Beverly Hills City Council
September 17, 2024

AGENDA REPORT
Meeting Date: September 17, 2024
Item Number:

To: Honorable Mayor and City Council
From: Cynthia Owens, Municipal Affairs Program Manager
Subject: A. REQUEST FOR DIRECTION SUPPORTING, OPPOSING OR

REMAINING NEUTRAL ON THE AFFORDABLE HOUSING,

HOMELESSNESS SOLUTIONS & PREVENTION NOW

INITIATIVE (MEASURE A) WHICH IS ON THE LOS ANGELES
COUNTY NOVEMBER 2024 GENERAL ELECTION BALLOT;
AND
B. REQUEST FOR DIRECTION ON IMPLEMENTING BEVERLY
HILLS MEASURE RP (2020) DUE TO MEASURE A BEING

PLACED ON THE BALLOT BY LOS ANGELES COUNTY
Attachments: 1. Measure A – Sales Tax Measure – Homelessness Services and Affordable Housing Ordinance

2. Bill Text - Assembly Bill 1679 (Santiago) Transactions and Use Taxes: County of Los Angeles Homelessness

3. July 14, 2020 Staff Report (Without Attachments)

4. August 4, 2020 Agenda Report (Without Attachments)

5. Resolution 20-R-13303 - Ordinance – Measure RP

6. Educational Flyer Shared with Public on Measure RP

RECOMMENDATION
Staff recommends the City Council:

A. Consider a position of support, oppose, or remain neutral on Los Angeles County’s Measure A, the Homelessness Solutions & Prevention Now Initiative; and
B. Provide direction on implementing Beverly Hills Measure RP due to the placement of Measure A on the ballot by Los Angeles County

INTRODUCTION
This item will provide information to the City Council on Measure A, a district tax placed on the November 2024 General Election ballot by Los Angeles County, which will increase taxes on the sale of items to aid in funding homelessness initiatives and affordable housing projects. Staff is requesting the City Council consider a position of support, oppose, or remain neutral on Measure A.

Meeting Date: September 17, 2024

This item will then provide an overview of Measure RP and how Measure A triggers portions of Measure RP which the City Council will need to act upon.

DISCUSSION
Measure A – Sales Tax Measure – Homelessness Services and Affordable Housing Ordinance
Background
The effective sales tax rate in a specific California location consists of three parts: the state sales and use tax rate, the local sales and use tax rate, and any district transactions and use tax rate(s) in effect.

The current base statewide California sales tax rate is 7.25% as shown below.

Rate Jurisdiction Taxing Authority Purpose

6.00% State Revenue and Taxation Code
Sections 6051, 6201
State general purposes

1.00% Local Bradley-Burns Uniform Local
Sales and Use Tax Law
Local jurisdictions

0.25% Local Revenue and Taxation Code
Sections 7202 and 7203
Local transportation fund

7.25% Total Statewide Rate
Some areas in California have effective sales tax rates that exceed the statewide rate of

7.25% as a result of voter-approved district taxes imposed by certain counties, cities or other local jurisdictions. Some areas in California do not impose district taxes while other areas have multiple district taxes in effect. District taxes (technically referred to as “transactions and use taxes”) differs slightly from the Bradley-Burns 1% tax in that it is allocated to the location where purchased goods are first put into use or are delivered, rather than the location of where sales are negotiated. For purposes of simplifying this report’s discussion, the base statewide rate plus any effective district tax rate will be referred to as the “effective sales tax rate”.

For all of Los Angeles County, the base effective sales tax rate is currently 9.50%. The additional 2.25% on top of the statewide rate comes from the following voter-approved district taxes:

Rate Measure

0.50% Proposition A - Approved by voters in November 1980, is a half-cent sales tax dedicated to transportation funding and was the first of its kind to address transportation challenges in LA County

0.50% Proposition C – Approved by voters in 1990, is a half-cent sales tax to fund the Los Angeles County Metropolitan Transportation Authority's (Metro) long-term debt, which is used to pay for the county's transportation system

0.50% Measure R – Approved by voters in 2008, is a half- cent sales tax for thirty years to pay for transportation projects and transportation improvements

0.50% Measure M – Approved by voters in 2016, is a half-cent sales tax with no sunset date that will help fund 40 major highway and transit projects.

0.25% Measure H – Approved by voters in 2017, is a quarter-cent sales tax to provide funds for homeless services and short-term housing. It is set to expire in 2027.

2.25% Total LA County District Tax Rate
Meeting Date: September 17, 2024

For Los Angeles County cities the maximum total effective sales tax rate currently cannot exceed 10.25%, and is comprised of: the statewide base sales and use tax rate, the county-wide district transactions and use taxes, and any local city district transactions and use taxes. There are numerous cities whose effective sales tax rate is set at the 10.25% maximum including:
• Santa Fe
Springs
• Alhambra
• Arcadia
• Azusa
• Baldwin Park
• Bell Gardens
• Bellflower
• Burbank
• Carson
• City of
Commerce
• Compton
• Covina
• Cudahy
• Culver City
• Duarte
• Gardena
• Glendale
• Glendora
• Hawaiian
Gardens
• Hawthorne
• Huntington Park
• Irwindale
• La Verne
• Lakewood
• Lancaster
• Lawndale
• Lomita
• Long Beach
• Lynwood
• Monrovia
• Montebello
• Monterey Park
• Norwalk
• Palmdale
• Paramount
• Pasadena
• Pico Rivera
• Pomona
• San Fernando
• San Gabriel
• Santa Monica
• Sierra Madre
• Signal Hill
• South El Monte
• South Gate
• South Pasadena
• Vernon
• West Hollywood
• Whittier
The cities of Compton, Lynwood, Pico Rivera, Santa Monica and South Gate do not pay into Measure H as they were already at the maximum rate of 10.25% when Measure H passed.

Change in State Law
In 2023, Assembly Bill 1679 (Santiago) - Transactions and use district taxes: County of Los Angeles: homelessness (“AB 1679”) passed in the State Legislature and became law on January 1, 2024 (Attachment 2). This bill allows Los Angeles County (“County”) to impose a district tax up to 0.5% that exceeds the 10.25% cap if the County adopts an ordinance proposing the tax by any applicable voting approval requirement, including by citizen’s initiative, voters approve it, and it replaces the tax currently imposed by Measure H in Los Angeles County.

