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City Council Hikes Parking Fines, Contemplates Tax Measures

Bob Kronovetrealty
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Santa Monica

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By Jorge Casuso

February 27, 2020 -- The City Council on Tuesday voted to hike the cost of parking fines and consider new tax measures in an effort to close a $2 million budget shortfall that is expected to grow.

The shortfall is largely due to a projected $5.4 million decrease in hotel bed taxes, which could be further impacted by "recent travel restrictions due to the novel coronavirus epidemic," according to staff.

Also contributing to the economic slowdown is the ongoing shift in customers away from shopping in retail stores or using landline telephones, and the increased use by visitors of ride share services that reduce parking usage, staff said.

“The accelerated downward trend of revenue streams that our community relies upon and the eventual slowing of the national economy, require us to take additional budget restructuring measures to avoid budget shortfalls this year with more to come,” said Finance Director Gigi Decavalles-Hughes.

The new parking citation fines will result in an increase of $10 for most types of citations, bringing them on par with those in the City of Los Angeles, staff said.

The cost of parking meter violations and beach parking violations will rise from $53 to $63 and street cleaning violations will go up from $64 to $73 under the new rates.

Fines for disobeying posted signs or parking in preferential parking zones without a valid permit will rise from $64 to $68.

The decrease in revenues from parking citations and fees are due to the rise of ridesharing services and "micromobity devices," such as e-scooters and e-bikes, and the arrival of the Metro Expo line in 2015, finance officials said.

"The number of parking transactions as well as how long visitors stay in the Downtown parking structures and lots have continued to decrease over the last few years," staff wrote in its report.

The emerging mobility trends "may require future parking rate adjustments to mitigate any potential ongoing revenue declines throughout the forecast period," staff said.

The Council also directed staff to begin researching various "potential tax revenue measures" that could be placed on the November ballot.

They include increasing the City's taxes on hotel rooms, parking fees, real estate transfers and residential rental properties with 4 or more units that gross more than $1 million a year.

Staff also will look at a comprehensive Business License Tax Modernization "to better reflect today’s business sectors, broaden the tax base, and foster an equitable and effective taxing system."

In addition, staff will analyze a new tax on long-term vacancies "that would incentivize property owners to return empty or under-utilized property to productive uses in a reasonable time frame."

The potential taxes come as finance officials warn the City's overall economy is slowing.

Forecasts show taxable sales will be "relatively flat" over the next two fiscal years as retail activity shifts from brick and mortar businesses to on-line businesses, auto sales soften and the overall economy slows.

Hotel bed taxes -- which increased at an average rate of 9 percent between 2011 and 2018 -- are also flattening as the tourism industry "is showing signs of weakness," staff said.

While the recent addition of 271 new hotel rooms is helping offset the declines, finance officials expect bed taxes to remain "relatively flat" over the next two fiscal years.

Business taxes are also expected to follow the same downward trend as sales and bed taxes, with several large taxpayers leaving the city, staff said.

Recent hikes in water and wastewater rates are expected to boost utility user tax revenues, offseting declining revenues from telecommmunications services, staff said ("City Council Doubles Water Rates," January 30, 2020).

Still, finance officials warn that belt-tightening measures at City Hall, hikes in fines and fees and potential taxes may not be enough.

"Despite these measures, it is clear that we can no longer stay the course with how we do business and that additional restructuring, reduction and realignment of our operations will be necessary to achieve balanced budgets in the future," staff wrote.

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