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M E M O R A N D U M
TO: Honorable Mayor and Members of the City Council
FROM: Eric S. Vail, City Attorney
Robert F. Messinger, Deputy City Attorney
FILE NO.: 08747-0009
DATE: July __, 2023
RE: Alternatives for Financing Mitigation of Warehouse Impacts on the City
RECOMMENDATION:
Receive report on alternative tax measures to finance additional public services and infrastructure repair and replacement arising from logistics operations with the City of Rialto, and provide direction to staff.
BACKGROUND:
The proliferation of logistics warehousing within the City of Rialto (“City”) has had significant impacts on the City’s infrastructure and public services, including truck traffic enforcement. The City has 31.2 million square feet of existing warehouse space and an additional 2.6 million either planned or approved. The result is 23,000 daily truck trips within the City. 1 Moreover, t he Inland Empire region’s geography coupled with the combined emissions of diesel t rucks, trains and planes have resulted in the Riverside - San Bernardino-Ontario area having the worst air quality in the United States as of 20192.
The generation of additional revenue to pay the costs of both the necessary ongoing services, and the repair and replacement of infrastructure, may be accomplished through the imposition of a tax.
DISCUSSION:
There are three methods of taxation to generate revenue that may be used for financing services and/or improvements needed as a result of impacts on the City arising from the proliferation of logistics operations located within the City. The three methods are a parcel tax, a Mello -Roos Community Facilities District special tax, and a business license tax.
All three types of taxes may be apportioned on the basis of the number of loading docks at the property or business that is subject to the tax. A comparison table is attached hereto as Exhibit A. The amount of revenue that may be generated by any of the three alternative taxes is dependent on the method of apportioning the tax and the rate of the
1 A Region in Crisis: The Rationale for a Public Health State of Emergency in the Inland Empire, January 2023, Robert Redford Conservancy for Southern California Sustainability, Pitzer College.
2 U.S. Environmental Protection Agency, Air Quality Index Report, 2019.
Honorable Mayor and Members of the City Council
July __, 2023
tax, both factors that will be determined by the City Council and cal culated by a special tax consultant.
Parcel Tax
Parcel taxes are authorized under the California Constitution, Article XIII, Section 4, and they require a two-thirds (66.67%) vote for approval. Parcel tax revenues can be used for any type of spending, including construction costs, employee salaries, and other projects or spending needs. Because a parcel tax is a special tax, the specific uses of the tax must be specified and the revenues limited to use for such purposes.
Parcel taxes are typically a flat amount based on the type of use on the parcel subject to the tax, such as residential, commercial, industrial. A parcel tax may also be apportioned on the basis of square feet of building space or the number loading docks at a warehouse.
Furthermore, a pa rcel tax may be structured to apply only to parcels zoned for specific uses, such as industrial uses, including warehousing and logisitics. The parcels that will be subjected to a parcel tax is a determination made by the City Council. The property owners are responsible for paying a parcel tax although it may be passed through to a tenant subject to appropriate lease provisions.
An election on a parcel tax measure is of the registered voters within the City and may be held either by a mail ballot election or a regular election. The mail ballot election date for 2023 on which a parcel tax measure may be conducted is the last Tuesday in August, 29, 2023. Alternatively, the regular established election date for 2023 is November 7, 2023.
Mello-Roos Community Facilities District Special Tax
Mello-Roos special taxes are authorized under the Mello-Roos Community Facilities Act of 1982, Government Code section 53311, et seq., and they require a two-thirds (66.67%) vote for approval. Mello -Roos tax revenues can be used for a wide variety of services, including police, fire, recreation, library, and street and road maintenance; and to finance acquisition and construction of any tangible property with an estimated useful life of five years or longer. Mello-Roos taxes are special taxes, and therefore, the use of the revenue must be specified and the revenues restricted to such uses.
Mello-Roos taxes are typically structured on the basis of density of development, square footage of construction, or flat acreage charges. The requirement is that the method of apportionment be based on a reasonable basis as determined by the City Council.
Therefore, a Mello-Roos tax may also be apportioned on the basis of the number of loading docks at an industrial building. Furthermore, a Mello-Roos community facilities district may be created to include only parcels zoned for specific uses, such as industrial uses, including as warehousing and logisitics. Similar to a parcel tax, it is at the City Council’s discretion to determine the parcels and uses that will be subject to the tax. As Honorable Mayor and Members of the City Council
July __, 2023
with a parcel tax, the property owners are responsible for paying a parcel tax although it may be passed through to a tenant subject to appropriate lease provisions.
