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Unutilized Commercial
Properties Tax ( UCPT)
May 3, 2022
City Council Workshop
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Process/Timeline
• This City Council workshop — if directed to move forward... • Draft ballot language
• Community poll/survey
• Adopt a resolution calling election in June 2022
• Submit to County for consolidation on the November ballot by August 2022 • Refine potential ordinance based on City Council input today • November 2022 election — if approved by the voters, move forward with implementation in 2023 beAgoweA,
Economic Development
Goal of the UCPT
The goal of this tax theis to encourage commercial property owners to fully utilize ir properties and keep them in good repair.
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3 Economic Development
Unutilized Commercial Properties in
Bellflower
Issues, Locations & Ownership
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Common Issues with Vacant Properties
(a burden on the City)
• high incidence of code violations
• attract vagrants and criminal activity
• draw and harbor vermin !'
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• vulnerable to fires
• negatively affect property values
• represent disinvestment in the area
• unsightly = A
• above average use of city resources
• hinders economic development bei4e,otum, Economic Development
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Location of Vacant Properties* ,
"Snap-shot in Time Feb. 2022" ��•1s. +_ ....:........
• Throughout the City's Commercial Corridors /' M V I t
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• Bellflower Blvd., Artesia Blvd., & Lakewood Blvd. 2 $°mani1DI. . • ' • + ' S.••.a°rd 4 Z
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• Shopping Center/Strip Malls z•-62 ' A •6� s. I ' '
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• Stand Alone Commercial Bldgs z I a oll..± 4•'� s ''°"`°� �' R ; r+a..se t . ,
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• Office Bldgs . .....•3t • Bellflower • + ,,.,...,u
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*Economic Development staff conducted walking „.•rt,� ,•......t. :
and windshield surveys of the major commercial r� , , aro t,.. t / / . corridors to identify vacancies. 6 • ' i _ 32t1 s 3! " .-.' . s • rt
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•
Ownership of Vacancies Vacant Commercial Property Ownership Profile • 122 total vacancies
• 9 vacant lots
• 15 Bellflower Owners (12%)
• 30 Unknown (same commercial
address or Bellflower PO Box) 12%
(25%)
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• 77 OUT OF TOWN OWNERSHIP
(63%)
•Out of Town Ownership •Bellflower Ownership •Same Commercial Bellflower Address or PO Box • 63% - 88% of vacancies are out of
town ownership 1 eff,6QQWQ�,
7 Economic Development
Estimating Revenue Loss/ Lost
Revenue Potential
Methodology
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Estimating Revenue Loss/Lost Revenue Potential
Business License Tax - $199 per vacancy
• Assumes 1 business and 3 employees per vacancy
• Base Business License Tax rate of $190 per year plus $3 per employee Unutilized Property Tax - $1,094 per vacancy
• Assumes an increase of 75% of the assessed value (AV) for improvements for all 122 vacant properties ("snap shot in time")
• The City revenue generated (City's 0.066% levy and VLF backfill) is then divided by the number of vacancies
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Economic Development
Estimating Revenue Loss/Lost Revenue Potential continued Sales Tax — Difficult to Quantify the Opportunity Cost
• Several typical uses identified-those likely to occupy the spaces • Ranges of Sales Tax per square foot (PSF) determined (data from consultant HdL) • Median Sales Tax PSF calculated as $3.38 (Sales Tax Factor) • Helps even out the results, reducing the impact of extreme lows and highs • Multiply the vacant building space or vacant lot size by the Sales Tax Factor ($3.38) • Staff recommends a minimum fee of $5,000 be established otherwise for small spaces the tax may not be enough to encourage action
• Staff recommends a cap of $50,000 to this portion of the tax as this fee can increase significantly for larger properties
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Economic Development
Estimating Costs — Law Enforcement
Methodology
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Estimating Costs — Public Safety
Methodology
• Staff identified 10 high profile vacant properties throughout the city • Varied in size
• Some vacant land, some vacant buildings or spaces in buildings • Calculated Public Safety time spent on these 10 properties • Both LACSD and Bellflower Public Safety Costs
• Totaled the Calls for Service for each property
• Used an average of 30 minutes of LACSD and City CSO time per call (2 CSOs per call)
• Used the LACSD contract broken down to a cost per deputy minute • Used the City's fully burdened rate
• Calculated an Average Public Safety Cost per vacancy - $1,931 ei4 go wet,
Economic Development
Estimating Costs — Code Enforcement
Methodology
• Staff identified 10 high profile vacant properties throughout the city • Varied in size
• Some vacant land, some vacant buildings and some vacant spaces in buildings • Calculated annual Code Enforcement time spent on these 10 properties over the past few years
• Totaled the hours worked for each property (as few at 2 hrs up to 50+ hrs) • Used an average Code Enforcement Hourly Rate of $118.25 per hour • Calculated an Average Code Enforcement Cost per vacancy - $2,140.23 13 beNeoweA,
Economic Development
Putting it all together
Tax Structure
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Economic Development
Proposed Unutilized Commercial Property Tax Structure Each Vacant Building/Vacant Lease Space/Vacant Lot Pays Both Below Base UCPT
Addresses the Code Enforcement and Public Safety costs to the City and loss of Business License Tax
• Estimated Law Enforcement Costs per Vacancy - $4,071 • Estimated Business License Tax Cost per Vacancy - $199 • TOTAL BASE UCPT - $4,270
Per Square Foot UCPT
Based on the square footage of the vacant building space or vacant lot • Includes a Property Tax Component based on an increase of 75% of the assessed value of the improvements of the vacant buildings identified in staff's survey - $1,094 • Sales Tax Component increases as the square footage increases (see sample Tax Table) IS 4.014)01/
15 Economic Development
Sample Unutilized Commercial Property Tax (UCPT)
lir Per Sq. Ft. UCPT
Property Property Type Property/Space Size Base UCPT ($1,094 + $3.38 PSF) Total UCPT Property 1 Space in Strip Mall 750 square feet $4,270 $5,0001 $9,270 Property 2 Stand-Alone Building 3,400 square feet $4,270 $12,586 $16,856 Property 3 Vacant Parcel 12,000 square feet $4,270 $41,654 $45,924 Property 4 Vacant Parcel 65,000 square feet $4,270 $50,0002 $54,270 1 Minimum Per Square Foot Tax is $5,00(
2 Capped Per Square Foot Tax at $50,000
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Economic Development
Implementation
1. Staff does a vacant/unutilized commercial property inventory every year prior to posting/levying the tax and could also attempt to collect vacancy information via other existing mechanisms such as the Planning, Building and Business License processes.
Notices to property owners sent out if tax is passed by voters and the ordinance formulated and approved by City Council.
2. Collection
a. Is the tax made part of the property tax assessment? (better, more reliable collection, set timing each year)
b. Is the tax made part of the annual business license tax (more problematic collection, varied timing of bills)
c. Set timing each year
3. Exemption — See next slide for proposed tJCPT exemption eeo GV0L Economic Development
Potential Unutilized Commercial Property Tax Waiver
Where the real property owner obtained a valid building permit and is constructing improvements in substantial compliance with the building permit not to exceed two years. Failure to complete work authorized by the validly issued building permit will void the exemption and require payment of taxes required by this chapter between the date a building permit is issued and it expires.
Any other appeals/waiver requests of this tax are to be heard by the City Council. bd,eYoNeA,
Economic Development
Discussion
Unutilized Commercial Property Tax
19 13tNexweA,
Economic Development