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Home My WebLink About1988-05-24; City Council; N/A; Proposition D TOT ElectionCI' - .. \B# ZNf 0 IITG. 5124188 IEPT. CM ' OF CARLSBAD - AGENt TITLE: PROP D . BILL Accept agenda bill for information purposes. ITEM EXPLANATION: DEPT. HO.$~ CITY An* MG At the May 17, 1988 Council meeting, Council Member Mamaux asked for information clarifying the impact on the general fund if Prop D passes at the June 7, 1988 election. The city currently provides $200,000 a year to the Chamber of Commerce for tourism promotion from the general fund. If Prop D passes, $200,000 would be provided from TOT revenue for tourism promotion beginning July 1, 1989 and $200,000 would no longer need be appropriated from the general fund. EXHIBITS: 1. Information packets on Prop C and D. . .- P R 0 P 0 S I T I 0 N "C" --FACT SHEET-- --BALLOT ARGUMENTS-- --BACKGROUND INFORMATION-- PROPOSITION C FACT SHEET 1. 2. 3. 4. WHAT IS TRANSIENT OCCUPANCY TAX (TOT)? - It is a tax that visitors pay on the rent charged by hotel operators. tax on residents, homeowners or business operators. It is not a WHERE DOES IT GO? goes directly into Carlsbad's General Fund. - Every TOT dollar collected in Carlsbad WHAT DOES IT PAY FOR? - The General Fund supports many City services, like police and fire protection, street maintenance, and parks and recreation. These services benefit both visitors and residents of Carlsbad. HOW MUCH DIFFERENCE CAN 2% MAKE? - If Proposition C is adop- ted, a visitor to Carlsbad who is paying $60 for a hotel room will have to pay an ddditional $1.20 in TOT; not a significant amount per individual. Carlsbad. If the City had been charging this additional 2% last year, it would have collected $570,000 more in TOT, which would have gone to pay for essential city services. However, over the course of a year it adds up for 5. WHEN WAS IT LAST INCREASED? - Carlsbad TOT started in 1964 The majority of agencies in and has never been increased. TOT rate in the County of San Diego. San Diego County charge 2% more than Carlsbad. In fact, Carlsbad charges the lowest 6. WHY DO WE NEED TO INCREASE TOT? - The ability of local gov- ernments to generate revenue has been severely reduced. Each year brings new legislation and new limitations. At the same time, the City has been expanding services to make Carlsbad a safe and desir- able community; building new roads, fire stations and parks. To get this far, the City has reviewed its operation it more efficient, and will continue to do so in the future. But to adequately meet future demands, the City must generate more revenue. Proposition C will raise significant revenues for the City's General Fund without taxing the residents or businesses of Carlsbad. each year to make 7. WHAT VOTE IS REQUIRED TO PASS? - Proposition C proposes a general tax to support the City's General Fund, which, under the laws of the State, requires the majority of the votes cast on this measure. . .. x i3 a _. . . . . . P R 0 P 0 S I T I 0 N "D" --FACT SHEET-- --BALLOT ARGUMENTS-- --BACKGROUND INFORMATION-- PROPOSITION D FACT SHEET 1. WHAT IS TRANSIENT OCCUPANCY TAX (TOT)? - It is a tax that visitors pay on the rent charged by hotel operators. tax on residents, homeowners or business operators. It is not a 2. WHERE WILL THE ADDITIONAL 2% GO? - Unlike the existing TOT and Proposition C TOT dollars, revenue generated by Proposition D will be used for the following: - $200,000 per year for the Carlsbad Convention E Visitors Bureau, to promote tourism in Carlsbad. - Up to $900,000 per year for debt-service payments on a bond issue to construct a major, public golf course and tennis facility. - An additional $200,000 per year to fund golf course and tennis facility improvements, or the construction of an executive golf course. - Any funds in excess of $1,300,000 will be returned to the City's General Fund. 3. HOW MUCH DIFFERENCE CAN 2% MAKE? - If Proposition D is adop- ted, a visitor who is paying $60 for a hotel room will have to pay an additional $1.20 in TOT; If the City had been charging the additional 2% last year, it would have collected $570,000 more in TOT. not a significant amount per individual. 4. IS IT A PERMANENT INCREASE? - No. The additional 2% tax will expire upon the final debt service payment on the bond issue (approxi- mately 20 years after the sale of the bond). 5. WHAT EFFECT WILL THERE BE? - Proposition D will provide rec- reational facilities to serve residents and visitors alike. 