To deal with budget constraints and millions of dollars in lawsuit costs, city staff has proposed the collection of transient occupancy taxes on private home rentals.
By Olivia Damavandi / Staff Writer
To deal with a $ 1.2 million budget shortfall for the last fiscal year, and to help balance the current fiscal year’s budget, city staff at an Administration and Finance Subcommittee’s special meeting on Monday recommended the city begin collecting taxes on the short-term rentals of private homes beginning July 1. The tax amounts to 12 percent of the rental price of so-called vacation homes, and would add an estimated $200,000 to the city’s budget.
However, the State of California may decide to utilize eight percent, or $600,000, of the city’s property taxes to ameliorate its $40 billion budget shortfall, which would further decrease the city’s revenue.
Also, while the city may spend more than $1.5 million in litigation costs in the 2009-2010 fiscal year, 25 nonprofit organizations have extended their palms and asked for more than $600,000 in city grant funds during the special finance meeting. The city revealed it has only $75,000 to allocate toward such grant funds. The national economic crisis resulting in declining property and sales taxes, licenses, permits and service charges has contributed to the city’s budget shortfall.
Vacation rental homes targeted for tax
City staff on Monday recommended that Transient Occupancy Taxes of 12 percent of rental income from private homes leased for 30 days or less be collected beginning July 1. (A property owner will have to pay $120 per $1,000 in rent charged.)
The Malibu Municipal Code allows for such a tax, but the city has thus far only enforced it on hotels and motels, Administrative Services Director Reva Feldman said.
The tax will generate an estimated $200,000 per year and will require property owners of the short-term rentals to register with the city and obtain a transient occupancy registration certificate. A one-time registration fee of $25 per property will also be implemented.
“That’s going to be part of the challenge,” Feldman said when asked how the city would ascertain whether a resident’s house was being used as a vacation rental. “Part of it’s going to be educating people about what we’re doing now. We’ll work through real estate companies who handle it and there are also quite a few Internet sites where people list their homes.”
State borrowing, lawsuits may impact budget
In the governor’s revised May budget, the state is considering utilizing 8 percent of city, county and special district property tax revenues. Property taxes are one of Malibu’s major revenue sources. If the option is carried out, the state must repay the entire amount within three years. Though City Manager Jim Thorsen called it “unlikely” that the property taxes will be utilized by the state, Feldman said a plan is being devised should it decide to do so.
“We’re going to have to figure out a way to make budget reductions,” Feldman said Monday in a telephone interview. “It would impact us considerably.”
Other costs that may significantly impact the City of Malibu’s budget are the multiple lawsuits that have piled up against the city over the years.
In fiscal year 2008-2009, the city projected it would spend $750,000 in litigation expenses associated with lawsuits filed by environmental groups the Natural Resources Defense Council and Santa Monica Baykeeper.
The Baykeeper alone has filed three water-quality related lawsuits against the city since 2007. The Malibu Township Council has also sued the city over the construction of Trancas Canyon Park, but the lawsuit was accompanied by a standstill agreement, which allows litigation to sit still for 90 days to help facilitate a settlement with the city. During this time, the city would not have to defend itself or pay attorney fees.
An additional $400,000 has been reserved for litigation against the NRDC and Baykeeper in the proposed budget for fiscal year 2009-2010. If the city is defeated, an additional $500,000 could be expended for a total litigation cost of more than $1.5 million.
Not enough money to go around
While 25 nonprofits have submitted applications for grant funds totaling $605,040, the city only has $75,000 in its general fund grant program for the proposed 2009-2010 fiscal budget. In prior fiscal years, the city awarded up to $200,000 in grants.
Numerous representatives of the nonprofits attended the special finance meeting Monday to demonstrate before City Council members Sharon Barovsky and John Sibert why their organizations are worthy of receiving the grant funds.
The groups include MalibuGreenMachine, asking $50,000; Malibu Foundation for Youth and Families, asking $75,000; the Wishtoyo Foundation, asking $120,000; and New Directions, Inc, asking $80,000, among others.
Mona Loo, executive director of Malibu Labor Exchange , a nonprofit that operates and administers a day labor hiring site to help local workers and the homeless, said the organization is struggling to keep its doors open due to the economy.
We have one paid employee who works six days a week at the labor exchange,” Loo said. “People in Malibu think we don’t have poverty here but we do. People come from all over the world to Malibu because they think they’ll find work.”
Approximately 70 laborers show up to the hiring site daily, and “we’re lucky if 20 percent of them get work,” Loo said. “I feel fortunate to work in this program because it exposes the community to things you might not expect to find in Malibu. We appreciate the help from the city, whatever they can afford.”
To deal with the tight economic times, the city has reduced its proposed 2009-2010 fiscal year budget by 10 percent, or $1.4 million, by eliminating $300,000 in personnel-related expenses; $26,000 in contract personnel; $577,000 in professional services; $228,000 in equipment, computer and vehicle expenses; and $155,000 in general fund grants.
However, the proposed 2009-2010 fiscal year budget contains added expenditures, which include $169,960 for law enforcement services; $15,000 for Utility User Taxes; $20,000 in software upgrades; $50,000 for tree maintenance; and $75,000 for election expenses.
The City Council will consider the 2009-2010 proposed budget at its meeting on May 26.
General Fund Grant Applicants and Requests
€ California Wildlife Center: $3,525 to treat injured wildlife.
€ Children’s Creative Workshop: $5,000 for parents to provide care and education for their children.
€ Children’s Lifesaving Foundation: $25,000 to continue counselor training program.
€ Friends of Malibu Urgent Care Center: $10,000 to provide one additional hour per day for 62 days during the summer months.
€ Friendship Circle of Malibu:
$40,000 for a program in which trained teenagers mentor children.
€ Malibu Chamber of Commerce: $28,700 to support the Community Information Center.
€ Malibu Community Labor Exchange: $28,000 to help employ laborers and the homeless.
€ Malibu Film Society: $10,000 to help cover start-up costs of the Malibu Film Festival.
€ Malibu Foundation for Youth and Families: $75,000 to maintain operation.
€MalibuGreen Machine: $50,000 for median enhancement project.
€ Malibu High-AVID: $5,000 for college preparedness.
€ Malibu High, Student Counseling: $20,000 to provide students with trained counselors.
€ Malibu High, Grad Night 2009-$1,000 to fund a safe, sober graduation party for MHS seniors.
€ Malibu Mountain Rescue Team, Inc.: $1,750 to install radios in rescue truck.
€ Malibu Stage Co.: $6,000 to fund 2009-2010 season.
€ Malibu Symphony Association: $15,000 to bring a professional orchestra to Malibu.
€ Meals on Wheels: $7,500 to deliver meals to the less fortunate.
€ New Directions, Inc., Regional Opportunity Center for Homeless Veterans: $80,000 for a recovery program for homeless veterans.
€ One Book, One City: $5,000 for a literacy program.
€Operation Interdependence: $2,000 to send care packages to military personnel.
€ Raincatcher, Inc.: $26,565 to expand sustainable awareness.
€ Safety Harbor Kids: $25,000 to help disadvantaged children.
€ SongFest 2009: $10,000 to fund a summer program for classical musicians.
€ The Nature of Wildworks: $5,000 for wildlife education programs and care for captive wild animals.
€Wishtoyo Foundation-$120,000 to construct an ancient Chumash dwelling and canoe.