STAFF REPORT
CITy oF BURBANK
FINANCIAL
SERVICES
DATE: November 15, 2022
TO: Justin Hess, City Manager
FROM: Jennifer Becker, Financial Services Director B
By: Steven Aragon, Senior Administrative Analyst
SUBJECT: Introduction of an Ordinance Amending and Restating Articles 2-4-6 (Transient Occupancy Tax) and 2-4-19 (Transient Parking Tax) of the Burbank Municipal Code to Revise Penalties for Failure to Comply with Audit Requests, Clarify Tax Administrator Powers and Other Clarifying Amendments
RECOMMENDATION:
Introduce AN ORDINANCE OF THE COUNCIL OF THE CITY OF BURBANK AMENDING AND RESTATING ARTICLES 2-4-6 (TRANSIENT OCCUPANCY TAX) AND 2-4-19 (TRANSIENT PARKING TAX) OF THE BURBANK MUNICIPAL CODE TO
REVISE PENALTIES FOR FAILURE TO COMPLY WITH AUDIT REQUESTS, CLARIFY TAX ADMINISTRATOR POWERS AND OTHER CLARIFYING AMENDMENTS.
BACKGROUND:
The Burbank Municipal Code (BMC) Article 6, Transient Occupancy Tax (TOT) and Article 19, Transient Parking Tax (TPT) establish the regulations and administrative procedures of these taxes for the City of Burbank. An annual audit was performed in 2021 for TPT compliance. During the Audit Committee meeting of August 30, 2021 staff presented the results of the annual audits for both TOT and TPT. Committee members, then Mayor Bob Frutos and Vice Mayor Jess A. Talamantes, requested staff bring back a proposal to increase the penalties for failure to comply with the audit provisions for the TPT ordinance, and to incorporate penalties for non-compliance into the TOT ordinance as well.
Through further examination of the BMC, Article 19, it was determined that the protocols requiring parking operators to comply with TPT audits should be revised to encourage timely cooperation with audit requests. Many of the provisions in the TOT ordinance are either identical or very similar to those of the TPT regulations. Staff found that similar to the TPT, it is necessary to revise the language in the TOT ordinance to encourage timely cooperation with audit requests. During this review, staff considered other changes to the TOT and TPT ordinances to clarify administrative procedures and define the authority of the Tax Administrator.
DISCUSSION:
The TPT ordinance currently includes language for a parking operator to pay a $500 penalty for failure to maintain records for three years. During the 2021 audit, there were some parking operators which were either deemed non-responsive or did not comply with requests for financial information by the City's audit firm, Lance, Soll & Lunghard, LLP (LSL). This is a frequent occurrence with parking lot operators, who may change ownership frequently and often don't maintain accurate records. The penalty as stated in the ordinance was found to be insufficient to encourage compliance and does not impose a reasonable penalty for non-compliance. On the contrary, the relatively low penalty amount of $500 can encourage some parking operators to refuse to cooperate, as the penalty is often less than what the findings could be for non-payment of taxes if the auditor were given access to the vendor's financial records. Staff proposes the penalty be revised to an amount of $1,000 or ten percent of the tax owed to the City for the audit period, whichever is greater.
The TOT ordinance section 2-4-613, Records includes vague language requiring hotel operators to provide records to authorized agents of the City as part of an audit. However, there are no provisions to enforce compliance when hotel operators fail to comply timely, do not comply, or fail to preserve required records. The addition of a monetary penalty and restructuring of the requirements to cooperate with audits are necessary to ensure compliance on the part of hotel operators. Staff proposes the addition of a penalty of $2,000 or five percent of the tax already reported for the audit period, whichever is greater.
This proposed penalty amount has been incorporated in section 2-4-611, Penalties and Interest and retitled Penalties, Interest, Audit Deficiency. As part of the reorganization and clarification of the ordinance language, all penalties have been moved to this section allowing hotel operators easier access to this information.
Staff also recommends changes to the TOT and TPT ordinances to reorganize both documents and clarify the respective taxes' intent and administration. These changes include the removal of the term "Director" and replacing it with the more proper "Tax Administrator" ", the revisions to gender-specific language to make the TOT and TPT gender-neutral, and revisions to clearly restate existing regulations. Language was added to state the Tax Administrator's powers granted under each ordinance. This includes the power to enforce these ordinances and the ability to adopt rules and regulations not inconsistent with the provisions of these ordinances to carry out and enforce the payment, collection, and remittance of the TOT. Where uncertainty exists regarding any interpretation of these ordinances, the Tax Administrator may interpret and determine the intent of the provisions of each ordinance.
FISCAL IMPACTS:
There is no direct fiscal impact as a result of this report. However, the proposed revisions 2 to both ordinances will encourage timely and accurate compliance with the City's audit procedures, thus minimizing the loss of future TOT and TPT revenues. Most importantly, the revisions will appropriately fine those who do not comply.
CONCLUSION:
Amending BMC Article 6, Transient Occupancy Tax and Article 19, Transient Parking Tax under this ordinance will restate existing regulations and procedures involving tax collection, expenditure, notice, penalties, and enforcement, including the authority and duties of the tax administrator.
Staff recommends that City Council introduce the proposed Ordinance and consider its adoption at a later meeting.
ATTACHMENTS:
Attachment 1: Ordinance
Attachment 2: Redline of TOT Text Amendments
Attachment 3: Redline of TPT Text Amendments