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HomeMy WebLinkAbout2004-04-21 e-packetSPECIAL MEETING CITY COUNCIL OF THE CITY OF SOUTH SAN FRANCISCO P.O. Box 7]i1 (City Hall, 400 Grand Avenue) South Sam Francisco, California 94083 CiTY HA. LL CONFERENCE ROOM 400 (;RAND AVENUE WEDNESDAY, APRIL 21, 2004 6:00 P.M. NOTICE IS; ttEREBY GIVEN, pursuant to Section 54956 of the Government Code of the State of California, the City Council of the City of South San Francisco will hold a Special Meeting on Wednesday, the: 21st day of April, 2004, at 6:00 p.m., in the City Hall Conference Room, 400 Grand Avenue, Somh San Francisco, California. Puq>ose of the meeting: t. Call to Order 2. Roll Call 3. Public Comments - comments are limited to items on the Special Meeting Agenda Study Session a) Willow Gardens Revitalization b) Options for Raising Revenues Adjournment lerk /I GEND/I ITEM 4a Willow Gardens is a planned unit development constructed in 1964 consisting of 53 tbur plex buildings. The residential buildings are privately owned and the common greens were dedicated to thc City to own and manage. There are 47 out of toxvn oxvners and i i owners who live in the City. The City established and Landscape and Lighting Maintenance District for an eight year period to undertake improvements to the common greens. Willow Gardens Neighborhood The development is poorly designed, without typical residential amenities such as tree lined sidewalks, architectural details, private entries or adequate trash enclosures. The design of the PUD does not provide a sense of place and the units do not have a clear entry or "eyes on the street". The buildings have sufi-'ered fi'om neglect and disinvestment lbr many years. For over 25 years, the City has received numerous police and code complaints regarding deteriorating conditions and illegal activities. The character of the neighborhood has been defined by vanda.ism., broken windows, graffiti, trash, broken down cars and buildingb in disrepair with numerous building code violations and no property management. Between [ 991 and 1998, the City organized an interdepartmental task force to address the on- going problems in the neighborhood, without SUCCESS. Willow Gardens Revitalization in 1998 and 1999 the City asked Mid Peninsula Housing Coalition to assist the ('ltv in its efforts to turn the neighborhood around. Mid Peninsula and Pyatok Associates undertook a design phase to address the lack of architectural detail evident in the buildings and to attempt to create nest' designs providing residential neighborhood amenities and a "sense of place". in 1999, City Council approved a master agreement with Mid Peninsula and a budget of $15 million to acquire 16 buildings that ~sere to be rehabilitated and managed by Mid Peninsnla as affordable units for Iow and moderate incom_e families. l-he financial mechanism included redeveiopmen~ funds, state tax credits, housing bonds and federal resources. The E! Camino Redexelopment Project Area amended in 2001, incorporating the XVillo~' Gardens neighborhood in order to allow the expenditure of · -atla~,~lnnmc~nt t'~,~d¢ "n thc, nrc~nneocl ro~'it,~li~tinn effort. It was pro.jected that buildings could be acquired for $400,000 and rehabilitated for $100,000 per structure, svithin a ten 3'ear period. Since approval of the revitalization plan for Willow Gardens, the economy has changed dramatically and the cost of the four plex structures has risen from $400,000 to $850,000. The increase in the sales price of the structures has had a detrimental impact on conditions in the area, as prices rise so do rents, and building conditions continue to deteriorate. Leaking roofs and windows, accumulated garbage and increased vandalism have continued to plague the neighborhood and absentee owners have not risen to the occasion by making improvements to their property. In fact, there have been two wiring and misuse of electrical outlets. Revitalization Concept · Acquisition of critical mass of buildings · Establish site control and presence in the neighborhood · Redesign buildings to create visual and structural improvements · Public improvements to create the feeling of single family homes · Establish on site professional management and maintenance · Low interest loan program available to other property owners with practical design guidelines · Improved landscaping of public and private spaces · Pedestrian oriented waikways throughout the neighborhood · increased code enforcement actions a~ainqt code violations 990, 996,982 Brusco Units Acquired :l:n December of 