Prior to setting and conducting an election for a Mello -Roos tax, a noticed hearing must be held on the proposed district to provide for protests against the establishment of the district, the extent of the dis trict, or the furnishing of specified types of public facilities or services. If no majority protest occurs, the City Council may then adopt a resolution of formation and submit the levy of the special tax to the voters in the next general election, or in a special election to be held at least 90 days, but not more than 180 days, following the adoption of the resolution of formation. The election may be conducted by mail ballot.
If the tax will apply to existing parcels with warehouse uses, the election w ill be of the registered voters within the City. If only new warehouse development will be subject to the tax, the election may be of either the registered voters or the landowners.
Business License Tax
Business license taxes imposed to raise revenue are authorized under California Government Code section 37101, and they require a majority (50% +1) vote for approval.
A business license tax is a general tax and its receipts are general revenues and may be used for any type of spending, including construction costs, employee salaries, and other projects or spending needs. Accordingly, a business license tax may not be characterized as being specifically for a limited purpose or it may be deemed a special tax and require two-thirds voter approval.
Business license taxes may be imposed as a flat amount based on gross receipts .
However, business license taxes may also be apportioned on the basis of the number of square feet of gross floor area of building space devoted primarily to distribution center use; or a business license tax may be apportioned based on the number of truck docks at a logistics or distribution business. Because the City already has a generally applicable business license tax ordinance, a business license tax applied to logistics businesse s or distribution centers would be drafted in the form of an amendment to the existing ordinance.
An election on a business license tax measure is of the registered voters within the City and may be held either by a mail ballot election or a regular election. The mail ballot election date for 2023 on which a parcel tax election may be conducted is the last Tuesday in August, which is August 29, 2023. Alternatively, the election may be held on the regular established election date for 2023 which is November 7, 2023. However, in either case, placing a measure on the ballot in 2023 would require a unanimous vote of the City Council that the placement of the tax on the ballot is an emergency. Otherwise, a general tax must be consolidated with a regularly scheduled general election for members of the City Council, which will next occur in 2024. (Cal. Const. Art. XIII, Sec. 2.) Honorable Mayor and Members of the City Council
July __, 2023
CONCLUSION:
There are three types of taxes the City Council may select from to place on the ballot for the purpose of raising revenue to finance services and/or improvements relating to the impacts of logistics operations within the City. All three types —parcel tax, Mello -Roos tax, and business license tax —may be used for both services and improvements. The three tax types may all be apportioned on the basis of number of truck docks or some other reasonable basis.
All three types may be presented to the voters through a mail ballot election. The parcel tax and the Mello-Roos taxes are subject to a 2/3rds approval vote. The business license tax is subject to a majority approval vote. The parcel tax may be placed on the ballot for August 29, 2023, as a mail ballot election or on November 7, 2023 as a regular election.
The Mello-Roos tax may be placed on the ballot for an election held not less than 90 days nor more than 180 days after adoption of a resolution of formation, as a mail ballot election, or on November 7, 2023, as a regular election. The business license ta x may be placed on the ballot for August 29, 2023, as a mail ballot election or on November 7, 2023, as a regular election, subject to a unanimous City Council vote that the placement on the ballot in 2023 is an emergency. Otherwise, the tax must be consolidated with a regularly scheduled general election for members of the City Council.
EXHIBIT A
TAX TYPE COMPARISON
TYPE PARCEL TAX MELLO-ROOS BUSINESS LICENSE
TAX
General or Special Special Special General
Approval Vote 2/3 2/3 Majority
Eligible Voters Registered
voters
Registered
voters/landowners*
Registered voters
Use for Services Yes Yes Yes
Use for
Improvements
Yes Yes Yes
Apportion on basis of
loading dock number
Yes Yes Yes
Regular Election
Date
11/7/23 11/7/23 11/7/23**
Mail Ballot Elec. Date 8/29/23 90-180 days after
Formation Resolution
8/29/23**
* Eligible voters are the City’s registered voters if existing warehouse parcels are subject to the tax; eligible voters may be landowners is only new warehouse development will be subject to the tax.
** Requires a unanimous City Council vote that the placement on the ballot in 2023 is an emergency.