Title
Adoption of Ordinance Enacting an Increase in the City’s Transient Occupancy Tax from Ten Percent (10%) to Fourteen Percent (14%), Subject to a Vote of the Electorate at the November 8, 2022 Election; and
Adoption of Resolution Calling an Election in the City of Alameda to be Consolidated with the City's Next General Municipal Election on November 8, 2022, and Submitting to the Electors A Ballot Measure, "City of Alameda Transient Occupancy Regional Parity Measure," Seeking Amendment to the City’s Transient Occupancy Tax from Ten Percent (10%) to Fourteen Percent (14%) by Amending the Alameda Municipal Code Chapter 3-61.3 (Tax Imposed), Establishing the Policies and Procedures for Such an Election, Requesting that the County of Alameda Conduct Such an Election and Authorizing City Councilmembers to File Written Arguments For or Against the Measure. (City Manager 10021030)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
On May 10, 2022, staff sought City Council direction in regards to potential revenue measures for the November 8, 2022 election. Following staff’s presentation of initial public polling and viable options, City Council directed staff to move forward with a measure to increase Alameda’s existing Transient Occupancy Tax (TOT) from ten percent to fourteen percent. At this time, staff is bringing forward the recommended actions to place the TOT measure on the November ballot.
BACKGROUND
The General Fund is the main operating fund for the City of Alameda (City). It accounts for sources and uses of resources that are discretionary to the City Council in the provision of activities, programs, and services deemed necessary and desirable by the community. In accordance with the Government Finance Officers Association’s (GFOA) best practices to maintain adequate levels of fund balance to mitigate current and future risks, the City maintains fiscal discipline and is currently able to meet its General Fund Reserve Policy of 25% of annual General Fund expenditures. Though General Fund revenues for Fiscal Year (FY) 2021-22 and FY 2022-23 are expected to remain healthy, the City faces significant and ongoing challenges. These are not new fiscal challenges and the City has been considering them since at least 2009, with the Fiscal Sustainability Committee’s Long Range Financial Forecast 2009-2019 and the last three biennial budget processes. Additionally, the FY 2019-21 capital budget identified nearly $800 million in deferred maintenance in public infrastructure citywide. Like many other Bay Area communities, the City must also address sea level rise, climate change, traffic safety, disaster preparedness, and affordable housing.
In March 2020, just prior to the uncertainty brought on by the global pandemic, the City Council was preparing to discuss a possible revenue measure for the November 2020 ballot to address a variety of identified local funding needs. COVID-19 put those discussions on hold. The City has been fortunate that the City’s General Fund continues to be supported by the volatile Transfer Tax, but growing demands on city revenues as evidenced by the 10-year financial forecasts, unfunded pension and other post-employment benefits (OPEB) obligations, and funding for climate adaptation, affordable housing, and other infrastructure needs makes this an important conversation to move forward. Up until March 2020, staff had been working with two consulting firms, Terris Barnes Walters Boigon Heath Lester Props and Measures Strategy and Communications (TBWBH) and Fairbank, Maslin, Maullin, Metz, and Associates (FM3) Research, to consider four possible revenue measures for the November 2020 ballot:
• Increase the existing TOT;
• A new cannabis tax;
• An infrastructure bond; and
• Increase to the existing business license tax.
Below is the link to the staff report that was published, but not presented or discussed, in March 2020:
<https://alameda.legistar.com/LegislationDetail.aspx?ID=4617959&GUID=7E6A933D-BCD4-40E2-AB7F-1AF6A1BB1667&Options=ID%7CText%7C&Search=FM3&FullText=1>
On December 7, 2021, City Council awarded two contracts to move forward with a potential revenue measure for the November 2022 ballot. A contract with TBWBH for assistance with ballot measure strategy and informational outreach, and a contract with FM3 for public opinion survey development, implementation, and analysis. These two firms are the consultant team that assisted the City in 2019 and 2020 with consideration of a potential revenue measure, and assisted the City with the successful Measure F sales tax measure in 2018.
