Securing Burbank s Financial Future Updated General Fund Status and Revenue Options JUNE 26, 2018
WHAT WILL BE COVERED Strategic Correction Plan: 3 Essential Elements 1. Measure T 2. Council and Labor Cost Saving Initiatives 3. Potential New Revenue Options and Recommendation Updated General Fund Financial Forecast What Other California Cities Have Done Citizen Survey Results 2
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Essential Element 1: Measure T Burbank Water and Power Fee Transfer 81.24% PASSING VOTE June 5, 2018 Statewide Primary Election Since 1950 s, the City has transferred up to 7% of BWP gross annual sales of electricity to the General Fund in-lieu of other taxes paid by a private utility such as Property Taxes and Franchise Fees. Pays for City of Burbank services such as Police, Fire, Library and Street Lights Measure T preserved $12.5 million in annual General Fund revenue 4
Essential Element 2: Council & Labor Cost Savings Initiatives Estimated $9 Million Recurring Annual Savings Labor pays 1/2 of Pension Cost Market Compensation Policy Workers Compensation Savings Fee Study CalPERS Liability Pre- Payment $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 $3.7 $2.0 $1.2 $1.2 $0.9 5
Tracking Our Progress: Essential Elements at Work (chart shown in millions) Essential Element 1: Measure T $12.5 million revenue preservation Essential Element 2: Council and Labor Savings Initiatives $9 million sustainable cost reductions $35 $30 $25 $20 $15 $10 $5 $0 Forecasted Structural Deficit $9.5 Million Remaining 6
INFRASTRUCTURE FUNDING NEED: Streets $150,550,000 Facilities Parks Storm Drains $99,475,000 $93,991,842 $126,200,000 Total Identified Infrastructure Funding Need: $683 Million New Assets $213,110,000 7
INFRASTRUCTURE FUNDING NEED Meet 75% of Existing Asset Need and 0% of New Asset Need over 25 Years 2% Annual Cost Inflation $400,000 $350,000 $300,000 $250,000 Annual Funding of $18 million required to meet 75% of existing asset need over 25 years $200,000 $150,000 $100,000 $17,937 $50,000 $- Payment Balance 8
ADDING IT ALL UP (000 s).. Forecasted Annual Funding Shortfall: Operating Deficit $9,454 Infrastructure Funding $17,937 Total Required Annual Funding: $27,391 9
Essential Element 3: Potential New Revenue Is Revenue Sufficient? Magnitude should address remaining structural gap and provide funding to begin to address infrastructure backlog Is Revenue Source Fair and Equitable to Burbank Constituents? Burbank services and infrastructure benefit our businesses, surrounding communities, and residents Will it be Successful and Timely? Consider the vote requirement A complex tax change may be difficult to communicate effectively Timely to preserve desired City services and curtail infrastructure backlog growth 10
Revenue Option: Admission/Entertainment Tax 10 California cities with Admission Tax Annual reported revenue by these cities range from $12,000 - $2.7 million Rate structure is either fixed fee per entry ($0.30-$1.50) or a % of entry price (3%- 10%) City of Pasadena Rose Bowl Admission Tax: Scaled approx. 10% max $1.70 per entry $260,000 annual revenue* *source Californiacityfinance.com Market Comparable Rates 5% up to $0.50 Residents Businesses Non-Residents Policy Change Sufficient revenue? NO Reliable Source Estimate $ $250,000-$500,000 Fair and equitable revenue source? NO Successful and Timely? YES Eligible for November '18 Election Yes Yes Yes 11
Revenue Option: Business Gross Receipts Tax No Gross Receipts Tax is a tool used by our Economic Development division to attract and retain local businesses Researching impacts of implementation is critical 5 Los Angeles County cities generate +$10 million* Beverly Hills, Culver City, El Segundo, Los Angeles, Santa Monica Neither City of Glendale nor City of Pasadena have a Gross Receipts Tax *source Californiacityfinance.com Market Comparable Rates 0% -.45% Residents Businesses Non-Residents Policy Change Sufficient revenue? Possibly Reliable Source Estimate $ unknown Fair and equitable revenue source? NO Successful and Timely? NO Eligible for November '18 Election Yes Yes Yes 12
Revenue Option: Cannabis Business Tax Requires changes to City ordinances to allow cannabis business operations Since legalization statewide revenues are below initial estimates Limited information is available on actual revenues generated Revenue source varies by proposed tax structure Due to required ordinances changes and the establishment of new business, this source is unlikely to provide significant revenues within the next 2 years Market Comparable Rates 5%-15% Sufficient revenue? Possibly Estimate $ unknown Fair and equitable revenue source? Possibly Residents Businesses Non-Residents Successful and Timely? NO Eligible for November '18 Policy Change Reliable Source Election Yes No Yes 13
Revenue Option: Parcel Tax 2/3 Voter approval required Consider impact to Burbank Unified School District which is limited to parcel taxes for new revenues Only property owners will contribute to new funding Market Comparable Rates varies Sufficient revenue? Possibly Estimate $ $5 - $15 million Fair and equitable revenue source? NO Residents Businesses Non-Residents Property Owners Only Successful and Timely? NO Eligible for November '18 Policy Change Reliable Source Election No Yes 2/3 Vote 14
Revenue Option: Transient Occupancy Tax Bed tax charged on nightly rate for short term stays Tax is typically paid by non-residents visiting Burbank for work or pleasure Surrounding Community TOT rates: City of Glendale 12% City of Pasadena - 12.11% City of Los Angeles 14% City of Burbank rate is 11% which includes 1% for the Tourism Business Improvement District Market Comparable Rates 12% Sufficient revenue? No Residents Businesses Non-Residents Estimate $ $1.2 million Fair and equitable revenue source? No Successful and Timely? Yes Eligible for November '18 Policy Change Reliable Source Election No Yes Yes 15
