In July 2017, John Thomas presented a 17-page report to the city with suggestions to help offset unreimbursed expenses the city incurs because of tourists. His report was done in conjunction with two UCI professors and Jim Danziger. This report to the city council lays bare the huge unreimbursed costs to Laguna residents due to the 6.2 million tourists the city accommodates annually.
The city spends an additional $20-30 million annually to cover the difference between city costs and revenue generated by tourists. Laguna taxpayers pay about $2,000 per household to cover the shortfall.
Thomas suggested 16 ways the city can implement changes to cover costs of providing for tourist revenue shortfall.
Parking: Consider increasing parking rates, additional metered spaces and eventually adopt a totally automated parking system. Parking revenue attributed to visitors in 2016 was $3,398,000. A well-executed plan should increase revenue by another $2-3 million dollars.
Trolleys: The city has about 900,000 boardings for summer and weekend trolleys. A charge of $2 per passenger would yield $1.8 million.
Festival Tax: Pageant attendance is 180,000 per year, $10 added to ticket prices would generate $1.8 million. Ticket prices for Art-A-Fair and the Sawdust festival could also be increased.
Broaden the Transient Occupancy Tax: Currently the city taxes only lodging. This generates $10.6 million. If broadened to include all the other hotel expenses such as bar, restaurant and spa, this could generate an additional $9 million. Remember, tourists don’t vote in Laguna.
Business License Fees: Many Laguna businesses, restaurants and bars are owned by non-residents. About 70 percent of downtown commercial space is owned by people who do not live here. Laguna businesses contribute little to the city government budget yet demand a disproportionate allocation of city services. Raise business fees.
Gross Receipts Tax: This approach is being used by other tourist destinations. Beverly Hills collects $45 million in gross receipts taxes.
Other potential sources of revenue included: Business Improvement District/Tourism BID for restaurants and bars, restaurant/bar license fees, local sales tax increase, Community Service District, city business income tax, CUP/AUP annual fees, increased utility taxes for increased wastewater—water used because of tourists.
The city commissioned John’s report but has taken no action. The Council seems unable or unwilling to put in place any of the suggested changes.
There are two hot-button issues here: 1. How to get tourists to pay their way. And 2. How, over time, to reduce the head count of municipal employees, particularly public safety personnel, with attendant salaries and unfunded pension liability.
Perhaps the city will post the report on their website. The city needs the money and the taxpayer shouldn’t be on the hook for it.
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