By Michele Monda
A responsible city should behave like a responsible household – expenses should be covered by available income.
Laguna Beach’s projected income for the next fiscal year is $144 million with budgeted expenses taking $143 million.
How does the over-eager City Council majority plan to pay for expensive projects it wants to do like taking over/undergrounding Laguna Canyon road ($150 million), a new fire station ($8 million), making the Promenade permanent ($3 million), a municipal pool ($12 million), overhauling St. Catherine’s with state-of-the-art staff offices ($20 million?), parking structure at the Village Entrance($10 to $15 million), Downtown Action Plan ($14 million)?
Raise taxes, of course.
Using the 2024 Community Survey as a guide, on June 11, 2024, the council discussed which form of increased taxes voters would support as a ballot measure in November: raising the sales tax, raising the Business License Tax, or raising the Transient Occupancy Tax (TOT) paid by hotel guests. A parcel tax on all real estate in Laguna was such a bad idea that it never made it into the survey.
A sales tax increase was dismissed even after residents were informed what the half-cent tax increase would fund — a split sample found 54% and 56% said no.
The Business License Tax (BLT) has not been revised in 28 years and is well below most other cities. While 53% responded no to raising the BLT, 49% agreed that the BLT needs to be modernized. It’s currently capped at $1,650 for all businesses, seemingly low for some of the larger businesses in town. Laguna restaurants, on average, enjoy annual gross revenue of $3 million with a relatively low turnover rate.
While, due to survey results, the council thought now is not the time to raise business taxes, all businesses wouldn’t necessarily receive substantial fee increases. If the BLT increase is targeted at restaurants and bars only, which collectively bring in over $400 million in annual revenue, and at least 50% of customers are visitors, the survey responses might have been different. Couldn’t the council impose increased BLT fees by category at a council meeting? They seem to be afraid to go that route and alienate their main constituents. But council felt if it could get the Chamber of Commerce on board with updating the tax, then this should be revisited.
The Transient Occupancy Tax (paid by hotel guests) is 14% of the room cost. 12% goes into the General Fund, the Capital Improvement Fund and the Measure LL fund. One percent goes to Visit Laguna for marketing, and 1% goes to fund the arts in Laguna. Compared to other cities, Laguna currently has the highest, with only Garden Grove (17%) and Anaheim (17%) higher. The council is proposing raising it 2%, making it 16%.
There was pushback from hotels in town — the general manager of the Ranch said they would fight this increase. With hotel occupancy rates at 70%, he felt this would erode occupancy even more as guests do look at total pricing. After being told tourists pay this tax, 62% of surveyed residents said they would approve this. In July, council will decide about raising only the TOT as a ballot measure. At a 2% increase, it is projected to raise $3.5 million.
Is $3.5 million enough? Councilman Bob Whalen claimed it wouldn’t be with all the deferred-for-decades projects the town needs to get done: a new fire station in South Laguna, city buildings requiring seismic updates and wildfire mitigation. Curious that he is just now worrying about these things when he was behind the $26 million St. Catherine’s purchase, the $13 million Presbyterian church parking structure (that we would never own), and the $150 million proposed Laguna Canyon Road takeover for undergrounding – all the while neglecting the biggest problem of them all: fixing the sewer system. He has been on the council for almost 12 years, and in this election year, he’s only now worried about infrastructure.
What about reducing costs and finding efficiencies? According to Laguna Beach City Manager Dave Kiff, that would not be enough to cover what the council wants to do. Yet 60% of respondents agreed that “The city should spend the money it already gets more responsibly instead of trying to ask for more.”
The city can start by having each employee justify why they are necessary. Since 2000, city staff has grown 50% while the population has declined by almost 1,400 residents.
We should investigate outsourcing departments like landscaping, institute a hiring freeze and look closely at their procurement processes. Our financial audits have had significant defects for years and need an independent review. But most importantly, the council needs to fund the things that residents care about most. Forget acquiring Laguna Canyon Road, stop spending on new staff offices at St. Catherine’s, let the Promenade go and sell Ti Amo. Repair our roads and stop big projects. Fix what’s broken first, and stop asking for more money.
Michèle is a 21-year Laguna resident and actively follows Laguna politics. She is the Treasurer of Laguna Beach Sister Cities and is involved with the local arts scene. She canbe reachedat[emailprotected].