2002 Way Alley Behind Brusco Way Units i 395 Susie Way Typical Bathroom Conditions Before Remodeling By Mid Peninsula Typical Bathroom After Remodel By Mid Peninsula Typical Bathroom After Remodel By Mid Peninsula TYPical Condition 0£ Walls ~4nd ~i ':i~, · DOors Typical Kitchens During Remodel By Mid Peninsula Typical Dining Rooms and Kitchens After Remodel Susie Way Fence Before and After Replacement Revised Willow Gardens Design J) roj)o,~ed J:~Jev;HioIls Comparison Of Existing And Proposed Design For All Units Owned By Mid Peninsula FIRST FLOOR PLAN SECOND FLOOR PLAN Proposed Rehabilitation Budget Scope of Work Garage & Sidewalks Hallways & Interior Stairs Siding, Stucco, Trim & Windows Doors, Windows, Cornices & Decks Sub-Total Construction Contingency, Management & Design Grand Total Estimate Total Estimated Per Unit Cost Interior Rehabilitation Total Cost* interior Per Unit Cost $ 460,000 Estimated Cost $116,420 $ 35,500 $109,300 $148,500 $ 409,720 $145,000 $ 554,720 $ 19,811 (previously completed)* Mid Peninsula proposes to use an existing letter of credit to finance the cnn<tn,eticm ec~t~ and then refinance existing acquisition/rehabilitation loans with a 501(C) (3) bond. The project revenues will then cover the future debt service for the total construction cost of the proposed improvements. Staff Xeport Date: 1~o: From: Subject: April 2 l, 2004 Honorable Mayor and City Council Jim Steele, Director of Finance Options for Raising Revenues AGENDA ITEM 4b RECOMMENDATION: It is recommended that the City Council review the information on taxes and other revenue raising options contained in this report and provide staff with direction at the April 21 study session. BACKGROUND/DISCUSSION: At thc: March 17 study session, the City Council was presented with preliminary information that the Budget Subcornraittee of the City Council (Councilmembers Green and Femekes) had discussed as part of their budget review meetings with staff earlier in March. This staff report contains additional background information on taxes and other revenue raising options that the Council may want to consider given the precarious State budget situation and the cumulative City budget cuts made to date of about $6.9 million over the past three fiscal years. This report is organized as follows: Additional information on raising the Transient Occupancy Tax by $1.00 and/or implementing a new Billboard/Outdoor Advertising Tax; II. Proposition 218 definitions of general vs. special taxes; III. Proposition 218 requirements for timing of tax elections; IV. Summary matrix on tax options/tirmng; V. Other revenue raising options provided for Council's information. I. Additional information on specific taxes Council asked for additional information on raising the Transient Occupancy Tax (TOT) and levying a new tax on outdoor advertising (billboards). Staff Report April 21, 2004 Subject: Options for Raising Revenues Page 2 of 8 A. Transient Occupancy Tax (TOT) increase CmTent Rates: The current TOT rate is 8%. (Unlike the other cities in San Mateo County, South San Francisco has an additional $2.50/room/night tax approved by the voters specifically to support the Conference Center). TOT rates for the other cities in San Mateo County are as follows: TOT Survey -- April 2004 City Rate Belmont Brisbane Burlingame County East Palo Alto Foster City Vlenlo Park Millbrae Pacifica Redwood City San Bruno San Carlos San Ivlateo South San Francisco 10% 10% 10% 10% 12% 8% 10% 10% 10% 10% 10% 10% 10% 8%+$2.50 It is worth noting that with the $2.50 per night conference center tax, South San Francisco's effective TOT rate is ihigher than 8%. Also note that the higher the average room rate is, the less of a difference the $2.50/night tax makes, on the effective TOT rate that a traveler pays. That is, $2.50 provides less of an impact to hotel guests when measured against a room that goes for $120/night than wheat compared against a room that goes for $70/night. The table below gives examples: Effective TOT Tax at Different Room Rates: (includes $2.50/room/night Conference (;enter Tax) At At Room Rate 8.0 % 9..0 % $70.00 11.6% 12.6% $90.00 10.8% 11.8% $100.00 10.5% 11.5% $110.00 10.3% 11.3% $120.00 10.1% 11.1% Staff Report April 21, 2004 Subject: Options for Raising Revenues Page :3 of 8 Revenue Generated There are roughly 3,000 hotel and motel rooms available for rental irt South San Francisco. The most recent 12 months' data for the period March 2003 through February 2004 shows that average occupancy was 60.4%, and the average room rented for $70.48. City