The bill requires all revenue from the tax to be dedicated to addressing and preventing homelessness. The bill specifies that a transactions and use tax established pursuant to its provisions would not be considered for purposes of the 10.25% combined rate statutory limitation. The bill states the intent of the Legislature that any transactions and use tax adopted pursuant to these provisions include robust oversight and accountability provisions. The bill would repeal this authorization on December 31, 2028, if an ordinance proposing the tax has not been approved by that date. This bill was a gut and amend of a horse racing bill introduced by Assemblymember Santiago, whereby the original contents were replaced with entirely new provisions.

Meeting Date: September 17, 2024

Measure A
On May 7, the Los Angeles County Registrar’s Office (the “Registrar”) received 393,293 signatures for a petition on a Los Angeles County Homelessness Services and Affordable Housing Ordinance. On June 18, the Registrar issued a certificate that the required number of signatures had been obtained to place Measure A on the November 5, 2024 ballot. On June 25, the Board then confirmed the validity of Measure A for it to be placed on the ballot.

If approved by the voter’s in Los Angeles County, Measure A would:
• Repeal Measure H’s sales tax rate of 0.25%;
• Impose a permanent 0.5% district tax rate on all retailers in the incorporated and unincorporated area of Los Angeles County to reduce and prevent homelessness while providing affordable housing;
• Measure A would continue the 0.25% funding for addressing homelessness services which Measure H provides and
• Measure A would provide 0.25% funding to the Los Angeles County Affordable Housing Solutions Agency for constructing affordable housing The goal of the Measure A is to significantly reduce and prevent homelessness in Los Angeles County by:
• Significantly increasing and accelerating the availability of affordable housing; • Significantly increasing the availability of immediate housing and interim housing options;
• Significantly increasing mental health treatment for people experiencing homelessness;
• Significantly increasing substance abuse treatment for people experiencing homelessness;
• Addressing large scale and individual encampments, people living in RVs and automobiles, or otherwise living in public spaces by creating connections to housing; and
• Preserving currently affordable housing
If approved, the net effect of this measure in Los Angeles County is to increase the effective sales tax rate by one-quarter percent (0.25%) on all taxable sales occurring in the cities where Measure H is currently effective, to increase the effective sales tax rate by one-half percent (0.5%) on all taxable sales occurring in the five cities where Measure H is not currently effective, and to make the increase permanent.

Based on California Department of Tax and Fee Administration records for the period September 2023 through August 2024, the half percent (0.5%) district tax is estimated to generate approximately $1.071 billion in local government revenue in the first year. Local government expenditures are expected to increase by a similar amount as these new revenues are used for the purposes specified in the measure.

Under the allocation plan specified in the measure, net local government revenues generated by the tax (estimated at approximately $1.071 billion in the first year) must be apportioned for the following programs, as defined in the measure:
• 61.25% (approximately $656 million in the first year) to the County for Comprehensive Homelessness Services, the Local Solutions Fund, Homelessness Solutions Innovations, and Accountability, Data, and Research; Meeting Date: September 17, 2024

• 35.75% (approximately $383 million in the first year) to the Los Angeles County Affordable Housing Solutions Agency for Affordable Housing and Prevention; and • 3% (approximately $32 million in the first year) to the Los Angeles County Development Authority for Local Housing Production.

The measure also allows the Board of Supervisors to change this apportionment beginning in Fiscal Year 2030-2031. Of the 61.25% apportioned to the County, at least 15% must be used for the Local Solutions Fund which will be distributed to cities, councils of governments, and to the County on behalf of its unincorporated areas, via a formula based on the point-in-time count required by the United States Department of Housing and Urban Development and/or similar measures of people experiencing homelessness, as the Board of Supervisors determines in consultation with cities within the County.

All the district tax revenues will be restricted to and must be spent on the purposes specified in the measure. In addition to the costs to collect and distribute the tax which are accounted for in the measure, certain costs will be incurred to monitor compliance.

However, those costs would be met by the increased revenue associated with the measure.

Due to the passage of AB 1679, all cities in Los Angeles County will see their sales tax increase if this measure is approved by voters, regardless if they are at the maximum effective sales tax rate allowed by state law.

The impact on cities currently at the maximum effective sales tax rate of 10.25% will depend on when they reached the maximum relative to the approval of Measure H. For example, the City of Santa Monica reached the maximum prior to the passage of Measure H; therefore, their effective sales tax rate would increase ½ cent, going from

10.25% to 10.75%, should Measure A pass. Whereas West Hollywood, who increased to 10.25% after the passage of Measure H, will see a net increase of a ¼ cent, raising their effective sales tax rate to 10.5%.

All cities who are currently at or below 10%, such as Beverly Hills at 9.5%, would see a net increase of a ¼ cent, raising the effective sales tax rate in Beverly Hills to 9.75%.

Staff is asking if the City Council would like to support, oppose, or remain neutral on LA County Measure A.

Measure RP
At the July 14, 2020, City Council Study Session Meeting, the City Council directed staff to prepare a ballot measure known as the Revenue Protection Measure. This measure, would provide that if, and only if, another local governmental entity seeks to raise a transaction and use tax (sales tax) in Beverly Hills by up to ¾ of a cent, then the City is authorized to prevent this tax increase and instead increase the Beverly Hills transaction and use tax by up to ¾ of a cent so that the revenue would flow to the City (Attachment 3).

On August 4, 2020 (Attachment 4), the City Council:
1) Adopted a resolution declaring a fiscal emergency in the City of Beverly Hills due to COVID-19 in accordance with Article XIII C of the California Constitution.

Meeting Date: September 17, 2024

2) Adopted a resolution submitting a transactions and use tax to a vote of the qualified electors in the City for the November 3, 2020 General Election. This measure provides that if, and only if, another local governmental entity seeks to raise the sales tax in Beverly Hills, then the City is authorized to prevent this tax increase and instead increase the Beverly Hills transaction and use tax by up to ¾ of a cent (Attachment 3).
3) Adopted a resolution consolidating the City election with the Los Angeles County General Election for November 3, 2020.

At the November 2020 election, 73.63% of the voters in Beverly Hills approved Measure RP.

