Council hears revenue ideas from city budget committee
The Claremont city council heard about ways to increase revenues during Tuesday evening’s meeting.
The city is current facing shortfalls of $1 million for the 2019-2020 fiscal year and $1.8 million for the 2021-2022 fiscal year. The deficits include PERS, insurance and contractual increases for maintenance and landscaping services.
The Future Financial Opportunities Committee (FFOC), which was created by then-Mayor Opanyi Nasiali in 2018 to look for ways to address the city’s structural financial deficits over the next few years.
The nine-person FFOC met 10 times between September 2018 and March 2019.
FFOC spokesperson Amanda Sabicer said the committee came up with a three-tiered presentation on different ways to make money—immediate recommendations, future recommendations and ideas that are not recommended for the city.
Immediate recommendations include a sales tax increase, regulating short-term rentals (such as AirBnbs) and creating a purchasing corporation in town.
Ms. Sabicer noted a tax increase was a surprising conclusion for the politically diverse committee.
“Nobody on the first day expected this to be our top recommendation, because nobody likes taxes, especially in California where we feel like we’re bleeding,” she said.
The reasoning was two-fold—a sales tax increase of three quarters of a cent would yield an additional $2.5 million in general fund revenue per year. Claremont’s current sales tax rate is 9.5 percent.
Another reason was beating the county to the punch. Ms. Sabicer explained that Los Angeles County, the South Coast Air Quality Management District (AQMD) and other regional entities were also exploring a countywide sales tax increase for the November 2020 ballot to pay for services. If the city were to pass a sales tax increase before the county, they wouldn’t be taxed for county services.
“If we’re going to be taxed, let’s keep it local,” Ms. Sabicer said.
A sales tax increase would only require a majority approval—that is, 50 percent or more—to pass. Mayor Corey Calaycay noted that nearby Glendora recently approved a sales tax increase this past March.
“Glendora’s not a liberal community, it’s a very conservative community, and they voted for it,” Mr. Calaycay said.
During public comment, Claremont Colleges student Jake Kessler said the AQMD is looking to put a sales tax increase on the ballot in November 2020 for pollution reduction initiatives, so the idea of putting city sales tax before the region “is a bit selfish in a lot of ways.”
“I understand that you are all responsible to your constituents, however you guys would technically benefit from this ballot initiative if it passed,” Mr. Kessler said. “Even if you decide to pass the sales tax and that kind of initiative was passed, you would still benefit even if you wouldn’t put money towards it.”
Mr. Calaycay responded the county does not always have outer suburbs like Claremont in mind when it passes regional sales tax increases. An example is Measure H, a half-cent sales tax increase the city voted for, but is still working with the county to get their fair share, he said.
This was the rationale used in Glendora, he added. “Better to keep it in their local community, than to have it go regionally and not get their fair share of the money,” he said.
Another immediate recommendation was regulating short-term rentals such as Airbnbs and VRBOs. Currently, Claremont doesn’t allow short-term rentals for fewer than 30 days in the city, though Ms. Sabicer noted there are anywhere between 50-100 of them currently in operation.
The city could regulate these by having owners apply for business licenses and permit fees, as well as transit occupancy taxes charged to the renter. Not only would the city benefit financially, but it would also lead to more transparency with regard to Airbnbs, and it would give Claremont visitors more legitimate lodging options.
Councilmember Jed Leano asked City Manager Tara Schultz how much money could be made from the regulations. Ms. Schultz explained the numbers were unknown, and it all depends on how many Airbnbs are out there and how much they charge per night.
“So it’s very difficult to estimate what the revenue is, and until we actually have a program in place, we don’t know what that offset is either,” she said.
Karen Rosenthal said during public comment that regulating AirBnbs could be extremely useful to the city. Some neighborhoods are already impacted by noise, parking issues and lights associated with these rentals, and “devising regulations and developing a program that would oversee them might be a significant source,” she said.
Another option would be encouraging large developers to create a “purchasing corporation” in Claremont. Under a purchasing corporation, the developer registers as a “point of sale” in the city, as a way to allocate sales tax revenue for the equipment they purchase for the project to the city. The impact to the developers would be minimal, the report stated, since they must pay a sales tax on purchases anyway.
Mr. Calaycay thought a good opportunity for that to happen would be with the upcoming Village South project.
A fourth immediate recommendation is a “per student fee,” where the city could enter into an agreement with the Claremont Colleges where the Colleges would collect a fee from students and transfer it to the city. The report acknowledges the fees are “not enforceable,” and the city has no means to compel the Colleges to enter into such an agreement, but said that such an agreement would “yield a sense of buy-in and collaboration with the broader community.”
The committee also presented “future recommendations”—recommendations that the city can implement at a later date. They included increases to the utility users tax and transit occupancy tax.
One of those future recommendations was the paid parking program, which was overwhelmingly shot down by the community late last year.
Ms. Sabicer acknowledged the community’s negative response to paid parking, but said the committee liked the proposal, which could generate up to $3.3 million annually for the city, part of which would be used to fund Village projects.
“So we actually put it back up for conversation for the future, when we’re ready for it,” she said. “We still think that there’s really an opportunity to come back and have this conversation again.”
The council was not required to make a decision that evening, only to receive and file the FFOC’s report. The council thanked the committee for their hard work and seemed open to exploring the immediate recommendations.
Ms. Schultz noted that if the city were to pursue a sales tax increase, it would first have to declare a financial emergency and then take steps to put the ballot measure in place by July.
Councilmember Ed Reece said if the city were to pursue a sales tax initiative, he wanted to make sure that, “We do not find ourselves ever stopping to be efficient and effective as possible with the dollars that we have.”
The next council meeting will take place on April 23.