TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Steve S. Charelian, Finance Director
Libby Bretthauer, Financial Services Manager
SUBJECT:Title
Consideration of Second Reading and Adoption of Ordinance No. 23-0007 Amending Section 8.20.020 of the Manhattan Beach Municipal Code to Increase the Rate of the City’s Transient Occupancy Tax to 14% in Accordance with Measure A (Finance Director Charelian).
ADOPT ORDINANCE NO. 23-0007
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council adopt Ordinance No. 23-0007 amending Section 8.20.020 of the Manhattan Beach Municipal Code to increase the rate of the City’s Transient Occupancy Tax (TOT) to 14% in accordance with Measure A, adopted by the Manhattan Beach electorate in 2019.
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FISCAL IMPLICATIONS:
Staff anticipates that increasing the City’s TOT rate from 12% to 14% will result in approximately $1.25 million in annual revenues within the General Fund, the fund that primarily supports the City’s public safety and general government activities. If the Council adopts Ordinance No. 23-0007, this rate change would take effect on July 1, 2023.
BACKGROUND:
On March 5, 2019, the Manhattan Beach voters approved Measure A at the City’s 2019 General Municipal Election. Measure A authorized the City Council to increase the City’s TOT rate by up to 4% to fund essential City services including police patrols and crime prevention; fire and paramedic emergency response; and other general City services. On March 21, 2023, the City Council introduced Ordinance No. 23-0007.
DISCUSSION:
As authorized by the voters in Measure A, City Council approved a 2% TOT increase and scheduled the implementation to take effect on May 1, 2020. However, in response to the COVID-19 pandemic, City Council deferred the escalation of the City’s TOT rate from 10% to 12% until July 1, 2020. Based on the voter-authorized parameters written into Measure A, City Council has the option to raise the TOT rate up to 14% after May 1, 2022.
Staff periodically monitors the TOT rates amongst various comparable cities in the greater Los Angeles area and current rates range from 12% to 15%. Similar to its coastal neighbors of El Segundo and Redondo Beach, the City’s current TOT rate is set at 12%. Many other area cities have higher TOT rates including Hermosa Beach (14%), Santa Monica (14%), Beverly Hills (14%), Culver City (14%) and Malibu (15%).
Raising the City’s TOT rate to 14% would allow the City to substantially offset the cost of recent public safety enhancements and align the City's TOT rate with other nearby cities. Staff estimates that this increase could generate an estimated $1.25 million annually in General Fund revenues to help offset costs associated with adding public safety positions.
Other cities that recently had a voter approved TOT increase made the effective date of the increase within two to three months. If the City Council adopts Ordinance No. 23-0007, the rate increase in Manhattan Beach would take effect July 1, 2023.
PUBLIC OUTREACH:
Staff informed all area hotels and short-term rental operators of the City Council agenda item considering the TOT increase prior to its presentation on February 21, 2023. Additional notifications were sent in March notifying hotel and short-term rental operators of the Ordinance reading dates.
ENVIRONMENTAL REVIEW:
The City has reviewed the adoption of the Ordinance for compliance with the California Environmental Quality Act (CEQA) and has determined that there is no possibility that the activity may have a significant effect on the environment; therefore, adoption of the Ordinance is not a project under CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW:
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENT:
1. Ordinance No. 23-0007