A COMPARATIVE ANALYSIS OF CALIFORNIA S LARGEST CITIES. May San Diego. Center on Policy Initiatives. Sacramento. Oakland San Jose.

Transcription

1 Sacramento San Francisco Oakland Fresno Long Beach Anaheim Santa Ana A COMPARATIVE ANALYSIS OF CALIFORNIA S LARGEST CITIES May 2010 Center on Policy Initiatives

2 Table of Contents The Center on Policy Initiatives Executive Summary 01 Revenues 02 Transient Occupancy Tax 06 Business License Tax 08 Utility Taxes 10 Trash Collection Fees 11 Summary of IBA Residents Opinions on City Services Survey 12

3 Executive Summary The recession has impacted every local government in the state of California, with steep declines in property tax revenue and sales tax revenue. Half the general government revenue for all cities in California comes from property and sales taxes, which makes budgets quite sensitive to changes in these streams. The purpose of this update to the 2005 Center on Policy Initiatives publication The Bottom Line is to establish a pre-recession baseline for general government revenue relative to other large cities in California, using the latest comparable data source from the California State Controller. These data coincide with fiscal year , prior to the onset of the current recession in December The data show that the City of continued to lag behind other large cities in California in most general fund revenue sources, including property tax, sales tax, transient occupancy tax, trash fee/tax and business license fee/tax. The City took in more revenue in than in , but much less than other cities, though the regional economy was doing well. This update also contains new information on property taxes and business license fees/taxes to supplement the charts in the previous report. This analysis does not include revenue sources that are not general governmental, such as special assessment districts (including the Tourism Marketing District), facilities benefits assessments, impact fees (including linkage fees) and enterprise revenue (including water fees). The Bottom Line: 2010 Update

4 Revenues Population of the Ten Largest Cities in California (in millions) San Francisco Long Beach Fresno Sacramento Oakland Santa Ana Anaheim Source: California State Controller s 97the Annual Report based on FY financial data remains the second largest city in California (see Figure 1) and is the 8th largest in the nation, down from 7th in The Center on Policy Initiatives

5 Revenues General Revenue per Capita $900 $809.0 $851.0 $875.0 $675 $676.0 $724.0 $617.0 $667.0 $679.5 $450 $433.0 $ $225 $0 Long Beach Fresno Sacramento Oakland Santa Ana Anaheim California Average Source: Population and Household Income from American Community Survey, US Census In Fiscal Year , the City of raised $676 per resident in General Revenue. That's almost identical to the $679 average per capita General Revenue for the nine largest cities in California. San Francisco was excluded from this comparison because of its integrated City/County form of government. The Bottom Line: 2010 Update

6 Revenues General Fund Revenue as a Percentage of Household Income Long Beach Fresno Sacramento Oakland Santa Ana Anaheim California Average Source: General Revenues from California State Controller s 97 th Cities Annual Report; Population and Household Income from American Community Survey, US Census. Yet San Diegans earn a lot more than their counterparts in most cities (Figure 3). Only the Bay Area cities (San Francisco and ) have mean household incomes higher than s. The General Revenue raised by the City of amounted to 2.26% of the total household income in the city. In contrast, the rest of California's largest cities were able to raise an average of 2.94% of household income in General Revenue. In fact, the City of raised the least amount of revenue for general services of any California city, in proportion to the total income of households The Center on Policy Initiatives

7 Revenues Figures 4 and 5 show that the City of is more reliant than the average California city on property taxes and sales taxes. gets 41% of its revenue from property taxes, compared to a 38% state average, and 22% from sales and use taxes, compared to 18% statewide. 4 Average of All California Cities Property Taxes 38% Utility Taxes 8% Transient Occupancy Taxes 5% Other 3% State (incl VLF) 2% Revenue from the Use of Money and Property 6% Fines, Forfeitures, and Penalties 1% Other Non-Property Taxes 9% Business License Taxes 5% Franchises 4% Sales and Use Tax 18% City of Property Taxes 41% Other 2% State (incl VLF) 1% Revenue from the Use of Money and Property 5% 5 Fines, Forfeitures, and Penalties 1% Other Non-Property Taxes 9% Business License Taxes 3% Franchises 14% Sales and Use Tax 22% Source: California State Controller s 97th Cities Annual Report The Bottom Line: 2010 Update

