While much of the focus has been on the soda tax, the council on a 3-2 vote moved to go forward with consideration of both a parcel tax and transient occupancy tax (TOT) increase, in addition to asking staff for more information on a potential soda tax.
On the other hand, the council’s vote effectively killed the potential utility user tax (UUT).
Staff analysis on the TOT, which would largely be a tax on people from outside of the area, showed that Davis has about a 10 percent tax at the moment, but other communities have between an 11 and 14 percent tax.
According to staff, “Each one-percent increase in the TOT currently amounts to approximately $130,000, and with the addition of new hotel rooms and a conference center in the future could increase in the future.”
Councilmember Brett Lee was among the councilmembers voting in the majority on Tuesday. He has been outspoken against the UUT and spoke with the Vanguard on Thursday to provide clarity on his views.
Councilmember Lee acknowledged, “Yes, there is a shortfall of revenue.” However, he wants to know more about what the revenue potential is for the innovation parks. For instance, he believes the $2 million in projected revenue at MRIC (Mace Ranch Innovation Center) “seems too low.” He said, “That seems like a drop in the bucket. I’d like to better understand how conservative of a number that is.”
He noted that in the past there were discussions about a square footage assessment. He said, “I’d like to know the feasibility of such a thing because the way the innovation parks were sold to use during (Former City Manager Steve) Pinkerton’s time is that these were going to be a big source of revenue to the city.” Based on that, he said, “I’m not going to just take as a given, it’s just two million and the developer cries poor and it can’t be any higher than that.”
When the $2 million number came out, Councilmember Lee called it “a big letdown.”
“Two hundred acres in play with the associated risks involved, when I can go and the city council can approve a hotel on two acres and get $500,000 a year pretty much guaranteed,” he said. “What’s wrong with this picture?” He said, “I need to know more about that.”
Still, he stated that “our infrastructure needs are huge.”
On taxes in general, Brett Lee acknowledged, “One of the problems of Davis is that it’s an expensive place to live.” Given that, one of his goals is to keep Davis more affordable.
What he said is appealing to him about the soda tax is “if you don’t want to pay it – you don’t have to. Don’t buy soda or buy your soda elsewhere. In effect, it’s something that people can avoid.”
Councilmember Lee said that, had the city gone in the direction of the UUT, he would have been more in favor of taxing cable and other more discretionary costs. He noted that people can choose whether or not to get the premium $200 cable package, he said, “if you have that sort of money, then paying a percent on that, I’m not too troubled by it. If you’re getting basic cable paying $30 a month, 3 percent on that is essentially 50 cents, it’s a very small fee. Something like that wouldn’t make Davis less affordable.”
On the other hand, he noted that people “do not have the ability to not have electricity, they do not have the ability to not use water, they don’t have the ability to not pay sewer fees.” He said, “So those fees were problematic. I was hoping to have the ability to have a tax that ideally was more discretionary.”
He said he was intrigued by the soda tax, but needed more information on what the small business exemption is. He noted that many small business owners “are worried that the soda tax is going to kill their business.” However, he said, “there’s a small business exemption that is designed to minimize impacts on businesses like that.”
He hopes to get answers from staff or the soda tax proponents as to how it works in Berkeley. “Once I get those answers I’ll be able to better sense whether I’m supportive of a soda tax,” he said.
Staff has also looked into a potential parcel tax that could be targeted to address “infrastructure needs for streets and roads; recreation amenity needs like repairs and/or enhancements to existing pools; irrigation expenditures in the parks; road and bike path maintenance and rehabilitation; or other potential enhancements to the community.”
One idea that has been floated is a $50 parcel tax that staff projects would yield about $1.4 million which, on top of the current $4 million budgeted for roads, could get the city closer to projected $6 to $7 million per year revised roads needs.
Staff recently downwardly revised the projected inflation from 8 percent down to 4 or 5 percent, which reduced the projected roads needs downwards from $10 million a year. On Tuesday, council expressed the hope that state roads money would eventually become available.
