CITY OF HUNTINGTON BEACH
CITY COUNCIL MEETING – COUNCIL MEMBER ITEMS REPORT
TO: CITY COUNCIL
FROM: Mayor Pro Tem Gracey Van Der Mark and Councilmember Casey McKeon
DATE: July 18, 2023
SUBJECT: Proposed Charter Amendment – City of Huntington Beach Real Property – Property Tax
ISSUE STATEMENT
The City’s Finance Commission reviewed the recent transactions that converted the properties Elan and Breakwater from privately owned residential income properties to “workforce housing”, the Finance Commission has determined that the scope of these real estate investments is outside of the city’s primary investment objectives. According to the Huntington Beach
Treasurer’s invest policy, the investment policies and practices are:
1) To assure compliance with all Federal, State, and local laws governing the investment of public funds under the control of the City Treasurer. 2) To protect the principal moneys entrusted to this office. 3) Achieve a reasonable rate of return within the parameters of prudent risk management while minimizing the potential for capital losses arising from market changes or issuer default.
In a recent Finance Commission issued memo, the Finance Commission observed that elected and Appointed Public Officials owe a fiduciary duty to their citizens with regard to the officials’ handling of the public’s money. In accepting a fiduciary duty, the City Council accepts a legal commitment to act in the best interests of their beneficiary, the citizens. It is the conclusion of the Finance Commission that Real Estate investments that require the City to forgo property tax collection for any particular property does not represent the “best interest” of the citizens of Huntington Beach, nor does it show prudent money management or prudent risk management. Moreover, any foregoing of property tax is essentially an “expense” or “burden” to the taxpayer, which should not be capriciously done by City Councils.
Finance Commission, therefore, requested the City Council to consider proposing an amendment to the City Charter that would restrict City Councils from engaging in real property transactions that would require the City of Huntington Beach to forgo regularly collected property taxes on investment property, unless those purchases are approved by the voters of the City of
Huntington Beach. Exceptions to this rule would/may include real property transactions that are important for acquisition of private property for infrastructure.
RECOMMENDED ACTION
1. Consider proposing an amendment to the City Charter that would restrict City Councils from engaging in real property transactions that would require the City of Huntington Beach to forgo regularly collected property taxes on investment property, unless those purchases are approved by the voters of the City of Huntington Beach. Exceptions to this rule would/may include real property transactions that are important for acquisition of private property for infrastructure. Request the Charter Review Ad Hoc Committee propose parameters, language, and timing of the Charter amendment measure for Council consideration.
2. Direct the City Manager to come back with
a system for the City to have a Real Property
Leasing, Purchasing, and Disposition Policy and a centralized Real Property function.
STRATEGIC PLAN GOAL
Economic Development and Fiscal Sustainability