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HomeMy WebLinkAboutMin - CC - 2021.09.20 study sessionCITY O BURLINGAME coo � 90 $AarEo � xE � BURLINGAME CITY COUNCIL Approved Minutes City Council Study Session on September 20, 2024 1. CALL TO ORDER A duly noticed study session of the Burlingame City Council was held on the above date via Zoom Webinar at 6:00 p.m. 2. ROLL CALL MEMBERS PRESENT: Beach, Brownrigg, Colson, O'Brien Keighran, Ortiz MEMBERS ABSENT: None 3. STUDY SESSION a. STUDY SESSION ON POTENTIAL TAX MEASURES City Manager Goldman stated that this Study Session came about as a result of modifying the municipal code to allow for cannabis delivery. She noted that the Council heard from one of the potential cannabis companies about how the City can obtain tax revenue from cannabis delivery. City Manager Goldman reviewed the basics of tax measures. She explained that there are two types of tax measures that the Council can consider putting on the ballot: 1. General Tax — a tax that is imposed for general governmental purposes. A majority vote of the electorate is required to impose, extend, or increase any general tax. An election for a general tax must be consolidated with a regularly scheduled general election of City Councilmembers. Examples of a general tax include: Burlingame Measure I, SMCTA's Measure A and W, and San Mateo County's Measure K. 2. Special Tax — a tax that is collected and earmarked for a specific purpose. A two-thirds vote of the electorate is required to impose, extend, or increase any special tax. Examples of a special tax include Burlingame School District's Measure L parcel tax. Finance Director Yu -Scott reviewed a table of the City's General Fund tax revenues. She noted that the City's top three General Fund revenue sources are property tax, sales tax, and transient occupancy tax (TOT). She added that these make up approximately 90% of total tax revenue. She stated that property tax is the most stable tax revenue source while the others are sensitive to economic changes. She discussed the decrease in TOT as a result of the pandemic. Burlingame City Council September 20, 2021 Approved Minutes Finance Director Yu -Scott noted that if the Council wants to maintain the current level of services to residents, then the City would have to look at other potential revenue sources. Cannabis Tax CDD Gardiner stated that other than its normal business tax, the City's current licensing and taxing structure does not provide for the imposition of other taxes, licenses, or fees on cannabis businesses. He added that currently, Measure I sales/transaction taxes are received when a cannabis delivery is completed within Burlingame. However, if the City was able to implement a cannabis tax, retail delivery operations located within the city limits would be subject to a local sales tax allocation of 1 percent. CDD Gardiner stated that a cannabis tax measure would impose a business tax specifically on cannabis businesses located in Burlingame, based on gross receipts, in addition to existing citywide business license taxes. He noted that this would not be a sales tax on cannabis consumers, and it would be separate from the application and permit fees imposed on cannabis businesses in the city. CDD Gardiner reviewed other cities in the county that have cannabis taxes for non -storefront retail delivery: Taxing Agency Tax Rate — Retail Delivery Brisbane 3% of gross receipts South San Francisco 5% of gross receipts San Bruno* 10% of gross receipts Redwood City 4% of gross receipts * Currently San Bruno does not allow cannabis businesses. The tax measure was approved in anticipation of allowing such businesses in the future. CDD Gardiner stated that a lot of these taxes in the above chart are maximums, and there is room for the City Councils to decrease the tax. Business License Tax Finance Director Yu -Scott stated that the business license tax is a type of excise tax imposed on businesses for the privilege of conducting business within the city. She explained that the tax is most commonly based on gross receipts or levied at a flat rate. She noted that Burlingame's current business license tax is a flat rate tax. Finance Director Yu -Scott stated that at the time that the staff report was finalized, the City had 7,400 businesses but had only received license renewals for 4,168. She noted that the regular business license tax is about $600. She reviewed some pie charts that discussed the different categories of businesses that exist in the city. 2 Burlingame City Council September 20, 2021 Approved Minutes Mayor O'Brien Keighran stated that there is a big difference between the businesses that exist in