How Does Measure A Impact Measure RP
The City Manager’s Office met with the City Attorney’s Office and Finance Department to discuss if Measure A would trigger Measure RP. After reviewing the information contained in AB 1679, as well as Measure A, it was determined that the language contained within the Ordinance (Attachment 5) created by the passage of Measure RP would be triggered.

Under Beverly Hills Municipal Code (BHMC) 3-12-114: Automatic Suspension, Implementation, Subsection B, the City suspended the collection of the taxes authorized by Measure RP so long as a district, which includes Los Angeles County, does not place a measure on the ballot seeking voter authorization for a new or increased retail transactions and use tax.

Under Subsection C, should a district, such as Los Angeles County, place a district tax measure on the ballot, then the City will commence the process of collection of the taxes authorized by the Ordinance created by the passage of Measure RP on the first day of the month that the election on the tax will take place on.

To protect the residents of the City, language was added to the ordinance that should the district tax fail to become effective, the City shall then suspend the collection of the taxes, or suspend the process for collection of the taxes, authorized under Measure RP.

Additionally, under BHMC 3-12-115, Suspension or Reduction, the City Council could consider suspending or reducing the imposed tax rates by resolution after a public meeting at which public testimony is taken.

Communications to the Residents on Measure RP
In 2020, Measure RP was described as a way to protect and preserve the remaining ¾ cent sales tax for use in Beverly Hills to the voters in Beverly Hills when it passed in 2020 (Attachment 6). The City made various statements to the residents in the educational materials created by the City and sent to the residents. This included:
• Measure RP does not raise taxes unless the County or another entity imposes an increase to the sales tax. Measure RP would then be imposed to capture that revenue for use in Beverly Hills.
• Measure RP would prevent the loss of local sales tax revenue to regional control and instead retain this funding for local use under local control.

After a review of Measure A, it was determined that the City could trigger Measure RP since Los Angeles County is increasing the effective sales tax rate should Measure A Meeting Date: September 17, 2024

pass this November. For Beverly Hills, the effective sales tax would have a net increase of ¼ cent and increase to 9.75% from the current 9.5%; however, technically, Measure RP would be triggered and the City could implement up to a ¾ effective sales tax increase.

However, with the passage of AB 1679, even if the City tried to protect the remaining sales tax revenue for local use, Measure A would be added on top of that ¾ cent tax; therefore, the effective sales tax in Beverly Hills would rise from 9.5% to 10.5% should they City implement Measure RP and Measure A passes.

Under consideration for the City Council is what action the City Council would like to take on this matter, including options such as:
1) Suspend the implementation of Measure RP and do not notify the state on November 1, 2024 of the City’s intent to implement Measure RP. This can be done by resolution at the October 10, 2024 Formal Session. 2) Notify the state on November 1, 2024 of the City’s intent to implement the sales tax approved by the voters of Beverly Hills. The City Council could then direct staff to bring this item back after the November election to consider the following Measure A Fails Measure A Passes
• The City must suspend
the collection of the tax
as mandated by the
ordinance
The City Council could:
• Allow Measure RP to stay in place at ¾ of a cent and
total sales tax in Beverly Hills increases to 10.5%
• Direct staff to bring this item back after the election to suspend some or all of the ¾ cent tax enacted by
Measure RP
3) Any other direction the City Council may wish to provide.

FISCAL IMPACT
Potentially significant dependent on the direction given by the City Council.

The exact amount a district tax would generate is difficult to estimate due to the unknowns associated with the amount of imports and exports of goods across jurisdictional boundaries, as well as economic impacts to taxable sales. Based on the City’s estimated sales tax revenue for Fiscal Year 2024-25 of $44.8 million, each 0.25% of a district transactions and use tax is estimated to generate an additional $9.9 million.

Keith Sterling
Deputy City Manager
Approved By
Attachment 1






   


  







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Attachment 2

Attachment 3

STAFF REPORT
Meeting Date: July 14, 2020
To: Honorable Mayor and City Council
From: Cynthia Owens, Policy and Management Analyst
Subject: Request the City Council Consider a Sales Tax Measure, Which Would Only be Levied if a Los Angeles County or Special District Sales Tax Qualifies for a Ballot and Would Only Continue to be Imposed if the Other Measures Receive Approval of the Voters Attachment: 1. Study Session Report – February 4, 2020

2. Staff Report – City of West Hollywood

3. Beverly Press Article – West Hollywood Sales Tax

INTRODUCTION
On February 4, 2020, staff presented information to the City Council on the City of Torrance’s Measure X, which appeared on the March 3, 2020 ballot. Measure X would have authorized a ¾ cent sales tax in Torrance (Attachment 1). The tax would only have been levied if a District sales tax measure has qualified for a ballot and may continue to be imposed only if that district measure receives voter approval.

At the February 4 Study Session meeting, the City Council directed staff to bring the item back to a future meeting for further discussion.

FISCAL IMPACT
Beverly Hills currently has a 9.50 percent sales tax on all purchases made in the city. Of that sales tax, 8.50 percent goes to the state, Los Angeles County, and other special districts (such as Metro for Measure M), while the remaining one percent is returned to the City. Should the City place a ¾ cent sales tax on the ballot, the City would retain the entire ¾ cents as general fund revenue should it pass and go into effect.

The table on the next page provides a framework of reference to the revenue the City could potentially generate from a ¾ sales tax. In the table, staff included:
 FY 18/19 as that is the last year for which the City has completed and audited financial statements;
 An estimate for FY 19/20, which is not yet closed and audited, in order to provide context to a decrease in sales tax due to the impact of COVID-19; and  A projection for FY 20/21 revenue, which includes a predicted decrease due to COVID-19 for a realistic expectation of what may occur. .

Meeting Date: July 14, 2020
Fiscal Year Actuals/Projected
at Current Sales
Tax Rate
Potential Revenue
from $0.75 Sales Tax
Increase
Total Potential
Revenue from
Sales Tax
FY 18/19 $37,410,459 $28,057,844 $65,468,303
FY 19/20 $31,500,000 $23,625,000 $55,125,000
FY 20/21 $21,712,009 $15,879,007 $37,591,016
There will also be costs associated with the preparation of a City ballot measure should that be the direction given by the City Council. No cost estimate is available at this time for the preparation of a sales tax measure.

DISCUSSION
The current sales tax in Beverly Hills is 9.50 percent. The legal maximum in California for sales tax is 10.25 percent. This amount is set by state statute by the California Legislature. Therefore, there is a maximum of 0.75 percent (or ¾ cent) of sales tax that can be potentially imposed in Beverly Hills.