6. WHAT VOTE IS REQUIRED TO PASS? - Proposition D proposes a special tax to construct a major golf courseltennis facility and pro- mote tourism, and as such, is defined as a Special Tax by the laws of the State, requiring two-thirds of the votes cast on this measure. .I . li c- z 8 5. a 'I 0) m C m n rn 0 9 4 U a z Q 0 h a z .. . 13 t- 0 -- CD CL Cl cc CL c. c 0' n- 0 a a F- .. ... .. .. .. : : -. .. .. h '0 9 March 2, 1988 TO : CITY MANAGER - FROM : Finance Director TRANSIENT OCCUPANCY TAX INCREASE One year ago the City Council arid City staff began to discuss the possibility o increasing Transient Occupancy Tax rates to finance City operations. At that time the largest issue facing the City Council was the possibility of having to pay approximately $700,000 per year for the Hosp Grove acquisition. Since that time the City Council and staff have examined other long-range issues such as Growth Management and the City's Capital Improvement Program, both of which point out the need for capital facilities and related operating costs. When the City Council reviewed the 1987-88 CIP, staff emphasized the point that the City would face a future shortfall of operating funds if all capital projects were completed on schedule. Although the future (short term) operating picture has improved somewhat because of better definition of project scheduling, the City still faces a shortfall in operating funds in years to come. The table below gives some examples of the operating costs the City will need to fund in the future. OPERATING COST Project Calavera Hills Park Hosp Grove Debt Fire Station 85 Fire Station 116 Library-South Senior Citizens Ctr Alta Mira Park Alga Norte Park Traffic Signals Street Projects TOTAL 1988-89 1989-90 1990-91 $ 278,000 350,000 200,000 $1,068,000 $ 278,000 700,000 500,000 800,000 200,000 100,000 190,000 $2,768,000 $ 278,000 700 I 000 500,000 500,000 800,000 200 1 000 272,000 122,000 190,000 - $3,562,000 1991-92 $ 278,000 700, uuu 500,000 500; 000 800,000 200,000 272, 000 200,000 150,000 190,000 $3 , 730,000 -2- Transient Occupancy Tax Increase This is not intended to be an exhaustive list of projects, but I believe it gives a good approximation of the magnitude of costs the City faces over and above basic operating costs in the future. If we compare these costs to the funds available after covering basic operations, tlie so called "deficit" becoines apparent. (The term "deficit" does not really apply to local government budgeting because the City can never spend inore tlran the resources available. spending.) Adjustments must be made to the budget to avoid deficit Both the Operating Budget and the CIP discuss the issue of deiiiand for services exceeding our present ability to provide funding. These forecasts project a $2 million deficit or shortfall by the year 1990, if no action were taken to modify schedules or to increase revenues. One year ago, the staff proposed three alternative methods of raising funds for City operating costs 1) increase TOT rates, 2) increase Business License fees, and 3) create a Utility Users Tax. Of the three, the increased TOT provided tlie greatest revenue with the least burden on local businesses or taxpayers. Council has since asked staff to proceed with the TOT increase resulting in the asenda bill presented to Council on March 1, 1988. In addition, the City Council has taken other actions to increase revenues or shift the burden of cost. These actions include 1) the User Fee Study currently underway, 2) the update of the Cost Allocation Plan to allow proper allocation oE overhead costs and interdepartmental charges, 3) the possible inclusion of street tree maintenance in the Lighting District Assessment, and 4) the creation of the Growth Management Fee designed to offset a large portion of the cost of Giowtli Management Plans. The coinbination of all of these actions including a TOT increase could provide $1 million or more to the General Fund in 1988-89. In addition, the recent approach to budgeting has reduced available City starc hy approximately 20 positions arid restricted tlie availability of funds to expand programs, thereby reducing operating costs. This approach will probably be continued for the foreseeable future. The staff intends to continue to provide the City Council with a viahle budget that allows for both steady progress on Council goals and the marlagemerit of conyingencies as they occur. Direct& inrn t