Following the award of contracts, staff worked with FM3 and TBWBH to conduct an initial public opinion survey. The survey was designed to broadly test opinions about city government, city services, current problems/issues facing the community, priorities for funding, and willingness to support specific revenue measures. The specific revenue measures included the options considered in 2020, as well as affordable housing measures and an increase in property transfer tax. The survey was conducted February 2-13, 2022.
The results of the February survey demonstrated that two types of revenue measures were potentially viable: (1) an infrastructure bond, or (2) an increase to the TOT, the business license tax, and/or adoption of a new cannabis tax. On May 10, 2022, staff sought City Council direction on which, if any, of these measures to advance. Staff presented the results of the initial polling, the pros and cons to advancing any one or more of these measures, or to choosing to advance no measure at all. At the May 10, 2022 meeting, City Council directed staff to proceed with a TOT measure to increase Alameda’s existing ten percent (10%) TOT to fourteen percent (14%). At this time, staff is bringing forward the necessary next steps to place the measure on the ballot.
TOT is a tax imposed for the privilege of occupancy in any hotel in the City. The lodger is currently required to pay a tax in the amount of ten percent (10%) of the rent charged by the operator of the hotel. The hotel operator collects the tax from the lodger on the City’s behalf and remits the tax to the City monthly. It is important to note that the tax is paid by the person occupying the room, not the hotel operator.
The City’s TOT was enacted by Ordinance No. 1739 on October 18, 1974 at a rate of 6%. The adoption of Ordinance No. 1922 increased the rate to 8% on May 24, 1978. The current rate of 10% (Ordinance No. 2504, September 18, 1990) has been in effect for 32 years.
In FY 2018-19, prior to the pandemic, the City collected $2.29 million, while in response to the pandemic TOT revenue fell to $1.95 million in FY 2019-20. In FY 2020-21 TOT rebounded to $2.00 million and in FY 2021-22 is anticipated to end the year at approximately $2.20 million.
DISCUSSION
Staff recommends placing a measure to increase Alameda’s TOT to fourteen percent (14%) on the November 2022 ballot.
The February polling concluded that there is community support for the proposed TOT increase, and the measure meets the simple-majority requirements to exceed 50%, (total support for the measure was initially 69% yes and 27% no, after messaging support was 67% yes and 28%.
Additionally, February polling concluded that voters most highly prioritize investments in maintaining emergency response times, infrastructure upgrades, and preparation for and prevention of natural disasters including flooding and earthquakes.
This proposed increase of four percent (4%) to TOT would generate additional general fund revenue, approximately $700,000 to $910,000 annually. This additional revenue would be deposited into the General Fund and be available to maintain essential city services such as public safety, 9-1-1- response times, park maintenance, and reducing backlog of repairs to Alameda’s public infrastructure. This measure supports the goal of maintaining a structurally balanced budget by ensuring recurring (versus one-time) revenues meet expenditures. The measure would contribute to the City’s financial stability and perhaps help reduce the City’s annual contributions to OPEB and CalPERS.
Ballot Question
City Council’s adoption of the resolution tonight would approve the following 75-word ballot question:
City Council’s adoption of the resolution tonight would approve the following 75-word ballot question:
City of Alameda Transient Occupancy Tax Regional Parity Measure. Shall an ordinance be adopted increasing the City of Alameda transient occupancy tax from 10% to 14%, paid by hotel/ motel/ short-term rental guests, generating approximately $500,000 annually until ended by voters for general government use such as maintaining 9-1-1 emergency response times, supporting fire/ paramedic/ police services, repairing potholes/ deteriorating streets and maintaining clean/ safe parks/ beaches?
This ballot question has been crafted with help from TBWB Strategies. The ballot question includes all of the required information under Election Code § 13119, including the duration of the tax-“until repealed by the voters.”
If the City Council approves this next step of placing the measure on the ballot, staff will continue execution of informational outreach and public engagement. Following City Council’s direction on May 10, TBWB Strategies worked with staff to develop a public communication plan. The plan includes development and distribution of two informational mailers providing information on the proposed TOT measure and inviting public input. The first of these mailers was distributed in June and the second is slated for later in July after City Council considers this item. The public communication plan also includes development and deployment of web and social media content and engagement. At this time, an additional public opinion survey is not recommended or planned given that the initial polling performed in February gathered sufficient information about the measure’s viability. Advocacy by City staff for or against the measure is not permitted.