The County of Los Angeles or other governmental entity (“District”) can impose sales taxes in both unincorporated areas and cities; however, if a city already collects sales taxes up to the maximum of 10.25 percent, a District regional tax cannot be collected within that city.

Of the 88 cities in Los Angeles County, approximately 31 cities have approved sales tax rates above the Los Angeles County base amount of 9.5 percent. Many of these cities (25 out of the 31) have approved increases up to the maximum amount of 10.25 percent.

These cities include, but are not limited to:
 Culver City
 Burbank
 Glendale
 Long Beach
 Pasadena
 Pomona
 Santa Monica
El Segundo has a 9.50 percent sales tax that will increase to 10.25 percent should a District sales tax measure be placed on the ballot. Staff understands that the increase in sales tax is triggered by the placement of the District sales tax measure on the ballot, not by its passage. No other jurisdiction in Los Angeles County has a sales tax in place similar to El Segundo. All other jurisdictions have implemented the sales tax upon its passage.

On March 3, 2020, the residents in the City of Torrance were presented with a sales tax measure similar to El Segundo. The residents did not vote in favor of imposing a sales tax increase.

On July 6, 2020, the City Council of the City of West Hollywood voted in support of placing a ¾ cent sales tax initiative on the November 3rd ballot (Attachments 3 and 4).

The staff report notes:
… the maximum sales tax rate increase available in West Hollywood could decline in future years (below the ¾ cent currently available).

Within the last five years, the sales tax rate has increased in West Hollywood due to two countywide sales tax increases being approved, including Measure M (countywide transportation) and Measure H (countywide homeless services). If other measures were approved on a countywide basis they would reduce the potential sales tax increase city Meeting Date: July 14, 2020
voters could approve in West Hollywood, this is because the maximum tax rate of 10.25% is still in effect and does not increase as other new increases are approved by the voters, instead, the amount of available increases diminishes.... Thus, a ballot measure to increase the sales tax rate would allow voters to decide whether to permanently keep those potential sales tax revenues for local purposes.

This is relevant to Beverly Hills as the City currently has the same 9.50 percent sales tax as West Hollywood. As mentioned previously, the City’s maximum sales tax rate under state law is 10.25 percent. A similar ballot measure in Beverly Hills would allow the residents to decide whether to retain the remaining ¾ cent sales tax for local purposes or leave the sales tax open for future Los Angeles County or other District sales tax measures.

The City of West Hollywood’s ballot measure, should it pass in November, will implement the ¾ cent sales tax immediately.

RECOMMENDATION
The City Council may provide any direction to staff on the items mentioned in this report.

Gabriella Yap
Approved By
Attachment 4

AGENDA REPORT
Meeting Date: August 4, 2020
Item Number:

To: Honorable Mayor and City Council
From: Cynthia Owens, Policy and Management Analyst
Subject: A. A RESOLUTION OF THE COUNCIL OF THE CITY OF

BEVERLY HILLS DECLARING A FISCAL EMERGENCY IN

ORDER TO PLACE A CONDITIONAL GENERAL PURPOSE

TRANSACTIONS AND USE (SALES) TAX MEASURE ON
THE NOVEMBER 3, 2020 SPECIAL ELECTION BALLOT
B. A RESOLUTION OF THE COUNCIL OF THE CITY OF

BEVERLY HILLS CALLING AND GIVING NOTICE OF THE

HOLDING OF A SPECIAL MUNICIPAL ELECTION TO BE

HELD IN THE CITY OF BEVERLY HILLS ON TUESDAY,
NOVEMBER 3, 2020, FOR THE SUBMISSION TO THE

VOTERS A QUESTION RELATING TO THE

AUTHORIZATION OF A THREE-QUARTER CENT

TRANSACTIONS AND USE (SALES) TAX, ESTABLISHING

REQUIREMENTS FOR BALLOT ARGUMENTS FILED WITH

THE CITY CLERK TO BE INCLUDED WITH VOTER

INFORMATION, AND DIRECTING THE CITY ATTORNEY TO

PREPARE AN IMPARTIAL ANALYSIS OF THE BALLOT

MEASURE
C. A RESOLUTION OF THE COUNCIL OF THE CITY OF

BEVERLY HILLS REQUESTING THAT THE BOARD OF

SUPERVISORS OF THE COUNTY OF LOS ANGELES

CONSENT TO THE CONSOLIDATION OF THE CITY OF

BEVERLY HILLS SPECIAL MUNICIPAL ELECTION TO BE
HELD ON TUESDAY, NOVEMBER 3, 2020, WITH THE

STATEWIDE GENERAL ELECTION TO BE HELD ON SAME
DATE, AND DIRECTING THE REGISTRARRECORDER/COUNTY CLERK TO ADMINISTER, MANAGE,

OVERSEE AND CANVASS THE RESULTS OF SAID

ELECTION
D. APPROPRIATE $120,000 TO THE CITY CLERK’S OFFICE

FOR ELECTION COORDINATION
F-1
Meeting Date: August 4, 2020

Attachments: 1. Resolutions

2. Staff Report – April 21 Without Attachments

3. Staff Report – May 14 Without Attachments

RECOMMENDATION
It is recommended the City Council:

A. Adopt a resolution declaring a fiscal emergency in the City of Beverly Hills due to COVID-19 in accordance with Article XIII C of the California Constitution. This will require a unanimous vote of the City Council prior to proceeding with items B, C and D.

B. Adopt a resolution submitting a transactions and use tax to a vote of the qualified electors in the City for the November 3, 2020 General Election. This measure, should it be adopted, would provide that if, and only if, another local governmental entity seeks to raise a transaction and use tax (sales tax) in Beverly Hills, then the City is authorized to prevent this tax increase and instead increase the Beverly Hills transaction and use tax by up to ¾ percent.

C. Adopt a resolution consolidating the City election with the Los Angeles County General Election for November 3, 2020.

D. Appropriate $120,000 to the City Clerk’s Office for election coordination.

INTRODUCTION
At the July 14, 2020, City Council Study Session Meeting, the City Council directed staff to prepare a ballot measure known as the Revenue Protection Measure. This measure, should it be adopted, would provide that if, and only if, another local governmental entity seeks to raise a transaction and use tax (sales tax) in Beverly Hills by up to ¾ percent, then the City is authorized to prevent this tax increase and instead increase the Beverly Hills transaction and use tax by up to ¾ percent so that the revenue would flow to the City. Currently, the total sales tax in Beverly Hills is 9.50 percent.