TOT (8%) revenue (not counting the $2.50/night tax that goes to the Conference Center) totaled the following for the past 3 fiscal years: 2000-01 2001-02 2002-03 2003-04- (est.) $6.1 million $4.0 million $3.9 million $4.0 million At these revenue levels, a 1% increase in the TOT (from 8 to 9%) would have generated an additional $762,000 in 2000-01 when room and occupancy rates were higher, and an additional $488,000 in 2002-03 and in 2003-04 (projected). B. Billboard/outdoor advertising tax Council asked about the feasibility of' charging companies that rent/lease billboard space. Presumably, the most straightforward way to address this would be to ask voters to amend the City's current Business License Tax to include a new section for a tax on billboard owners/operators. Several cities in California have such a tax (see table below). Some of those cities charge a fiat annual tax, and others charge a percentage of the gross receipts on the advertising rental revenue received. Note that a tax on gross receipts tends to generate more tax revenue potential. If the Council were interested in pursuing this option, it may want to direct staff to draft a measure with the Attorney's Office that specifically focuses on outdoor advertising contained[ on larger billboards, and exclude smaller advertising. Examples that the Council may want to exclude from taxation could be signs for a business specifically at its own prope, rty, or small signs not placed on city streets that advertise local businesses (such as at a little league ball field). While billboard taxes are relatively uncommon in California, below is; information received from other California cities that do have a billboard tax. Note that two of the cities that responded to the survey, Brisbane and Emeryville have relatively higher tax rates than those of the other cities. However, because of the limited number of billboards within their city limits in those two small communities, the revenue that those two cities generate is not significant. Council should be aware that based on feedback from one city that considered revenue measures impacting billboard companies in the past, that the large billboard companies in that city mounted an extensive lobbying effort against efforts; to tax and/or regulate thern, citing freedom of speech argurnents. Staff Report April 21, 20O4 Subject: Options for Raising Revenues Page 4 of 8 Cities in California w/Business License Tax on Billboards City Population Brentwood 38,000 How Char~ed .3% of first $500K in gross receipts, adjusted for amounts over $500K Est. Annual Revenue unknown Brisbane 3,600 8% of gross receipts One operator/ confidential Emeryville 7,550 3.5% of gross receipts $2,500 Morgan Hill 35,000 $10/billboard small Oroville 13,270 $25/year plus $1 O/billboard $425 Oxnard 182,000 $210 per company plus $3.00 per small billboard Santa Monica 91,000 $75/lst $60,000 rev; .3% of revenue small thereafter Tustin 70,000 $50/sign/year small Estimates of annual business license 'taxes that could be received from charging a gross percentage of billboard revenue are shown below. The estimates for South San Francisco range from $8,000-$1.1 million annually, and are meant only to give Council an idea of the possible ranges of revenue, and are very preliminary estimates only. These estimates are based on an informal count of the number of billboards on E1 Camino Real (4 billboards with 7 total faces) and/or visible from the 101 freeway but located in South San Francisco (11 billboards with 19 total :faces). The estimates are also based on informal observations made by the Economic and Community Development as it has been involved in business attraction efforts in South San Francisco over the years. Note that the revenue ranges vary widely, with billboards adjacent to a freeway being much :more expensive to rent. Revenue ranges also vary widely dependent on the strength of the economy. During strong economic times, such as befoi'e the dot corn implosion, billboard advertising sells for a much higher rate than during times with a relatively weak economy, such as now. Annual Business License Tax Revenue estimated at Different Billboard Tax Rates: Tax Rate: 0.5% 1,0% 2.0% 3,0% 5.0% 8.0% Slow Economy $ 8,100 $ 16,200 $ 32,400 $ 48,600 $ 81,000 $ 129,600 High Economy $ 73,440 $ 146,880 $ 293,760 $ 440,640 $ 734,400 $1,175,040 Staff Report April 121, 2004 Subject: Options for Raising Revenues Page 5; of 8 II. Proposition 218 definitions of aeneral 'vs. special taxes Proposition 218 was passed by the Califi>rnia voters in 1996. One