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The City Council May Take Action on any Item on this Agenda.
1. CALL TO ORDER / FLAG SALUTE / ROLL CALL
Council
Council Member Kyle Conley
Council Member Mike Losey
Council Member Kris Mobley
Mayor Pro Tem Mike Johnson
Mayor Tami Trent
Staff
City Manager Merritt Perry
City Clerk Siana L. Emmons
2. ORAL COMMENTS FROM THE PUBLIC
Members of the Public may be heard at this on any item within the subject matter jurisdiction of the City that is not on the Public Meeting Agenda. It is the practice of the Council to hold public comment for every item of business on the agenda at the time that item is heard. If a speaker cannot stay for a particular item of business, they may be heard during this time. Comments concerning the Consent Calendar may also be heard at this time. Speakers addressing the Council will be limited to 3 minutes per speaker. Be advised that, by law, the City Council can only deliberate or take action on items that are included on the agenda.
Special Meeting
Monday, February 26, 2024 at 9:30 am
3. DISCUSSION ITEM
a. Consider Potential Revenue Sources to Fund City Council Priorities Attachments:
Staff Report (3._2-26-24_Potential_Revenue_Generation.pdf)
4. BUSINESS ITEM - This item was moved to the beginning of the meeting. a. Approval of Letter Opposing Measure A "The Humboldt Cannabis Reform Initiative" Attachments:
Staff Report (4._2024-02-26_Staff_Report_-_Opposition_w_Attachment_.pdf)
5. ADJOURN
Pursuant to Government Code Section 54957.5, any non-confidential documents or writings that the City distributes, less than 72 hours before a regular meeting, to all or a majority of the legislative body's members must be made available to members of the public at the same time as the distribution. Documents and information related to the agenda topics are available for review at City Hall, 621 11th Street, between the hours of 8:00 AM to 5:00 PM. Members of the public are invited to come to the meeting and comment. In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk at 725-7600.
Notification prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting.
Contact: Siana L. Emmons, City Clerk ([email protected] (707)725-7600) | Agenda published on 02/22/2024 at 4:09 PM
Discussion Item a
STAFF REPORT
Discussion Item
DATE: February 26, 2024
TO: Honorable Mayor and Council Members
FROM: Merritt Perry, City Manager
Aaron Felmlee, Finance Director
SUBJECT: Consider Potential Revenue Sources to Fund City Council Priorities STAFF RECOMMENDATION:
It is recommended that the Council consider providing staff direction on potential revenue sources to fund City Council Priorities, and possibly consider a ballot measure for the November 5, 2024, General Election.
EXECUTIVE SUMMARY:
Council has expressed interest in maintaining competitive pay for public safety and other City workers whose pay are paid for from the City’s General Fund. In order to achieve this goal, the City needs to increase revenue. Although there are other options for increasing revenue for the City, taxes provide a stable source with the potential to generate sufficient dollars to fund the needs staff and the City Council have identified.
One of the needs identified by staff are related to the challenging environment to attract and retain employees, in particular public safety employees. This has been compounded by other Cities in Humboldt County offering hiring bonuses and higher salaries for the same job positions. If general fund dependent salaries which are primarily police positions were increased by 10% to remain competitive in the local area, the cost would be approximately $500,000 per year. With increasing employee benefit and insurance costs, that amount could increase by $50,000 or more annually.
Additionally, non-payroll costs are also increasing and there are increasing demands for training, equipment, materials and fuel. Staff would recommend targeting a minimum revenue generation amount of $1M per year to meet the short-term needs of the City.
In recent communications with the Fortuna Volunteer Fire Protection District (FVFPD), they have also had a challenging time recruiting and retaining staff and its volunteer workforce is less responsive than in years past. District representatives have indicated that they are also in need of additional revenue for additional staffing. Preliminary estimates provided by the FVFPD indicate they would need a minimum of $750K to $1M in additional revenue annually to add an additional six paid positions and cover purchases of new equipment and increased costs for payroll and nonpayroll costs.
