Costa Mesa considers new taxes

Alicia Robinson

City leaders won’t ask voters to approve a hike in the sales tax, but

they will consider four other new and increased tax options to boost

the city’s income over the long term.

Council members asked city staff members to bring them more

detailed information about possible increases in the business license

tax and the transient occupancy tax, both of which would require

voter approval, and creation of a sanitation franchise fee and a

fire/medical subscription fee, both of which would be new and could

be imposed by council.

New sources of revenue have been a topic of discussion for the

council since June 2003. Based on preliminary estimates, the sales

tax would have been most lucrative, with an increase of a quarter of

a percent generating nearly $9.4 million per year.

But council members and business leaders have been wary of the

sales tax idea, citing the state’s penchant for digging into local

coffers to cover its financial shortfalls.

“That seems to be the standard way of operating, just raiding our

taxes every time we increase them, so why give them more money to

fumble?” Councilman Allan Mansoor said.

But city reports noted the business license tax and transient

occupancy tax rates haven’t changed for at least 20 years. The

business license tax is a fee paid by businesses that make at least

$1,000 in annual gross receipts. It starts at $25 for businesses that

make between $1,000 and $25,000 per year and increases incrementally

for businesses that make more but is capped at $200 regardless of a

business’ income.

Transient occupancy tax is a “bed tax” of 6% of hotel room costs

that is now charged to hotel users. The occupancy tax would grow by

about $665,000 for each 1% increase.

The proposed sanitation franchise fee would be charged to waste

haulers for using city streets and right-of-way. Most cities that

charge such a fee base it on a percentage of the waste haulers’

revenues. Based on a survey of 18 Orange County cities that charge

between 1% and 10% of waste haulers’ earnings, the fee could yield as

much as $1 million annually in additional revenue for the city.

Right now, city residents’ tax dollars cover their emergency

medical service. The fire/medical subscription would charge a fee to

participating households for emergency medical services such as

ambulance transportation. Those who participate would pay a fee, for

example $30 a year, to cover everyone in their household. People not

participating in the program would be billed for emergency medical

services when used. No estimate was available for how much money it

would generate for the city.

City Finance Director Marc Puckett is scheduled to meet with the

city manager today to determine what information council will need,

but he wasn’t sure when staff will report its findings.

“The timeline for each of the issues may be slightly different

based on the depth of the information that needs to be prepared on

each of the matters,” he said.

Whatever council members decide, the current proposals are not

designed to fix this year’s budget shortfalls but are planned as a

strategy to increase revenues in future years, Puckett said.

Costa Mesa Chamber of Commerce President Ed Fawcett said council

members were smart to drop the sales tax idea because the business

community and voters would not have likely supported it.

While businesses are wary of the two options on the table that

could cost them, they realize the city’s need to address its ongoing

loss of revenue to the state, Fawcett said.

“The council is wise in looking at options and I think it’s

absolutely mandatory that they bring anybody impacted by any tax

increases into the conversation early on,” he said.

Mansoor said the fire/medical subscription fee was the only option

of the four to be studied that he wanted more information about

because it’s voluntary and user-based rather than being imposed on

everyone.

“I definitely don’t support increasing any kind of tax before we

make some serious cuts and I don’t think we’ve done that,” he said.