8 Transient Occupancy Tax Transient Occupancy Tax Rates 15.00% 14.0% 14.0% 15.0% 11.25% 10.5% 10.0% 12.0% 12.0% 12.0% 11.0% 11.0% 7.50% % 0% Long Beach Fresno San Francisco Sacramento Oakland Santa Ana Anaheim The tax does not include the Tourism Marketing District surcharge, which does not go into the general fund Source: CFO Mary Lewis memo to the Audit Committee dated January 22, 2010 regarding the 2009 CAFR. has the lowest Transient Occupancy Tax (TOT) rate among the state s top tourist destinations -- Anaheim,, and San Francisco. Among all the major cities, only has a lower TOT, the tax paid by hotel guests (see Figure 6) The Center on Policy Initiatives

9 Transient Occupancy Tax Transient Occupancy Tax Rates In addition to the base TOT rate of 10.5%, the City of charges an additional 2% of gross hotel (short-term) room revenue in order to fund the Tourism Marketing District (TMD), which funds marketing, tourism promotion, and special events and programs in the City of. TMD rates in are competitive with similar Business Improvement Districts that have been implemented or are in the process of being implemented in the region and across California. Many of the most popular tourist destinations in California use a TMD or similar Business Improvement District (BID) in order to provide a consistent, targeted source of revenue for tourism promotion. The City of Long Beach assesses an additional 3% of gross short-term room rentals on top of its base 12% TOT. San Francisco assesses an additional 1%-1.5% of gross room revenue on top of its 14% TOT, depending on the zone in which the hotel is located. charges an additional $0.75-$2.00 on top of its 10% TOT, depending on the zone. The City of Palm Springs charges an additional 2% of gross room rentals on top of its 13.5% TOT. Anaheim,, Orange County, and Santa Barbara (among others), are either considering or in the process of forming a TMD. Within the region, the cities of Carlsbad ($1.00/room/night), Chula Vista (2.5% of gross room revenue), and Dana Point ($3.00/room/night) assess a TMD fee. Del Mar has considered and Oceanside is in the process of forming a TMD. The Bottom Line: 2010 Update

10 Business License Tax lags far behind all other major California cities in business fees. Annual Business License fees in are $34 for small businesses and $125 for large businesses, with an additional $5 per employee. Table 1 shows that businesses pay the least for most types and sizes of business among the four largest cities in California. Sample Annual Business Fees Sample Business Description San Francisco Retail shop of $1 million sales with 2 employees $1,480 $943 $150 $34 TABLE 1 Professional services with $15 million in revenues and 60 employees Restaurant group with $36 million in revenues and 850 employees $88,650 $53,280 $13,340 $83,315 $1,086 $15,306 $365 $4,315 Hotel with $50 million in revenues and 600 employees $74,000 $80,192 $10,806 $3,065 Large construction company with $500 million in revenue and 800 employees $590,107 $254,577 $14,406 $4,065 Multimedia/Hi-Tech company with $6 billion in revenues and 4,500 employees $7,080,000 $2,095,037 $25,000 $22,565 Source: CPI survey in 2005 Bottom Line The Center on Policy Initiatives

11 Business License Tax License Tax Revenue per Active/Open Business Tax/License Account $1,500 $1,125 $1, $1, $750 $ $ $ $375 $0 $78.74 $ $ $ $ $ San Francisco Modesto Fresno San Bernardino Oakland Huntington Beach Garden Grove State Average Source: CMRTA survey; 10 largest cities selected Figure 7 compares the average tax revenue per business account in the largest 10 cities included in a recent California Municipal Revenue and Tax Association Survey. At $78.74, sits at the bottom of the list, well below the California state average of $ The Bottom Line: 2010 Update