of its key provisions was the voter .approval requirement for taxes. The proposition distinguishes 'between what it defines as "general" vs. "special" taxes. Proposition 218 defined a "special tax" as one in which the end use of the tax revenues is dedicated in the ballot measure itself for a specific purpose. A special tax is in contrast to a "general tax", in which the funds can be used for any purpose. For example, a tax specified to be used for parks or for public safety is a special tax, while a tax that does not specify an end use, or is used for general pm-poses only, such as; to help a city balance its budget, is a general tax. Note that the type of tax proposed (TOT tax, business license tax, parcel tax, etc.) does not determine whether the tax is general or special, but rather to what purpose its end use is defined, if at alt. III. Proposition 218 requirements for timing of tax elections Proposition 218 also places specific requirements on when votes for 'taxes can occur. A special tax (requiring 2/3 voter approval) may be timed to appear on any ballot. A general tax (requiring majority voter approval) may only be placed on a ballot to coincide with a City Council election, "except in cases of emergency declared by a unanimous vote of the" C, ity Council." Staff can think of two ways to mitigate the restrictions of the timing of a general tax. First, Proposition 218 does not define an "emergency". If the Council were interested in this option, it might be possible to make findings that an emergency existed due to the deterioration of the City budge, t situation, such as having cut the budget by $10 million over the past three years. A more specific finding might also be made :if the Legislature passes a budget that contains the Governor' s proposed taking away of City property taxes. Second, several entities have used an approach known as the "Measure A/Measure B" approach, namecl after the ballot measures used by Santa Clara County to place a Transportation sales tax before the voters with only majority voter approval. In such an approach, the city may place a non-specific measure on the ballot as a general tax, that is, without specifying the end use of the revenues. That ballot measure would become "Measure A," and would only require majority approval to pass. Accompanying that measure as a separate "Measure B" on the same ballot would be an advisory measure. The advisory measure would state something to the effect that "if new tax revenues become available to the City in the next year, the City should use those funds for" some specific purpose, such as for parks or public safety or libraries. "Measure B" language would have to clearly state on the ballot that it was advisory only, and that it had no legal binding on the City Council if it: were passed. Because Measure B is advisory to the Council only, courts have held that the accompanying ballot measure (Measure A) does not legally specify an end use for the tax revenues, and therefore Measure A has been upheld as a general (non-specific) tax that only requires majority voter approval to pass. Staff Report April 21, 2OO4 Subject: Options for Raising Revenues Page 6 of 8 IV. Summary Matrix of Tax Options Type of Tax General Tax Special Tax Examples TOT increase for any General Fund purpose, with no purpose specified; Parcel tax for any General Fund purpose, with no purpose specified; Business License Tax increase for arty General Fund purpose, with no purpose specified. TOT increase for library improvements; Parcel tax for public safety; Business License Tax increase for park improvements. Vote Requirement 50% approval. 2/3 approval. 'Vote Timing Must be consolidated with a regularly scheduled general election for members of the governing body of the local government, except in cases of emergency declared by a unanimous vote of the governing body. "Emergency" is not defined, but .might be defined as a significant budget shortfall. May be scheduled with any election. V. Other Revenue Raising Options Below are additional revenue raising options for Council's information: Admissions Tax While roughly two dozen cities in California have an admissions tax, it appears that only two charge a tax on movie ticket admissions (Santa Cruz and Indian Wells). Because of the possibility that our current theaters may close and new theaters may open in San Bruno, this option may not result in the possibility of more tax revenue for South San Francisco. B. Parcel Tax Many California cities have assessed a Parcel Tax, in which a fiat amount is charged on the