Should another local entity successfully pass a sales tax increase in the future, then the Beverly Hills sales tax should in theory take precedence because it was adopted first.

Thus, Beverly Hills tax will prevent the tax revenue from flowing out of the City and preserve the revenue raised from the sales tax for the benefit of residents of Beverly Hills. The sales tax in Beverly Hills would remain at 9.50 percent until another taxing entity’s sales tax measure passes.

This item presents three resolutions to the City Council for consideration for adoption on this matter.

FISCAL IMPACT
Under state law, the County, the City, or a special district with jurisdiction over the City of Beverly Hills may seek voter approval of up to an additional 0.75 percent increase in the Beverly Hills sales tax. The County’s, City’s, or district’s access to this remaining 0.75 percent in sales tax is effectively available on a “first come, first serve” basis. This means that should the County, the City, or a district put forward a measure to increase the local sales tax and the other public entities do not, the public entity proposing the measure would receive the remaining 0.75 percent for itself should the voters approve that measure. The other public entities would no longer be able to impose all or even a portion of the 0.75 percent local sales tax due to state law, which establishes a maximum sales tax rate in the state of 10.25 percent.

Meeting Date: August 4, 2020

Beverly Hills has a combined sales tax of 9.50 percent on all purchases made in the City. As stated above, the maximum sales tax rate is 10.25 percent. Thus, there is 0.75 percent that is unused. Of the current 9.50 percent sales tax, 6.00 percent goes to the State, 2.50 percent goes to Los Angeles County and other special districts (such as Metro for Measure M), and the remaining one percent is returned to the City to be used for general fund purposes, such as police, fire protection, and library services.

Should another local entity place a tax measure on the ballot and it passes, the other entity would use up all or part of the 0.75 percent. As a consequence, Beverly Hills residents’ tax dollars would likely be used regionally rather than locally. However, should the City place a 0.75 percent sales tax on the ballot and that passes, the City could prevent the outflow of local tax dollars and preserve them for use within the City for general fund purposes.

Staff is aware that the Los Angeles County Board of Supervisors has been considering whether to seek voter approval of a 0.75 percent increase to the County’s local tax.

Should the City place a 0.75 percent sales tax on the ballot in advance of the County, then the City, not the County, would receive the entire 0.75 percent as general fund revenue if the measure passes and goes into effect.

Importantly, should the voters approve the local ballot measure, the sales tax would not go into effect until such a time another local entity places a sale tax measure on the ballot and it passes, ensuring that the sales tax will not be raised unless another entity convinces the voters to raise the tax, and in that case, ensuring that the money collected locally stays local.

The table below provides a framework of reference to the revenue the City could potentially generate from a 0.75 percent sales tax. In the table, staff included:
 FY 18/19 as that is the last year for which the City has completed and audited financial statements;
 An estimate for FY 19/20, which is not yet closed and audited, in order to provide context to a decrease in sales tax due to the impact of COVID-19; and  A projection for FY 20/21 revenue, which includes a predicted decrease due to COVID-19 for a realistic expectation of what may occur.

Fiscal Year Actuals/Projected
at Current Sales
Tax Rate
Potential Revenue
from a 0.75 percent
Sales Tax Increase
Total Potential
Revenue from
Sales Tax
FY 18/19 $37,410,459 $28,057,844 $65,468,303
FY 19/20 $31,500,000 $23,625,000 $55,125,000
FY 20/21 $21,712,009 $15,879,007 $37,591,016
Expenses for the November 3, 2020 Special Municipal Election are not currently budgeted within the City Council approved FY 20/21 budget for the City Clerk’s office.

Staff estimates the cost to coordinate the election will be $120,000 for the City Clerk’s office. This includes costs associated with the Los Angeles County Registrar’s office administering the election, placement of required newspaper notices, and a Voter Education Guide. Similar to March 2020, the Voter Education Guide will be sent to all registered voters and households in the City of Beverly Hills.

Meeting Date: August 4, 2020

If the City Council wishes to move forward with the ballot measure then an appropriation of $120,000 from the general fund for the City Clerk’s Office is being requested at this time to cover costs associated with the election.

City staff will also (1) develop educational materials for distribution to the registered voters of Beverly Hills, (2) create educational advertisement materials for placement in the various local newspapers, and (3) perform other outreach efforts to provide nonbiased information to the voters. This will include hiring a consultant to develop the materials, the cost to distribute the materials, and other outreach efforts such as providing educational information in the local newspapers. The cost estimate for these activities is $90,000.

The costs associated with the educational materials may potentially be absorbed within the City Council approved Policy & Management budget. Any cost that requires an appropriation from the City Council will be brought back at a future City Council meeting for approval.

DISCUSSION
Background
COVID-19 was first detected in Wuhan City, Hubei Province in China in December 2019.

COVID-19 is spread between people primarily via respiratory droplets produced when an infected person coughs or sneezes. Symptoms of the virus include fever, cough, and shortness of breath, and infected individuals have experienced a range of outcomes, from mild sickness to severe illness and death. Symptoms typically appear two to fourteen days after exposure.

On January 30, the World Health Organization declared COVID-19 a public health emergency of international concern. On January 31, United States Health and Human Services Secretary Alex M. Azar II declared the COVID-19 global outbreak a public health emergency for the United States to aid the nation in responding to COVID-19.

On March 15, 2020, Beverly Hills City Manager George Chavez, in his role as Director of Emergency Services, declared a local emergency in response to the ongoing public health concerns surrounding COVID-19. On March 16, 2020, the City Council ratified the local emergency declaration. Subsequent to those actions of the City, the state of California and Los Angeles County issued stay at home orders and shuttered nonessential businesses.

In mid-May 2020, both California and Los Angeles County began to lift the stay at home orders and allow businesses to reopen in a phased approach. Due to an increase in COVID-19 cases and hospitalizations in late June, the reopening was stepped back to discontinue indoor operations for nearly all businesses with the exception of retail. The limited nature of how a business can operate has had an impact on revenue for both businesses and for the City.