Burlingame and how many renewals the City has received. Finance Director Yu -Scott stated that this is partially because a lot of the licenses are for contractors and consultants who don't renewe their license until they are conducting business in Burlingame. Finance Director Yu -Scott stated that staff reviewed the other cities' business license tax. She explained that Burlingame is the only one with a flat rate, while the others either base the business license tax on employee levels or gross receipts. Finance Director Yu -Scott stated that the City may want to review and change the City's business license tax structure. Tax to Address Sea Level Rise City Manager Goldman stated that the Council has discussed what to do about sea level rise. She explained that there is a lot of work that needs to happen on the Bayfront, and the City currently doesn't have a revenue source to fund this work. She reviewed various options such as: • Assessments • Parcel tax • General Obligation Bond (Foster City Levee Project) Councilmember Colson stated that the County is undertaking a large assessment on a potential sea level rise, fire, and flooding parcel tax for the 2022 ballot. She noted that the City will obtain funding from this tax if the measure is approved. She added that another way to address sea level rise is through public -private partnerships. She explained that businesses that are redeveloping land on the Bayfront would be likely to chip in. Mayor O'Brien Keighran stated that the City shouldn't do a competing bond against the County. The Council concurred with Mayor O'Brien Keighran. Councilmember Brownrigg asked if the City creates a special district for sea level rise, would it be different than a parcel tax. City Manager Goldman replied in the affirmative. Councilmember Beach stated that the City of East Palo Alto put a parcel tax on the 2018 ballot for commercial office space above a specific threshold. She explained that the funds were directed for affordable housing and noted that the measure was overwhelmingly approved by the voters. She suggested a similar parcel tax to fund affordable housing or sea level rise. Other Revenue Options • Transient Occupancy Tax ("TOT") increase Burlingame City Council September 20, 2021 Approved Minutes City Manager Goldman discussed TOT. She explained that is also known as a "hotel tax" or "bed tax." She explained that it is a certain percentage on the rate paid by guests at local hotels (and short-term rentals) for stays of 30 days or fewer. She noted that in 2009, the Burlingame voters raised the TOT from 10% to 12%. City Manager Goldman noted that the hotels are currently struggling as a result of the pandemic. Therefore, she explained that this might not be the time to increase the TOT. She reviewed the TOT rates in other San Mateo County cities and noted that some cities are above Burlingame with a 14% rate. • Utility Users Tax City Manager Goldman stated that a Utility User Tax ("UUT") may be imposed by a city on the consumption of utility services, including (but not limited to) electricity, gas, water, sewer, telephone (including cell phone and long distance), sanitation, and cable television. She explained that the rate of the tax and the use of its revenues are determined by the local agency. She added that the UUT rates range from 1 % to 11 %. • Parcel Tax City Manager Goldman stated that a parcel tax is a special non -ad valorem tax on parcels of property generally based on either a flat per -parcel rate or a variable rate depending on the size, use, and/or number of units on the parcel. She explained that parcel taxes are generally restricted to a particular use. She added that a parcel tax requires 2/3rd approval on the ballot, regardless of use. Vice Mayor Ortiz stated that he is interested in the creation of special districts as there are certain areas of the city that will be more impacted by sea level rise. He asked if the City can have more than one special district. City Manager Goldman stated that staff would need to talk to other cities that have done it to determine what is the best course of action. Councilmember Beach asked if Burlingame and neighboring cities have a UUT and what their rate is. City Manager Goldman stated that the City currently doesn't have a UUT. She noted that it was discussed prior to the placement of Measure I on the ballot. City Manager Goldman asked the Finance Director Yu -Scott to pull information on other cities' UUT. Finance Director Yu -Scott stated that the following cities have a UUT: • Daly City has a 5% rate • East Palo Alto has a 5% rate • Menlo Park has a 1 % rate • Pacifica has a 6.5% rate • Portola Valley has a 4.5% rate • Redwood City has a 5% rate Councilmember Colson stated that a UUT could greatly impact the most vulnerable people who can already barely pay their bill. She asked if there is a way to exempt certain classes of people. City Manager Goldman 4 Burlingame City Council September 20, 2021 Approved Minutes stated that she has only seen a straight tax, but she would need to do more research. She added that a UUT didn't need to be put on all utilities. Mayor O'Brien Keighran asked if there was a breakdown of the cities that have tiered business license taxes according to gross receipts versus employees. Finance Director Yu -Scott stated that she would get back to Council with this information. Mayor O'Brien Keighran opened the study session for public comment. No one spoke. City Manager Goldman reviewed the next steps: • Council discussion of funding options, including other options Council wishes staff to analyze • Further staff research and analysis of one to three possible funding measures • Additional Council study session(s) on possible funding measures for a future ballot Councilmember Brownrigg stated that he supported this discussion becoming a more routine discussion. He added that as the Council thinks about these tax options, they need to think about whether they are trying to assist an operating deficit or a capital deficit. He noted that while he initially thought the City was trying to cover capital deficit, it seems more like an operating deficit based on the Finance Director's slides. Councilmember Brownrigg stated that he thought the Council should further discuss a cannabis tax and a potential tax for office space above a certain threshold. He noted that he didn't think the Council should consider increasing TOT. He stated that he didn't believe the City could rely only on landowners for assistance with sea level rise. He added that the City needs to do more research on the infrastructure needs to combat sea level rise and the necessary funding. Vice Mayor Ortiz stated that while a business license tax wouldn't raise a lot of funds, the City should revisit this tax. He added that for sea level rise, he would like to see a special district formed. He noted that he has an issue with UUT for the reasons Councilmember Colson stated. Vice Mayor Ortiz thought the Council should look into a cannabis tax and a potential tax for office space above a certain threshold. Councilmember Beach stated that the Council should further review a cannabis tax and business license tax. She noted that she wasn't in favor of a TOT increase or a UUT at the moment. She added that she thought the Council needed to focus on the capital deficit but would appreciate the staff s input on this matter. Councilmember Beach discussed exploring a special district or an office space parcel tax to assist in funding sea level rise and the Broadway Grade Separation. Councilmember Colson stated that she supported a further discussion of a cannabis tax and business license tax if it is based on gross receipts. She noted that she wasn't in favor of a UUT. She added that the Council needs to pick either a special district or an overlay district. 5 Burlingame City Council September 20, 2021 Approved Minutes Mayor O'Brien Keighran stated that she was in favor of further reviewing the business license tax using gross receipts and the cannabis tax. She noted that she wasn't in favor of increasing the TOT and was against the UUT. Mayor O'Brien Keighran stated that when it comes to sea level rise, the City should look at how the Bayfront can assist in paying for it. She noted that she was also concerned with the Broadway Grade Separation and how it can be paid for. Councilmember Brownrigg stated that whenever the City considers implementing a new tax on a business, he thought it was important to look at what the whole tax burden is on a business. He explained that it is important to ensure that businesses want to stay in Burlingame. Mayor O'Brien Keighran and Vice Mayor Ortiz discussed how sea level rise will impact more than just the Bayfront. They noted that the businesses on the Bayfront also help to provide jobs and tax funds for the City. City Manager Goldman reviewed the direction that staff was given: • Interested in more information on a business license tax increase • Interested in cannabis tax • Interested in addressing sea level rise • Interested in office space tax City Council agreed with City Manager Goldman's review of the direction staff was given. 4. ADJOURNMENT Mayor O'Brien Keighran adjourned the study session at 6:59 p.m. Respectfully submitted, /s/ Meaghan Hassel -Shearer City Clerk 6 Burlingame City Council September 20, 2021 Approved Minutes