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Council Poised to Place Two Tax Measures on Ballot


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By Jorge Casuso

July 9, 2024 -- Two years after Santa Monica voters approved three tax measures in 2022, the City Council is expected to place two more on the November ballot to generate additional revenues for the cash-strapped City.

At its meeting June 25, the Council unanimously voted to move ahead with a measure to modernize the business license tax that would generate approximately $3.9 million in its third year by removing auto dealer tax exemptions and raising the corporate headquarters rate.

In addition, at its meeting this Tuesday, the Council is expected to reconsider a Parking Facility Tax it rejected at its meeting last month that would generate approximately $6.7 million a year to enhance public safety.

"While Santa Monica’s economy continues to recover, the City also continues to navigate various challenges," City finance officials wrote in a report to the Council.

The challenges range from "economic uncertainty resulting from inflation and high interest rates, increased costs, the need to address deferred infrastructure and equipment maintenance, and contingent liabilities," staff wrote.

"This has hindered the City’s ability to expand services to levels that meet the community’s needs and expectations."

The changes to the City's 1990 business license tax ordinance would "improve tax equity and fairness, exempting small businesses from the tax (and) decreasing tax rates for most retailers and restaurants," according to the draft ballot language.

The proposed measure increases the Small Business Tax Exemption threshold from $40,000 to $100,000 and reduces the penalty schedule from 100 percent to 50 percent.

The measure also reduces the tax rate for retailers and restaurants that gross less than $5 million and the rate for residential buildings with less than four rental units.

Those changes would lead to a revenue loss of as much as $1.54 million, according to calculations by the City's Finance Department.

That would be easily offset by revenues totaling as much as $5.25 million from increased taxes on auto dealers and companies with headquarters or administrative offices in Santa Monica.

Under the proposed measure, auto dealers would pay business license tax on their total gross receipts at a rate of $1.25 per $1,000 for sales and $3 per $1,000 for the auto repair operations with no maximum tax.

The measure also would double the tax rate for companies with corporate/administrative headquarters in the city from $1.25 to $2.50 per $1,000. It also would charge a processing fee of about $40 to process business licenses.

The revenues generated would be used "to fund essential city services such as 911 emergency response, public safety, and addressing homelessness," according to the draft ballot language.

A poll of 439 randomly selected Santa Monica voters found 58 percent would vote for the measure, which requires a simple majority for approval.

The Council could add an additional boost to the City's public safety initiatives by reviving the Parking Facility Tax rejected by the Council on June 25.

The tax -- which would increase the rate by 8 percent for non-City owned parking lots and structures -- is expected to generate $6.7 million a year.

It was rejected on two weeks ago by the Council's Change majority, with one of the fout votes cast by Councilmember Lana Negrete, who placed the item to reconsider the tax on Tuesday's agenda.

If the measures are approved by voters in November, the changes would go into effect on January 1.

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