The upcoming general election on November 5, 2024, provides the City Council with the opportunity to place either a general tax or a special tax measure on the ballot. General tax measures may only be placed on the ballot during a regularly scheduled general election of the Discussion Item a
City Council. This means a general tax would need to be scheduled for November 5, 2024, or it would need to wait until November 3, 2026.
A “general tax” is not legally restricted to any specific purpose and only requires a simple majority or 50% plus one for voter approval. A “special tax”, as opposed to a “general tax”, is legally restricted for a specific use and requires a super majority or two-thirds voter approval to pass. The difference in votes required between the simple majority and super majority is often the reason municipalities place general tax measures instead of special tax measures on the ballot.
Key differences between general and special taxes to consider in developing potential tax ballot measures are outlined below.
General Tax Special Tax
Use of Revenues Unrestricted Restricted
City Council Approval Two-thirds (66.67%) Majority (50% + 1) Voter Approval Majority (50% + 1) Two-thirds (66.67%)
Other Rules
A general tax election must be
consolidated with a regularly
scheduled general election of
the City Council unless an
emergency is unanimously
declared by City Council.
Special taxes must be deposited
in a separate account and the
City must publish an annual
report including tax rate,
amount of revenue collected
and expended, and status of
projects funded by the tax.
To meet the filing deadline to submit the request for a consolidated election to Humboldt County, the City should have the full text of a proposed measure or measures to the City Clerk on or before May 13, 2024. This leaves less than three months to determine and craft what, if any, revenue measures should be developed into written ballot measures to present to the voters on November 5, 2024.
Revenue Generation Options:
Local Transaction and Use Tax
The City’s local Transaction and Use Tax (TUT) rate is currently .75% or three-quarters of a cent for every dollar spent. Currently the City’s TUT, “Measure E”, generates approximately $2 million a year. The Transaction and Use Tax Oversight Committee (Measure E Committee) was created with the stated purpose to annually review the “Measure E” expenditures. Although the Measure E Committee monitors spending on parks, transit, streets, and public safety and the tax was and continues to be committed to this purpose, it was presented and passed by the voters as a “general tax”, only requiring a simple majority (50% plus one) to pass. “Measure E” will sunset in 2033, unless it is renewed by City voters in a future ballot measure.
Local municipalities (Cities and County combined) are limited to 2.0% additional tax above the state’s base rate of 7.25%. Fortuna’s 0.75% Measure E plus the County’s 0.50% Measure Z tax, Discussion Item a
equals 8.50% and thus leaves up to 0.75% capacity for a new or increased Fortuna TUT. Local TUT’s may be established or increased in 0.125% increments.
Every additional 0.125% increment in TUT for Fortuna would generate approximately $330,000 annually.
Transient Occupancy Tax
The City’s current Transient Occupancy Tax (“TOT” – also sometimes referred to as Bed or Hotel tax) rate is 10% with an additional 2% collected which is remitted to the Humboldt County Lodging Alliance. Unlike TUT, TOT rates are set at the discretion of the City voters and are not subject to a legal cap on amount. The most common rate for California cities is 10%, but a few cities, including Anaheim and Palo Alto have rates at or above 15%. In June 2022, Humboldt County (in unincorporated portions of the county) and Trinidad successfully increased their TOT rate to 12%.
Based on current revenue projections, every 1% increase in Fortuna’s TOT would generate $70,000.
Parcel Tax
The City does not currently have a per parcel special revenue tax but it is an option the City could consider. Because of the limitations placed on property taxes based on value by Proposition 13, parcel taxes are either a flat per-parcel tax or based on use, size or number of units on each parcel.
Constitutional limits placed on Parcel taxes require that they must be special taxes.
Based on rough current projections, every $25 per parcel tax would generate approximately $80,000 annually.
FISCAL IMPACT:
Exploring potential tax measures does not have a direct impact on the City’s budget or fiscal state, although a successful tax measure’s impact will increase revenue depending on the tax rate, tax type and intended use of funds.
RECOMMENDED COUNCIL ACTION:
Provide staff direction on potential revenue sources to fund City Council Priorities as a ballot measure for the November 5, 2024, general election.