Revenue Option: Transient Parking Tax Tax on short-term parking fees (paid parking for less than 30 days) Tax is typically paid by those parking at the Burbank airport or for paid parking at privately owned parking lots/structures Surrounding Community TPT rates: City of Glendale N/A City of Pasadena N/A City of Los Angeles 10% City of Burbank rate is 12% Market Comparable Rates 12% Sufficient revenue? No Estimate $ $0 (1% increase =$250k) Fair and equitable revenue source? Yes Residents Businesses Non-Residents Successful and Timely? Yes Eligible for November '18 Policy Change Reliable Source Election No Yes Yes 16
Revenue Option: Expanded Utility Users Tax Expand Utility Users Tax to include Water, Cable & Over the Top TV Currently UUT applies to Electric, Gas and Telecommunications at a rate of 7% Surrounding Community UUT rates: Glendale Pasadena Los Angeles Water 7% 7.67% 0% Cable/Video 6.5% 9.4% 0% Market Comparable Rates 7-8% Residents Businesses Non-Residents Sufficient revenue? No Fair and equitable revenue source? No Estimate $ $3.8 million Successful and Timely? Yes Eligible for November '18 Policy Change Reliable Source Election Yes Yes Yes 17
Revenue Option: Utility Users Tax Increase existing Utility Users Tax rate by 1% Currently UUT applies to Electric, Gas and Telecommunications at a rate of 7% Surrounding Community UUT rates: Glendale Pasadena Los Angeles Telephone 6.5% 8.28% 9% Electricity 7% 7.67% 10% Gas 7% 7.90% 10% Market Comparable Rates 8% Residents Businesses Non-Residents Sufficient revenue? No Fair and equitable revenue source? No Estimate $ $2.6 million Successful and Timely? Yes Eligible for November '18 Policy Change Reliable Source Election No Yes Yes 18
Revenue Option: Sales Tax Local Transaction and Use Tax: commonly called Sales Tax ¾ cent sales tax capacity available to City of Burbank generates $20 million annually Burbank use of the remaining capacity would prohibit additional use by Los Angeles County Historical trends show 1/3 of our sales tax comes from residents, 1/3 from business, and 1/3 from non-residents shopping in Burbank Cities of Glendale and Pasadena considering a ¾ cent sales tax Market Comparable Rates 3/4 cent Sufficient revenue? Yes Estimate $ $20 million Fair and equitable revenue source? Yes Residents Businesses Non-Residents Successful and Timely? Yes Eligible for November '18 Policy Change Reliable Source Election No Yes Yes 19
LOCAL SALES TAX MEASURE: Matches the 3 Criteria Best 20
TIMELINE FOR NOVEMBER 2018 LOCAL SALES TAX MEASURE July 17, 2018 November 6, 2018 April 1, 2019 June, 2019 City Council to place Local Sales Tax Measure on November 2018 Ballot Day of the General Election voters decide on ¾ cent local sales tax measure New sales tax rate is effective City of Burbank receives first ¾ cent local sales tax remittance 21
WHAT HAVE OTHER CITIES DONE? LOCAL REVENUE MEASURES November 2016: 224 non-school local tax measures taken to voters 32% of all California cities had a revenue measure 120 General Purpose Passage Rate (50%+1): 84% 33 Specific Purpose Passage Rate (2/3): 56% Most Common was Local Sales Tax 86 Cities had Local Sales Tax Measures 56 Cities & 3 Counties general sales tax ranging from ¼ to 1 cent 1 cent was the most common (41% of measures) 51 of the 59 proposed measures passed (86%) Approx. 180 cities have a Local Sales Tax City of Glendale and City of Pasadena considering Local Sales Tax Measure 22
THE COMMUNITY SPEAKS: SURVEY RESULT HIGHLIGHTS City contracted FM3 to survey community on the importance of City services and willingness to increase taxes to preserve City services and infrastructure Random sample of 2,635 City of Burbank registered voters completed the survey According to FM3 overall margin of error based on full sample is plus/minus 3.1% Full presentation on results given during the January 23, 2018 City Council Meeting 23
THE COMMUNITY SPEAKS: SURVEY RESULT HIGHLIGHTS Among those that ranked extremely or very important: +70% agreed: Maintaining fire, police, and 911 response 90% Protecting local ground water quality and supply 87% Keeping neighborhoods safe and clean 84% Maintaining long-term financial stability 83% Repairing streets 78% 24
THE COMMUNITY SPEAKS: SURVEY RESULT HIGHLIGHTS Maintaining services for the disabled, veterans, and seniors 75% Earthquake retrofitting of city buildings, and bridges 74% Improve traffic flow & safety on streets 73% Maintaining Parks and Recreation programs for children and youth 73% Maintaining public parks, sports fields, and community centers 73% 25
THE COMMUNITY SPEAKS: SURVEY RESULT HIGHLIGHTS Community wants Accountability & Oversight Requiring that all funds be used in Burbank 90% Requiring audits 69% Requiring citizens oversight 68% 26
THE COMMUNITY SPEAKS: SURVEY RESULT HIGHLIGHTS After learning about a potential ¾ cent Local Sales Tax Measure that would maintain City services and help address infrastructure: 69% would vote Yes to a ¾ cent Local Sales Tax 27
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Recommendation: Direct staff to return to Council with updated Citizen Survey results and appropriate ordinances/resolutions necessary to proceed with establishing a November 2018 Local Measure to allow our community to consider through a ballot measure the implementation of a ¾ cent local sales tax with appropriate citizen oversight. 29