Additionally, based on travel restrictions enacted through a Presidential Executive Order which prohibits travel from many international counties to the United States, the occupancy rate at the hotels located in Beverly Hills were impacted and are well below what is traditionally seen throughout the year. This has several cascading and detrimental effects on tourism, shopping, and dining in Beverly Hills. The lower number of tourists has impacted the amount of transient occupancy tax collected by the City and the City will most likely see a decrease in sales tax.

Meeting Date: August 4, 2020

Impacts to the City’s Budget – Fiscal Emergency
At the City Council Study Sessions on April 21, 2020 and May 14, 2020, staff presented the significant projected negative effects of the COVID-19 pandemic on the City’s finances (Attachments 2 and 3). These reports contained information on a financial forecast for the City based on the impacts of COVID-19 to the City’s revenue. These forecasts are considered to be works in progress due to the ever-changing landscape presented by this virus and its impacts to the community.

For Fiscal Year 2020/2021 (“FY 20/21”), the operating budget adopted by City Council on June 29, 2020, projects a $38.4 million decrease in General Fund revenues as compared to the Fiscal Year 2019/2020 operating budget due to the impacts of COVID19 as well as the stay at home orders issued by Los Angeles County and the state of California.

The City has undertaken several efforts to reduce expenditures in FY 20/21 including reductions to:
 Capital improvement project funding;
 Maintenance and operations costs, equipment and vehicle replacements, and  Salary and benefit costs, which will have a direct effect on the level of services provided to the community.

Reductions to personnel have occurred through freezing all non-critical vacant positions as well as direction received from the City Council to offer programs to the employees to encourage early retirements and/or voluntary separation from the City.

It is extremely difficult to forecast how quickly the economy will recover from COVID-19 and it is highly unlikely the economy will fully normalize before either a vaccine or a cure for COVID-19 is found. Most experts believe COVID-19 will not be under control for another 6-18 months. Until a vaccine is widely administered, it is unlikely society will be able to return to activities related to travel, hospitality/entertainment, business, social interactions, and general life outside of their home. During this time, it is likely most business sectors, particularly the travel, hospitality, and entertainment sectors will struggle. The City is dependent on these industries for revenue and will continue to see significantly depressed revenues as these industries struggle.

In June, the Congressional Budget Offices stated the United States will face a long road to recovery and the impact on the economy caused by COVID-19 could last a decade.

This opinion is supported by the publication of various experts’ opinions in many newspapers, including the New York Times. Some of the experts have stated they believe as many as 75 percent of independent restaurants and bars in the country will not survive the economic impacts of COVID-19. Additionally, retailers are struggling nationwide with many filing for bankruptcy protection, including Brooks Brothers.

The City is very dependent on international and domestic travelers for revenue related to transient occupancy tax and sales tax. Many of these visitors dine at our restaurants and shop at the retail stores located in the City’s business triangle. The reduction of visitors combined with the limited way businesses may operate due to the health officer orders, will have a lasting impact on the City’s revenue. The Finance Department is projecting a $38.4 million decrease in General Fund revenues for FY 20/21, resulting in fiscal emergency for the City of Beverly Hills as the long term financial impacts are still to be fully realized.

Meeting Date: August 4, 2020

In order to place this measure on the November ballot for approval by the voters, the California Constitution provides that the Council must unanimously find that a fiscal emergency exists. Absent this finding, the measure would be placed on the next regular election for Council members, which is March of 2022.

Revenue Protection Measure
The Revenue Protection Measure, should it be adopted, would provide that if, and only if, another local governmental agency seeks to raise a transaction and use tax (sales tax) in Beverly Hills, then the City is authorized to prevent this tax increase and instead increase the Beverly Hills transaction and use tax by up to 0.75 percent.

In theory, should another local agency successfully pass a sales tax in the future, then the Beverly Hills’ sales tax measure would take precedence and preserve the revenue raised from the sales tax for the benefit of residents of Beverly Hills. However, this concept has not been tested in court.

Per the ordinance to be submitted to the voters, the City would begin the process to collect the tax on the first day of the month that another local governmental entity has scheduled an election on its tax. If the other entity’s tax fails to receive a sufficient number of votes, then the City of Beverly Hills process to collect the tax will be suspended. On the other hand, if the other entity’s tax passes, then the City of Beverly Hills will continue to process to collect its tax and would collect the tax in the beginning of the quarter that is at least 110 days away. The ordinance being submitted to the voters also provides an option for the City Council to suspend the tax at any time.

There is no immediate impact to the sales tax rate in Beverly Hills should this measure be successful. The sales tax would remain at 9.50 percent until these very specific set of circumstances arise.

The estimated revenue that would be generated by this transaction and use tax, in the event it is assessed, is approximately $28.06 million annually based on the last audited financial for the City, which was Fiscal Year 2018/2019. This measure would ensure the revenue from any future sales tax would be received by the City of Beverly Hills rather than Los Angeles County or any other special district. Those revenues could then be used to maintain the level of City services that the City’s residents desire.

Finally, August 7, 2020, is the last day to submit a measure to the Los Angeles County Registrar’s Office for inclusion on the November 3, 2020, ballot. The first resolution makes a finding of fiscal emergency. That requires a unanimous vote. If approved, then the ordinance and ballot question in the second resolution will need to be adopted by a two-thirds majority vote of the City Council (4 Council Members). Finally, the City Council will need to adopt a resolution to consolidate the election with Los Angeles County by a majority vote. If approved, the City Clerk’s Office will coordinate with Los Angeles County on the ballot measure and the elections process. City staff will coordinate the educational outreach efforts to the community.