12 Utility Tax Utility taxes are commonly used by most other cities in California to pay for specific enhanced services or to generate general revenue. Cities such as Oakland have regularly used utility taxes as an option for citizens to pay for a higher level of services. In most cases, these taxes take the form of billing surcharges that customers pay, usually as a percentage of the total bill. Utility Taxes per Capita $200 $150 $ $ $ $100 $81.27 $97.34 $84.59 $ $50 $0 $0 $0 $0 San Francisco Long Beach Fresno Sacramento Oakland Santa Ana Anaheim Source: California State Controller s 97th Cities Annual Report The average Californian living in one of the state's 10 largest cities pays $81.86 annually on the consumption of utilities such as electricity, natural gas, telephone, cell phone, cable television, and water. Almost all major cities in California charge taxes on electricity and natural gas consumption. San Diegans, in contrast, do not pay any taxes or surcharges to the City for any of these utilities (Figure 8) The Center on Policy Initiatives

13 Trash Collection Monthly Single-Family Trash/Recycling Rates $80 $77 $60 $54 $50 $58 $40 $36 $37 9 $20 $22 $24 $16 $0 $0 San Francisco Long Beach Fresno Sacramento Oakland Santa Ana Anaheim Source: CPI Survey Residential refuse collection is a free service offered by the City of (see Figure 9). The average monthly cost for single-family residential refuse collection in the other nine largest cities is $ Were the City of to charge at that average rate, this fee would generate an additional $231 million in annual revenue. If the City of charged that average monthly rate, based on the latest U.S. Census count of 464,564 households in the city, this fee would generate an additional $231.7 million in annual revenue. The Bottom Line: 2010 Update

14 Summary of IBA Residents Opinions on City Services Survey The City of Office of the Independent Budget Analyst (IBA), in conjunction with the Citizen s Revenue Review and Economic Competitiveness Committee (CRRECC), commissioned a survey of residents to collect input on city service priorities and service levels. The survey also gauged the respondents support for different methods of addressing the current budget deficit. The IBA survey, reported in April 2010, suggests that San Diegans are willing to pay additional fees in order to maintain city services, especially in areas like street maintenance and public safety. San Diegans also rejected the elimination of city services as a solution to the city s budget deficit. The IBA survey found that San Diegans prioritize public safety services (fire, police, emergency medical, and fire prevention), residential trash and recycling collection services, and services that maintain the integrity of our ocean, beaches, and bays as most essential. San Diegans are most satisfied with the quality of trash and recycling collection services, fire protection, beach lifeguard service and parking availability. The survey asked respondents to indicate whether they would be willing to pay more in taxes and/or fees in order to maintain service levels or avoid cuts. Willingness to pay was then combined with levels of satisfaction to produce a priority spending index. The condition of city streets, police and fire response, and efforts to address homelessness were identified as the priorities with lowest satisfaction and highest willingness to pay. When asked what strategies the City of should take in order to address the budget deficit, a majority of residents preferred the use of more private contractors, increased fees to avoid service reductions, and a combination of new revenues and service cuts. San Diegans support additional fees by a 59%-36% margin, but oppose new increased taxes by a 46%-50% margin. The least popular option was to eliminate or further reduce City services The Center on Policy Initiatives

15 A Publication of the Center on Policy Initiatives design by gastonjah.com

16 The Center on Policy Initiatives is a nonprofit research and advocacy organization formed in 1997 to address issues affecting working people. Through research, advocacy, public education and coalition-building, CPI promotes policy solutions that guarantee access to quality healthcare, ensure development meets community needs, and combat economic inequality. CENTER ON POLICY INITIATIVES address telephone website 3727 Camino del Rio South, Suite 100, CA (619)