Any action taken by the City Council this evening to advance this measure to the November ballot is not a vote to support or oppose the measure. While the City Council has the right to take a formal position on this measure if it chooses, tonight’s action is simply whether to advance the measure forward so Alameda voters have the opportunity to consider it and decide.
Ballot Arguments and Impartial Analysis
In addition, the resolution authorizes the City Council to submit arguments and rebuttals concerning the measure. Arguments and rebuttals shall be submitted in accordance with Elections Code Sections 9280-9287. The City Clerk, as the City Elections Official, has set the deadline for submitting direct arguments as 5:00 p.m. on Monday, July 25, 2022 and rebuttals are due 5 p.m. on Wednesday, August 3, 2022.
If the City Council elects to prepare ballot arguments, the options are: 1) draft an argument as a whole body in open session and decide signers at that time; 2) authorize no more than two Councilmembers to meet as subcommittee of the City Council to draft an argument and have the entire City Council sign; 3) authorize no more than two Councilmembers to draft an argument and decide the combination of Councilmembers and/or other signers; or 4) authorize no more than two Councilmembers to draft and sign an argument and have up to three/four other signers. The City Council could also elect not to draft an argument.
Per California Elections Code § 9280, the City Attorney will prepare an impartial analysis of the measure showing the effect of the measure on the existing laws and the operation of the measure. The analysis will include a statement indicating the measure was placed on the ballot by the City Council. The analysis cannot not exceed 500 words in length and must be printed on the ballot preceding the arguments for or against the measure. The impartial analysis is due 5 p.m. on Wednesday, August 3, 2022.
The deadline for City Clerk to deliver final adopted election resolution to Alameda County Registrar of Voters to finalize process for qualifying for the ballot is August 12, 88 days prior to election day.
ALTERNATIVES
• Adopt the Proposed Ordinance and Direct staff to proceed with placing the measure, as presented, on the November ballot.
• Provide alternative direction/modifications to the measure and direct staff to proceed with placing the modified measure on the November ballot.
• Direct staff to place no measure at all on the November ballot.
FINANCIAL IMPACT
Since November 8, 2022 is a general election with many measures expected on the ballot, election costs are likely to be no more than $30,000 for printing and translation.
If the qualified voters of Alameda approve the measure, it would provide approximately $700,000 to $910,000 in revenue annually to preserve services valued by residents. Not placing a revenue measure on the ballot means that the City’s long-term financial challenges will remain without a solution, and in the case of public infrastructure, the costs of future repairs will continue to increase.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378 (b)(4) of the CEQA Guidelines, because it concerns governmental fiscal activities (consideration of funding mechanisms), which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
CLIMATE IMPACT
The ability of the City to meet the challenge of reducing its greenhouse gas emissions, responding to sea level rise, more frequent and intense storms, and other climate change impacts will require an infusion of new funds.
RECOMMENDATION
Adopt an Ordinance enacting an increase in the City’s Transient Occupancy Tax from Ten Percent (10%) to Fourteen Percent (14%), subject to a vote of the electorate at the November 8, 2022 election; and adopt a Resolution calling an election in the City of Alameda to be consolidated with the City's next general municipal election on November 8, 2022, and submitting to the electors a ballot measure, "City of Alameda Transient Occupancy Regional Parity Measure," seeking amendment to the City’s Transient Occupancy Tax from ten percent (10%) to fourteen percent (14) by amending the Alameda Municipal Code Chapter 3-61.3 (Tax Imposed), establishing the policies and procedures for such an election and requesting that the County of Alameda conduct such an election.
Respectfully submitted,
Margaret O’Brien, Finance Director
Dirk Brazil, Interim City Manager
By,
Margaret O’Brien, Finance Director
Financial Impact section reviewed,
Margaret L. O’Brien, Finance Director