property tax bill. Several rate, s are typically charged, such as different rates for single family, multi--family, retail, office, and industrial parcels. While this tax has the potential to raise significant revenue, it would impact all property owners. Staff Report April 21, 2004 Subject: Options for Raising Revenues Page 7 of 8 Do Utility Users' Tax Many Califonnia cities have a Utility Users' Tax, which is collected by utility, water, and phone compaJ~ies as a percentage o~~ each utility user's consumption. This option bas the potential to raise significant revenue, but it would impact all residents and businesses. Sales Tax A few cities have gone to the voters to ask for a .25% sales tax increases. A .25% sales tax increase (from 8.25% to 8.5%) would impact all residents and would put South San Francisco's tax rate higher than surrounding cities, but would generate roughly $3.0 million annually. Increase in Business License Tax South San Francisco's Business License Tax is relatively low compared to other cities, because in rnost cases it is linked to the number of employees rather than to that companies' gross receipts. It therefore does not increase over time unless a business expands to add employees. A low business license tax is advantageous in attracting new businesses, however. If the Council considers raising the business license tax for billboards, it may want to also consider at the very least placing additional language in the municipal code that allows the Council to raise the tax by an amount not to exceed the inflation rate each year. In that way, the Business License Tax would rise annually with inflation. Fee for sidewalk replacement service Some cities have adopted an ordinance that makes homeowners and businesses responsible for sidewalk repairs/replacement in front of their property, either by requiring the property owner to fix the sidewalk, or by charging them the city's cost of the repair. South San Francisco spends roughly $250,000 annually on sidewalk repairs. Because such a charge is a fee, not a tax, it would not require voter approval. Fee for street sweeping services Some cities charge for street sweeping services on the garbage b/II. Under Proposition 218, fee increases for garbage sel-vices are exempted from public vote requirements. If the City Council believed that street sweeping was legitimately a part of garbage services, presumably because street sweeping is another part of solid waste removal services, it could consider instituting a fee without voter approval. The City spends roughly $500,000 annually on street sweeping. While the City does not bill directly for garbage services, staff could look into either discussing this poss:ibility with the South San Francisco Scavenger Company, or, alternatively, including the fee on the property tax bill in a similar way that sewer charges are levied now. Fee for 911 Service Some cities charge a 911-response fee on the phone bill, for access to the 911 emergency response system. As a fee for service, it would not require a vote of the public. Vehicle impact fee or increase to business license tax for companies with large trucks. Some cities charge either a tax or an impact fee on trucks. Two possibilities include: Staff Report April 21, 2004 Subject: Options for Raising Revenues Page 8 of 8 1) 2) An increase to the Business License Tax for compzmies located in South San Francisco that have trucks in their fleets. Our current tax charges $75 per vehicle only to companies in the "transportation" business. An expansion of the tax to all trucks owned by a comp~my located in South San Francisco would require voter approval. Some cities have assessed a truck impact fee to pay fbr the cost of street repairs and maintenance associated with the wear and tear that trucks generate. If such a fee is calculated based on a nexus study that links trucks with the cost of maintaining city streets, and if the fee is used to finance street maintenance, then require voter approval. Three ways to collect such a fee would the fee does not be: a) b) c) Through the business license process for South San Francisco businesses; A more limited approach of only assessing the fee on garbage trucks, which the Scavenger Compzmy would end up passing along to South San Francisco ratepaye,~rs. Through the building permit process, and applied to construction trucks belonging to out of town companies that work on large construction projects in South San Francisco. Prepared by: i~m Steel~e Finance Director Approved by: / '7---~ - Michael A. ~;ilsbn City Manager