Business Item a
STAFF REPORT
City Council Business Item
DATE: February 26, 2024
TO: Honorable Mayor and Council Members
FROM: Shari Meads, Community Development Director
THROUGH: Merritt Perry, City Manager
SUBJECT: Letter Opposing Measure A “The Humboldt Cannabis Reform Initiative” STAFF RECOMMENDATION:
Authorize and sign a letter to record City Council opposition to the Humboldt Cannabis Reform Initiative (Measure A) as unanimously approved (with Council Member Conley absent) at the February 20, 2024 Council meeting.
INTRODUCTION:
The March 5, 2024 California Presidential Primary Election ballot includes a local voter initiative entitled the Humboldt Cannabis Reform Initiative (Measure A).
The Humboldt Cannabis Reform Initiative Committee provided an informational presentation in support of Measure A at the February 5, 2024 Council meeting. The presentation was followed by considerable in-person public comment in opposition of the measure. The Humboldt County Growers Alliance provided a presentation in opposition of Measure A at the February 20th Council meeting.
Members of the public provided in-person public comment supportive of the No on Measure A campaign. The Council, after considering the two Measure A related presentations and public comment, directed staff to prepare an official record of opposition to Measure A for signature by the Mayor (Attachment 1 to this report).
DISCUSSION:
Measure A proponents cite several laudable goals, including supporting small-scale, high-quality cannabis cultivation, environmental protection, water conservation, and public transparency and participation, among others. Additionally, Measure A suggests expanding public notice, ensuring appropriate use of generators, and limiting noise.
While at a first glance these appear as supportable initiatives, Measure A opponents point out implementation approach problems such as limiting the size of cannabis farms, reducing the number of overall farming permits in the county, and requiring stricter building regulations and redundant inspections which could hamper an already struggling cannabis industry. Cannabis cultivation is currently one of the most regulated industries in the state and Measure A would do nothing to improve regulatory oversight.
Business Item a
Another argument against Measure A is that voter initiatives are amendable only through subsequent voter initiative. If Measure A were to pass but not accomplish its stated goals, another vote of the public would be required before changes could be implemented; a costly and lengthy endeavor. Given the complex and rapidly-evolving nature of the legal cannabis industry, adopting policy which cannot be nimbly amended in response to public input is unwise.
As part of the Measure A discussion, Council Member Losey recognized that many of the stated intentions of the proposed measure could and likely should be considered as part of a comprehensive County evaluation of the Cannabis Ordinance.
FINANCIAL IMPACT:
None
RECOMMENDED COUNCIL ACTION:
Authorize and sign a letter to record City Council opposition to the Humboldt Cannabis Reform Initiative (Measure A).
ATTACHMENTS:
• Attachment –Letter of Opposition to Measure A, the Humboldt Cannabis Reform Initiative
Fortuna City Hall
621 11th Street
Fortuna, CA 95540
(707) 725-7600
1 City of Fortuna
www.friendlyfortuna.com
February 26, 2024
To Whom It May Concern:
RE: Formal Opposition to Measure A, the “Humboldt Cannabis Reform Initiative” On March 5, 2024 the California Presidential Primary Election will be held. This election includes a Humboldt County voter initiative called Measure A, the “Humboldt Cannabis Reform Initiative.” The Fortuna City Council recognizes that the success or failure of the already highly regulated cannabis industry impacts the City’s economy and opposes Measure A.
A March 2023 analysis from the County of Humboldt’s Planning and Building Department determined that if passed, Measure A would have “dire consequences to the cannabis industry in Humboldt County by “discourage [ing] existing permit holders from modifying their permits in any way.” Additional language from the County’s analysis points to Measure A’s proposed restrictions on “infrastructure intended for environmental protections or modification of activities or site configuration to adapt to the evolving industry,” and how “these restrictions affect the smallest of farms permitted in Humboldt County to the largest cultivation sites.” As a voter initiative, Measure A would establish regulations that could not be changed without another voter initiative. This creates obstacles to the success of the industry in an already highly regulated market by preventing policy changes necessary to adapt to the evolving industry. The County needs to retain flexibility and responsiveness to public input to maintain an appropriate balance between all interests.
For these reasons, the Fortuna City Council is opposed to Measure A.
Sincerely,
Tami Trent, Mayor
Fortuna City Council