These issues will presumably come back to council prior to their need to act on them in February.
—David M. Greenwald reporting
Transient occupancy tax, please.
Agree, make the out of towners help pay for our roads. That tax has never stopped me from renting a room when on vacation. I feel it’s just part of the cost of traveling.
I tend to agree with your logic BP, but have another question regarding a TOT. Kelly Stachowicz told Council that each 1% of TOT produces approximately $130,000 of revenue for the City. Given that, “Why are we considering only a rise from 10% to either 11% or 12%?”
That small an increase means only $130,000 to $260,000 of added revenue per year. Given the fact that putting a tax measure on the ballot isn’t free (estimates I have heard over the yearsnaverage about $130,000, some significantly higher and others somewhat lower), year one of the TOT at 11% or 12% will produce very little net revenue to the City. Wouldn’t a rise from 10% to 15%, or even 20%, be more fiscally meaningful for the City Budget?
Here are some TOT rates nationwide: http://www.consumerreports.org/cro/news/2014/06/booking-a-hotel-these-cities-have-the-highest-hotel-taxes/index.htm
Thanks Don. That is very interesting.
JF: “Transient occupancy tax, please”
Rimshot
http://www.urbandictionary.com/define.php?term=Rimshot
http://www.youtube.com/watch?v=cB2diSL2sa4
Matt: Look at Jim’s post. Find David’s typo in the quoted text and then recall Jim’s occupation. Gave me a chuckle, though he shouldn’t quit his day job.
Are you saying that Jim’s surveys aren’t a slam dunk?
Jim
“Transient occupancy tax, please.”
I tend to agree. However, in all fairness, I think that we need ( and the CC will surely receive ) the input of the local hotel owners before arriving at a firm conclusion. Those likely to be most affected should always be consulted before instituting a major change. This is supposed to be the way things are handled in Davis, isn’t it ?
So are you also advocating that soda drinkers should be a major part of the soda tax conversation.
why wouldn’t they? btw, why do we have to have a conversation before a vote? a vote means everyone gets to have their say?
Actually, I wasn’t advocating for the TOT — though I think there’s probably some room to increase it — I was just pointing out the typo.
Which begs the question: is there a more efficient method of alerting the editors about typos? Should I email David? Or should I just ignore the goofs (which is hard for some of us to do)?
Tax on transits, next thing they’ll want to tax levels and compasses.
Funny.
BP
“So are you also advocating that soda drinkers should be a major part of the soda tax conversation.”
Absolutely !
That is exactly what I am advocating. I have been very clear on my position. I believe that the citizens of this community should have the opportunity to vote on this issue. That would obviously include both soda drinkers and non soda drinkers. My only ask is that the CC put this on the ballot and let the voters decide.
Rather than focusing on which taxes to raise, perhaps the City Council should be looking at how to cut expenses? They could start by looking at city salaries, benefits, and overtime pay.
I agree, we don’t need some of our firefighters being some of the highest paid public employees in the region.
we need taxes for the roads, there is no amount of expenses we are going to cut that will pay for the roads.
We need a comprehensive solution that incorporates higher taxes, lower expenses and revenue growth through economic development. So far the CC has raised taxes, increased expenses and dropped the ball on economic development.
We cannot tax our way out of this problem. especially when the track record for this CC and CM is to use any new tax money to create new expenses, rather than funding the backlog of old ones.
i agree with a lot of your points here. i generally favor a tax for roads, i generally opposed the mou and the lack of an overall plan. i think part of the time crunch the cm is whining about in the other article is due to the lack of work by the city with regards to getting revenues measures ready to go. why is that?
Agreed DP, which is another reason to wonderwhy such a small increase in the TOT was proposed by Lucas. As I noted above, Kelly Stachowicz told Council that each 1% of TOT produces approximately $130,000 of revenue for the City. That small an increase means only $130,000 to $260,000 of added revenue per year at the level proposed by Lucas. Wouldn’t a rise in the TOT from 10% to 15%, or even 20%, be more fiscally meaningful for road repairs and maintenance?