered four options for increasing City revenues that could
be used to support City priorities related to affordable housing and public education.
Council directed staff to draft ballot language for two measures, th e first of which would
allow voters to express their preferences related to affordable housing and schools, and
the second of which would increase the local transaction and use tax (TUT) by ½ cent.
Discussion
Pursuant to Council direction, two measures a re proposed to appear on the
November 2016 ballot. One measure would allow voters to express their desire that
enhanced local revenues associated with an increase in the local transactions and use
tax be used to support public schools and affordable housi ng. Pursuant to feedback
from school leaders, the educational uses that could be supported by the measure
include improvement and maintenance of local public schools, attraction and retention
of high -quality teachers, expanded access to pre -school, techn ology improvements, and
enhanced instruction in arts, music, math, and science. Pursuant to Council direction,
the housing uses that could be supported by the measure include preservation of
existing housing to protect current residents and maintain long -term affordability, rental
assistance to help residents stay in their homes, creating permanent supportive housing
for those who are currently unhoused, and protect ing residents from displacement by
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rising housing costs .
The other measure would allow voters to consider a ½-cent increase in the TUT . The
TUT functions like a sales tax, and is collected on the sale of goods that are not
otherwise exempt from sales taxes (i.e., food, medicine, etc.) Council identified the TUT
as the preferred reven ue source for a variety of reasons. First, the TUT provides
relatively stable revenues from year to year. Other revenue sources considered, such
as the documentary transfer tax and a construction tax, are volatile from year to year,
making it difficult t o implement programs when budgets fluctuate significantly. Second,
the TUT is considered a universal tax that everyone pays, including residents, visitors,
and businesses. While residents pay the tax, analysis completed at the Los Angeles
County level sh ows that visitors and business es pay a large share of the tax. With
Santa Monica’s many businesses and visitors, it is likely that residents will pay an even
smaller share than at the County level. Third, taxes imposed on the sale of goods are
typically c onsidered to be regressive taxes that put an undue burden on low -income
residents . However, because California law exempts food, medicine, rent, and
services, the regressive nature of the tax is muted. In addition, the California
exemptions mean that the tax is applied to purchases that are more discretionary in
nature, as opposed to essentials such as food and housing. Increasing the TUT by ½
cent for general municipal purposes requires approval by over 50 percent of those who
vote on the measure.
Summa ry of Ballot Measures
As envisioned, the adjustment to the TUT would be considered a general tax and
thereby would require a simple majority (50 percent plus one) for voter approval.
The advisory measure allowing voters to demonstrate their intentions for the increased
revenues would be directly relevant only if the TUT adjustment were to be approved.
Attachment B is the resolution submitting the measures to the voters of the City of
Santa Monica. The title s of the measures are as follows:
PROPOSITION “ “: ADVISORY VOTE ONLY: If a local transaction 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
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access to pre -schools, assisting at -risk students, 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 redu ce homelessness ?
PROPOSITION “ “: To maintain and improve Santa Monica community services
including preservation of affordable housing, reducing homelessness, school repair and
improvement , education for Santa Monica children and students, and other gene ral fund
services, shall an ordinance be adopted to enact a Santa Monica one -half percent
transactions and use tax, subject to independent annual audits, all funds used locally,
and no money going to Sacramento?
In addition, the resolution authorizes the City Council to submit arguments and rebuttals
concerning the measure. Council may designate one to five members to submit
arguments and rebuttals for the measure. Finally, the resolution directs the City Clerk to
transmit a copy of the measure to the C ity Attorney and directs the City Attorney to
prepare an impartial analysis of the effects of the measure on the existing law as well as
on the operation of the measure.
Arguments and rebuttals shall be submitted in accordance with State Elections Code
Se ctions 9280 -9287 and Santa Monica Mun icipal Code Section 1.04.125. The Elections
Official will set the deadline for submitting arguments as 14 days from the date the
election is called on the measure and the deadline for submitting rebuttals to arguments
a s 10 days after the deadline for submitting arguments on the measure.
The advisory measure does not raise taxes; rather, it expresses Santa Monica voters’
preference if the transaction and use tax is increased. The results of the measure
would not bind t he current or future city councils as to use of the revenues. In 2010,
Santa Monica voters approved a half -percent transactions and use tax, as well as a n
advisory measure expressing a desire that half of the revenues from the transactions
and use tax be used to support school programs. Since adoption of the two measures,
Council has allocated 50 percent of all revenues to school programs.
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 v oter s approv e the transaction and use tax measure , General Fund
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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
factor s 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: Andy Agle, Director
A pproved
Forwarded to Council
Attachments:
A. Proposed Ordinance
B. Proposed Resolution
C. August 25, 2015 Staff Report
D. January 12, 2016 Staff Report
E. June 28, 2016 Staff Report