PURPOSE:

The purpose of this report is to request the City Council to consider a public hearing to increase the City�s Transient Parking Tax (�TPT�) from 10% to 12%.

BACKGROUND:

On December 12, 1995, the City Council approved an ordinance that authorized the collection of a TPT.  This tax, set at 10%, has been collected by the City since February 1, 1995.  The Council then decided to place the Tax on the ballot for voters to approve due to Proposition 218 (which requires that any general tax imposed after January 1, 1995, be approved by a majority of the voters) in late 1996.  The voters approved the TPT by 61% in the April 8, 1997 election.

On October 15, 2002, staff presented a report requesting the Council to consider increasing the TPT from 10%.  Council directed that staff return with additional information to determine the appropriate tax increase to be placed on the April 2003 ballot.  This information was provided to Council by staff on December 17, 2002 wherein Council approved that the measure to increase the tax from 10% to 12% be placed on the April 8, 2003 ballot (see Exhibit A).  It was subsequently approved by the voters, but still required Council approval.

The City held its Public Hearing on June 10, 2003 to receive public input on its Fiscal Year (FY) 2003-04 Proposed Budget and Citywide Fee Schedule, which included a proposal to increase the TPT to 12%.  The Council voted 4-1 against raising the TPT at that time and directed staff to use the BWP Set-Aside Fund to cover the budget shortfall and to bring the matter back for discussion at the budget mid-year review (see Exhibit B).

ANALYSIS:

As presented in the First Quarter Financial Status Report for Fiscal Year 2003-04 on November 18, 2003, the City�s Five Year Forecast currently shows an increasing budget gap between recurring revenue and expenditures, culminating in a deficit of approximately $8.5 million in 2007-08.  At this meeting, Council Member Golonski requested this TPT issue be brought back.  This report serves as the first step in a one-step, two-step process to consider whether or not to proceed with another public hearing to increase the tax.

The TPT has been stable source of General Fund revenue, representing approximately 1.5% of recurring revenue.  It is a flat tax (i.e., not regressive), is easy to collect and is remitted quarterly by the parking owners/operators.  Based on FY 2000-01 TPT receipts, if the tax rate is increased to 12%, it will bring in nearly $400,000 annually in incremental revenue to the City ($373,606).

At the first public hearing on this issue, it was Council�s overall concern as to how this increase would affect the parking lot owner/operators in Burbank.  The following chart illustrates the average annual increase to owner/operators based on their annual revenue:

For example, those operators whose annual revenue is between $20,000 and $30,000, the average annual increase is $424 (or approximately $35 per month).  For operators generating revenues between $150,000 and $200,000, the average incremental increase is $4,000 per year (or $334 per month).  The operators falling in the top revenue category of over $1 million annually include the airport parking lots whose combined revenue for FY 2000-01 was nearly $6 million (see Exhibit C for additional detail).  It should be noted that Burbank airline passengers levels are up 9% for First Quarter 2003-04 versus First Quarter 2002-03.

Additionally, the owner/operators would not be forced to absorb the increase of the TPT.  They have the option of passing along all or part of the 2% tax increase to the customer.  For example, if the operator rate is $4.55 per day (wherein the customer actually pays $5.00 including the current 10% tax), the amount a customer would pay increases $.10, to $5.10 per day.  At the rate of $7.00 per day (with the customer paying $7.70 including the 10% tax), the increase to the customer would only be $.14 per day.  Staff is aware of the �parking wars� at the airport, but the owner/operators, not the City, need to decide as to how to handle that situation whether the tax is increased or not.

CONCLUSION:

The voters approved the ability of the City Council to increase the TPT, a Public Hearing was held in June 2003, and Council requested to revisit the issue at mid-year 2003-2004.  The benefit to the City of the 2% increase would boost its annual recurring revenues in the amount of approximately $400,000 and assist in balancing its budget shortfalls for the upcoming years.

RECOMMENDATION:

It is staff�s recommendation that the Council consider holding another public hearing on increasing the Transient Parking Tax from 10% to 12%.

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