Laurence Wiener,
City Attorney
Gabriella Yap,
Deputy City Manager
Concurred By Approved By
Attachment 5
B0785-0001\2441815v7.doc
RESOLUTION NO. 20-R-______

A RESOLUTION OF THE COUNCIL OF THE CITY OF BEVERLY HILLS

CALLING AND GIVING NOTICE OF THE HOLDING OF A SPECIAL

MUNICIPAL ELECTION TO BE HELD IN THE CITY OF BEVERLY HILLS ON TUESDAY, NOVEMBER 3, 2020, FOR THE SUBMISSION TO THE

VOTERS A QUESTION RELATING TO THE AUTHORIZATION OF A

THREE-QUARTER CENT TRANSACTIONS AND USE (SALES) TAX,

ESTABLISHING REQUIREMENTS FOR BALLOT ARGUMENTS FILED

WITH THE CITY CLERK TO BE INCLUDED WITH VOTER INFORMATION,

AND DIRECTING THE CITY ATTORNEY TO PREPARE AN IMPARTIAL

ANALYSIS OF THE BALLOT MEASURE
WHEREAS, on August 4, 2020, the City Council of the City of Beverly Hills (“City”) unanimously declared a fiscal emergency in order to place a general purpose transaction and use (sales) tax measure on the November 3, 2020 election ballot; and WHEREAS, the fiscal emergency declaration is based in part on the following unprecedented forecasted funding gaps, which were presented to City Council on May 21, 2020, and which threaten City services: an estimated $38.8 million deficit in Fiscal Year 2020/2021 (prior to budget balancing measures); and an estimated $32.4 million deficit in Fiscal Year 2021/2022; and
WHEREAS, the reductions in services that may be required in order to address the magnitude of the deficit facing the City could jeopardize the public’s health and safety by requiring the reduction of critical City services;
WHEREAS, approximately 42.6% of the sales tax in Beverly Hills is estimated to be paid by visitors and non-residents; and
WHEREAS, on the basis of the foregoing, the City Council determines that it is necessary to place a measure to conditionally impose the transactions and use (sales) tax by three-quarter cent per dollar, before the voters at the November 3, 2020 election, to address the budget crisis. A successful measure would increase the overall sales tax rate from 9.50% to 10.25% only if a similar sales tax measure is submitted by another governmental entity to the voters and receives voter approval. Thus, ensuring that the additional sales tax revenue comes directly to the City rather than to the other governmental entity.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BEVERLY HILLS DOES RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS:

Section 1. The foregoing recitals are true and correct and are hereby adopted by the City Council.

Section 2. Calling Special Municipal Election. Pursuant to the requirements of Article 1, Chapter 3, Division 9 of the California Elections Code, the City Council hereby calls and orders to be held in the City of Beverly Hills, California, on Tuesday, November 3, 2020, a Special Municipal Election for the purpose of submitting the voters the following question:














 




13303
2 B0785-0001\2441815v7.doc
Revenue Protection Measure: Shall an ordinance be
adopted which provides that if, and only if, another local governmental entity seeks to increase the transaction and use tax (sales tax) in Beverly Hills, then the City may prevent this tax increase and instead impose a Beverly Hills transaction and use tax by up to ¾% (approximately $28.06 million annually, indefinitely) so that the tax revenues will flow to Beverly Hills rather than the other governmental entity?
Yes
No
Section 3. Ballot Measure. The full text of the proposed Ordinance to be approved by the voters entitled “AN ORDINANCE OF THE CITY OF BEVERLY HILLS IMPOSING A

REVENUE PROTECTION MEASURE BY ENACTING A TRANSACTIONS AND USE (SALES) TAX TO BE EFFECTIVE IF ANOTHER LOCAL GOVERNMENTAL ENTITY IMPOSES A SIMILAR TAX” is attached as Exhibit A and incorporated herein by this reference, and such Ordinance shall be printed in the voter information pamphlet. The ballots to be used at the election shall be in the form and content as required by law.

Section 4. Passage of Measure. The passage of the general tax measure requires approval of a majority of qualified electors of the City voting in the election on the issue.

Section 5. Election Laws. The City Clerk is authorized, instructed, and directed to procure and furnish any and all official ballots, notices, printed matter and all supplies, equipment and paraphernalia that may be necessary in order to properly and lawfully conduct the election. In all particulars not recited in this Resolution, the election shall be held and conducted as provided by law for holding special municipal elections.

Section 6. Notice. The notice of the time and place of holding the election is given, and the City Clerk is authorized, instructed, and directed to give further or additional notice of the election in time, form and manner as authorized by law.

Section 7. Impartial Analysis. Pursuant to Elections Code Section 9280, the City Council hereby directs the City Clerk to transmit a copy of the ballot measure to the City Attorney.

The City Attorney shall prepare an impartial analysis of the ballot measure pursuant to California Elections Code Section 9280.

Section 8. Ballot Arguments. The City Council and its members are hereby authorized to submit a ballot argument in support of the ballot measure under Article 4, Chapter 3, Division 9 of the California Elections Code to the City Clerk. Any voter eligible to vote on the ballot measure, bona fide association of citizens, or any combination of voters and associations may also file a written argument in favor or against the ballot measure with the City Clerk. The arguments in favor or against the ballot measure must be 250 words in length or less. If more than one ballot argument in favor or against the ballot measure is received by the City Clerk, the City Clerk shall give preference and priority to the City Council and its members. 













 




DocuSign Envelope ID: ADC93D1A-25CB-48AB-BAD5-8E9B092DC3F9 Section 9. Rebuttal Arguments. Pursuant to Section 9285 of the California Elections Code ofthe State ofCalifornia, when the City Clerk has selected the arguments for and against the ballot measure that will be printed and distributed to the voters, the City Clerk shall send copies ofthe argument in favor ofthe ballot measure tothe author(s) ofthe argument against, and copies ofthe argument against to the author(s) ofthe argument in favor. The author(s), or a majority of theauthors, may prepare and submit rebuttal arguments notexceeding 250 words ormay authorize, in writing, others to submit a rebuttal argument. The rebuttal arguments shall be filed with the City Clerk, accompanied by the printed name(s) and signature(s) ofthe person(s) submitting it, or ifsubmitted on behalf of an organization, the name ofthe organization, and the printed name and signature ofat least one ofits principal officers, not more than 10 days after the final date for filing direct arguments. Rebuttal arguments shall be printed inthe same manner as thedirect arguments.

Each rebuttal argument shall immediately follow the direct argument that it seeks to rebut. All previous resolutions providing for the filing of the rebuttal arguments for City measures are repealed. The provisions of this Section 9 shall apply only to the Special Municipal Election of November 3, 2020, concerning the ballot measure set forth in this Resolution and shall then be repealed.

Section 10. Certification. The City Clerk shall certify to the passage and adoption of thisResolution and enter it into the Book of Resolutions of theCouncil of thisCity.

