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HomeMy WebLinkAboutPOWERPOINT - 55CJuly 3, 2018 City Council Meeting Jorge E. Garcia, Assistant to the City Manager Background • March 20, 2018- City Council Authorized staff to enter into agreements to evaluate revenue generating options • May 1, 2018- City Enters into Agreement with MuniServices —Contract Covers two tax measures: Sales Tax and Adult Use & Commercial Cannabis Tax —Additional Consultant Team • Strategy Consultant- GrassrootsLabs (Mike Madrid) • Polling Consultant- FM3/Fairbanks, Maslin, Maullin, Metz (John Fairbanks) What is a sales and use tax? • Definition — The sales tax is imposed on retail transactions. It applies to all retail sales of tangible personal property. The use tax is imposed on consumers of tangible personal property that is used, consumed, or stored. — Sales tax is the common term used to describe both. Rate Jurisdiction Purpose 3.69% State Goes to State's General Fund 0.25% State Goes to State's General Fund 0.50% State Goes to Local Public Safety Fund to support local criminal justice activities (1993) 0.50% State Goes to Local Revenue Fund to support local health and social services programs 1991 Realignment) 1.06% State Goes to Local Revenue Fund 2011 1.25% Local 0.25% Goes to county transportation funds 1.00% Goes to city or county operations 0.50% Local Measure M2 transportation Total: 7.75% State/Local Total Statewide Base Sales and Use Tax Rate What is Sales and Use Tax NOT Applicable to? ■ Five General Exemption Categories — Necessities of Life • Food products (unless heated), purchases made with CALFRESH Benefits, health related, housing (i.e. utilities, rental of furnishings) — General Public Benefit • Alternate energy, museums and public art exhibits, non -profits, out-of-state military purchases — Industry Benefit • Transportation related industry (i.e. motor vehicle fuel, air carriers, entertainment industry) — Exclusions by Definition • Admission charges, sales price/gross receipts, services — Others Exemptions, Exclusions, or Credits Why should Santa Ana consider an add on sales and use tax? • Placing the measure on the ballot allows voters to decide what level of service they would like • A service level deficit currently exists • Improve police response times and address crime • Address homelessness related concerns • Address deferred maintenance • Provide quality youth services Additional needs and priorities • Quality of Life Team & Homeless • More Youth Programing • Funding to Enhance Economic Dev. • Additional Police Officer Recruitments • Maintain Reserve Policy Funding levels • Facility Deferred Maint. & Vehicles • Information Technology Infrastructure • Enterprise Fund Compliance • Worker's Compensation • Liability Increases • City Hall Seismic Retrofit • SARTC Improvements • PERS Challenges Status Quo: Surplus/(Structural Deficits) (10.0) (20.0) (30.0) (40.0) (50.0) (60.0) (70.0) (80.0) FY 18-19 FY 19-20 Proposed Budget* Forecast FY 20-21 FY 21-22 FY 22-23 FY 23-24 Forecast Forecast Forecast Forecast 100% Success Rate in 2016 in Orange County Add On Sales Tax Measures • Voters approved local sales and use tax in five Orange County cities • Other cities are evaluating similar options for 2018 city Fountain Valley Rate Increase 1% La Palma 1% Stanton * 1% Westminster 1% La Habra 0.50% * Reaffirmed in 2016 How will consumers respond? • Consumers do not generally comparison shop for better sales tax rates —They prefer to shop local • Costs to go beyond city limits generally not considered worth the extra effort • Historically passage of add on sales tax measures has not led to a decline in sales tax revenue especially if it is clear how the additional tax revenue will be spent (i.e. homelessness, public safety, quality of life, and infrastructure) = • Poll Conducted by FM3 June 7-17, 2018 — 642 respondents by Santa Ana voters — 95% confidence interval with ± 4% margin of error —Poll conducted via telephone and online survey via email • Poll questions prepared by team of consultants • Draft/Preliminary Results received by CAO June 201h Councilmember Questions from June 19, 2018 • Sales Tax Revenue at different intervals — % = $20 million — % = $30 million — 1 = $40 million — 1'/z = $60 million • Were other options evaluated? • Staff recommendation based on: — Timing, probability of success, and funding opportunity Councilmember Questions from June 19, 2018 • Sunset Option — Typically used to finance fixed project or capital infrastructure — Typically used to address temporary or term specific needs — Can polarize electorate by temporary providing services and having them go away — May require re -authorization by electorate • Addressing Economic Development & Development Impact — Branding Study, Business Attraction and Retention, Shop Local Program, Financial Incentives, Site Selection, Small Business Development, Job Training through WorkCenter — Planning & Building Agency has begun including a section titled "Economic Development Benefits" on the Planning Commission staff reports. The objective is to identify the economic benefits for each new development. The economic benefits of each development projects will vary depending on the type of use, but generally the reports will capture estimates of: new jobs, projected sales tax revenue, and the increases in property valuations, infrastructure impacts, and core service impacts. Councilmember Questions from June 19, 2018 (cont'd) • Analysis on Housing Impact — The City imposes impact fees on land development projects to mitigate general impacts to city infrastructure, such as parks, library, transportation, sewer, and storm drainage systems. The primary objective of a development impact fee (DIF) program is to ensure that new development pays the capital costs associated with growth. — The City is completing a study is to establish the infrastructure expansion that is needed to mitigate general impacts from anticipated land development projects, and to quantify those mitigations into dollars. Funds collected will be used to pay for increasing the infrastructure's capacity in support of development. — The fees are limited to fair share proportional costs for capital and may not be used for infrastructure maintenance. Councilmember Questions from June 19, 2018 (cont'd) ■ What other City ballot measure are being considered — Current Pending Items • City Councilmember Elections • Adult Use & Commercial Cannabis Tax • Charter Amendments • District Elections • What other impacts to rate payers are pending — November Election • SAUSD potential school bond — Other considerations • Poseidon Desalination Plant • Gas Tax Repeal Ballot Initiative • Electricity, Refuse, Water, and Sewer rates • Reduction of Sanitation Rates What will the revenue be used for? • Quality of Life Team & Homeless • More Youth Programing • Funding to Enhance Economic Dev. • Additional Police Officer Recruitments • Maintain Reserve Policy Funding levels • Facility Deferred Maint. & Vehicles • Information Technology Infrastructure Other City Council and Community Priorities • Enterprise Fund Compliance • Worker's Compensation • Liability Increases • City Hall Seismic Retrofit • SARTC Improvements • PERS Challenges Ensuring Fiscal Transparency • Oversight Board • Annual Independent Audit • Disclosure of expenditures Questions? 17