PURPOSE:

The purpose of this report is to request the City Council to consider placing a measure on the April 12, 2005 General Election ballot that would ask the voters of Burbank to approve an increase in the City�s Transient Occupancy Tax (TOT) rate from 10 percent to 12 percent.

BACKGROUND:

The TOT, otherwise known as a �bed tax,� currently is a 10 percent tax applied to the cost of occupying a room in a hotel, inn, motel, tourist home, or other lodging facility (hereinafter referred to as �facility operators�) within the City�s limits.  It does not apply to persons who use the facility as their residence, or stay in the facility for a calendar month (or 30 consecutive days) or more.

There are currently 16 facility operators in Burbank who remit TOT to the City, totaling $3.5 million in FY 2002-03, $4.2 million in FY 2003-04, and estimated at $4.2 in FY 2004-05.

As of Fiscal Year (FY) 2003-04, the TOT represents approximately 3.7 percent of the City�s General Fund Revenue.  It was initially adopted in 1964 at a rate of 4 percent, and eventually increased over the years to 10 percent in 1983.  It has remained at 10 percent for over 20 years.

Burbank�s history of the TOT follows:

• Ordinance 1930, adopted 7/14/64.  4 percent.

• Ordinance 2083, adopted 11/7/67 (effective 1/1/68).  5 percent.

• Ordinance 2644, effective 1/1/78.  6 percent.

• Ordinance 2926, adopted 10/11/83 (effective 11/14/83).  Changed wording of how much tax to pay by referring to the Burbank Fee Resolution.

• Resolution 20,730, adopted 9/20/83.  10 percent.

• Ordinance 3058, effective 2/21/87.  Changed code section to 14-603.

Since the TOT is paid primarily by non-residents who also use City services including public safety, public transportation, and streets, it is only equitable that they should also contribute to fund these services.  Thus, the TOT allowed the City to raise additional revenue necessary to accommodate this increased demand by taxing the actual recipients of the services.

Not only was the TOT a viable way to have non-residents pay a share of City services they receive while visiting Burbank, it was also implemented due to the fact that the City was projected to continue experiencing recurring budget deficit.  To be in a position to continue providing the citizens of Burbank with the exceptional programs/services they have grown to expect and deserve, the City needed to find creative ways to increase revenues to address the shortfall to avoid any cuts in services.

The TOT is a general tax with the revenues collected placed in the City�s General Fund to be allocated to various General Fund expenditures including Police and Fire services.  As with all General Fund revenues, the City Council has full appropriation discretion and authority over how the TOT proceeds are expended.

ANALYSIS:

Since Burbank is contemplating putting the approval of the increase of the TOT from 10 percent to 12 percent before the voters, cities with TOT�s were surveyed for comparison purposes.  This survey information was helpful in establishing the most appropriate and reasonable tax in Burbank.  A focus of this survey was comparison cities as well as California cities surrounding airports similar to the Bob Hope airport.

The following are May/August 2004 survey results:

*�Comparison� cities are those cities Burbank uses routinely as benchmarks for various comparisons (salary, tax rates, etc.) due to their similar demographics, size, and so on.

The overall average TOT rate is 11.1 percent, and our comparison cities average 11.6 percent.  Fourteen, or over half, of the twenty-three cities surveyed charge more than 10 percent.  Clearly, Burbank is well below the survey California cities� average.  It should also be noted that the City of Santa Monica has put a measure on the November general election ballot asking voters to raise the TOT from 12 percent to 14 percent.

*comparison Cities

CONCLUSION:

Burbank�s TOT has been in place since 1964 with no increase since 1983.  Burbank is below average in all regional categories for California cities.

Although it would not be totally logical to use the Consumer Price Index (CPI) as a potential gauge for a representative cost of the TOT today, it is still relevant to ascertain the inflationary costs that have occurred since 1983, particularly since one of the reasons the TOT was implemented was to enhance the City�s revenue stream to address rising expenses.  From 1983 to 2003, the CPI has increased 84.7 percent and Burbank�s costs have certainly kept pace with this inflation.  Again, the CPI is not the best measure since the TOT is a percentage-applied tax and not a flat tax, but it does offer some perspective.

Taking all factors into account, it is certainly reasonable for the Council to consider increasing Burbank�s TOT to 12 percent.  Every � percent increase in the TOT equates to approximately $210,000 in additional revenue to the City (based on the 2003-04 projected Fiscal Year revenue).  If the TOT were increased to 12 percent, this equates to over $800,000 in incremental revenue to Burbank.  With this and the next few years being challenging budget years for the City, the State of California, and the Federal government, an increase in the TOT would certainly help Burbank to maintain existing services and programs.  The increase of the TOT has been identified as an item in the City�s Long Range Budget Balancing Plan as a potential way to increase City revenue.

RECOMMENDATION:

It is recommended that the City Council consider directing staff to prepare an ordinance for Council approval that would place a measure on the April 2005 General Election that would ask the Burbank voters to approve an increase in the Transient Occupancy Tax from 10 percent to 12 percent.

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