Adopted: August 4, 2020
ATT^Tf
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City Cleric , -^
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LESTER J. FRIEDMAN
Mayor ofthe City of
Beverly Hills, California
APPROVED AS TO FORM: APPROVED AS CONTENT:

LAURENCE S. WIENER GEORGE CHAVEZ
City Attorney City Manager
3 B0785-0001\24418I5v7.doc
4 B0785-0001\2441815v7.doc

EXHIBIT A
ORDINANCE NO. 20-OAN ORDINANCE OF THE CITY OF BEVERLY HILLS

IMPOSING A REVENUE PROTECTION MEASURE BY

ENACTING A TRANSACTIONS AND USE (SALES) TAX TO

BE EFFECTIVE IF ANOTHER LOCAL GOVERNMENTAL

ENTITY IMPOSES A SIMILAR TAX

THE PEOPLE OF THE CITY OF BEVERLY HILLS HEREBY ORDAIN AS FOLLOWS:

Section 1. A new Article 12 is hereby added to Chapter 1 of Title 3 of the Beverly Hills Municipal Code to read as follows:
“Article 12. Transactions and Use Tax
3-12-101: Short Title
3-12-102: Operative Date
3-12-103: Purpose
3-12-104: Transactions Tax Rate
3-12-105: Place Of Sale
3-12-106: Use Tax Rate
3-12-107: Contract for State Administration
3-12-108: Adoption Of Provisions of State Revenue and Taxation Code 3-12-109: Limitations On Adoption of Provisions of State Revenue and Taxation Code and Collection of Use Taxes
3-12-110: Permit Not Required
3-12-111: Exemptions And Exclusions
3-12-112: Amendments
3-12-113: Enjoining Collection Forbidden
3-12-114: Automatic Suspension, Implementation
3-12-115: Suspension Or Reduction
3-12-116: City Council Authority to Amend
3-12-101: SHORT TITLE
This article shall be known as the TRANSACTION AND USE TAX OF THE CITY. 3-12-102: OPERATIVE DATE
Except as modified by Section 3-12-114 below, this tax will become operative on the first day of the first calendar quarter commencing more than one hundred ten (110) days after the adoption of this article.
3-12-103: PURPOSE














 




5 B0785-0001\2441815v7.doc
This article is adopted to achieve the following, among other purposes, and is to be interpreted in order to accomplish these purposes:

A. To impose a retail transactions and use tax in accordance with the provisions of part 1.6 (commencing with section 7251) of division 2 of the state Revenue and Taxation Code and section 7285.9 of part 1.7 of division 2 of the state Revenue and Taxation Code, which authorizes the City to adopt this article, which becomes operative if a majority of electors voting on a ballot measure approving this article vote to approve the imposition of the tax at an election called for that purpose.

B. To adopt retail transactions and use tax regulations that incorporate provisions identical to those of the Sales and Use Tax Law of the State insofar as those provisions are not inconsistent with the requirements and limitations contained in part 1.6 of division 2 of the state Revenue and Taxation Code.

C. To adopt retail transactions and use tax regulations that impose a tax and provides a measure therefore that can be administered and collected by the California Department of Tax and Fee Administration in a manner that adapts itself as fully as practicable to, and requires the least possible deviation from, the existing statutory and administrative procedures followed by the California Department of Tax and Fee Administration in administering and collecting the California State Sales and Use Taxes.

D. To adopt a retail transactions and use tax ordinance that can be administered in a manner that will be, to the greatest degree possible, consistent with the provisions of part 1.6 of division 2 of the state Revenue and Taxation Code, minimize the cost of collecting the transactions and use taxes, and at the same time, minimize the burden of record keeping upon persons subject to taxation under the provisions of this article.
3-12-104: TRANSACTIONS TAX RATE
For the privilege of selling tangible personal property at retail, a transactions tax is hereby imposed upon all retailers in the incorporated territory of the City at a rate of three-quarters of one percent (0.75%) of the gross receipts of any retailer from the sale of all tangible personal property sold at retail in said territory on or after the operative date of this article. The tax imposed herein is in addition to any other transactions tax imposed by the City, Los Angeles County, or the State of California.
3-12-105: PLACE OF SALE
For purposes of this article, all retail sales are consummated at the place of business of the retailer unless the tangible personal property sold is delivered by the retailer or his agent to an out-of-State destination or to a common carrier for delivery by the retailer or his agent to an outof-State destination or to a common carrier for delivery to an out-of-State destination. The gross receipts from such sales include delivery charges, when such charges are subject to State sales and use tax, regardless of the place to which delivery is made. In the event a retailer has no permanent place of business in the State or has more than one place of business, the place or places at which the retail sales are consummated is determined under the rules and regulations to be prescribed and adopted by the California Department of Tax and Fee Administration. 













 




6 B0785-0001\2441815v7.doc
3-12.106: USE TAX RATE
An excise tax is imposed on the storage, use, or other consumption in the City of tangible personal property purchased from any retailer on and after the operative date of this article for storage, use, or other consumption in said territory at a rate of three-quarters of one percent (0.75%) of the sales price of the property. The sales price includes delivery charges when such charges are subject to State sales or use tax regardless of the place to which delivery is made.

The tax imposed herein is in addition to any other excise tax imposed by the City, Los Angeles County, or the State of California.
3-12-106: CONTRACT FOR STATE ADMINISTRATION
Before the operative date, the City shall contract with the California Department of Tax and Fee Administration to perform all functions incident to the administration and operation of this article; provided that, if the City has not contracted with the California Department of Tax and Fee Administration before the operative date, it must nevertheless so contract and in such case the operative date shall be the first day of the first calendar quarter following the execution of such a contract.
3-12-107: ADOPTION OF PROVISIONS OF STATE REVENUE AND TAXATION CODE
Except as otherwise provided in this article and except insofar as they are inconsistent with the provisions of part 1.6 of division 2 of the State Revenue and Taxation Code, the City adopts the provisions contained in part 1 of division 2 of the State Revenue and Taxation Code, commencing with section 6001 thereof, insofar as they relate to sales and use taxes. 3-12-109: LIMITATIONS ON ADOPTION OF PROVISIONS OF STATE REVENUE

AND TAXATION CODE AND COLLECTION OF USE TAXES
In adopting the provisions of part 1 of division 2 of the State Revenue and Taxation Code:

A. Wherever the State is named or referred to as the taxing agency, the name of this City will substituted. However, the substitution is not made when: