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HomeMy WebLinkAboutItem 2 - Resolution to delay collection of TOT Penalties Department Name: Finance Cost Center: 2001 For Agenda of: March 27, 2020 Placement: Consent Estimated Time: N/A FROM: Brigitte Elke, Finance Director SUBJECT: RESOLUTION TO DELAY TRANSIENT OCCUPANCY TAX RELATED LATE FEES AND PENALTIES RECOMMENDATION Adopt a Resolution (Attachment A) authorizing the City’s Tax Collector to delay the collection of late fees and penalties for overdue Transient Occupancy Tax (TOT) received for stays during February and March 2020 until August 31, 2020. DISCUSSION Background On Tuesday, March 17, 2020, the City Council declared a state of emergency in response to the global health crisis and pandemic brought on by Covid-19 (Coronavirus). During these difficult times and in an effort to slow the spread of the disease, the County of San Luis Obispo has given “shelter at home” directive for non-essential services and activities and the City is partaking in these efforts. The impact of the global pandemic and the resulting response to slow the spread of the disease has impacted the business and tourism activities in the City and staff is in the midst of assessing the short- and long-term ramifications and effects on the City’s finances. One portion of the City’s projected losses is due to reduced TOT revenues. Most lodging businesses within the City are now experiencing dire declines in occupancy while trying to maintain their properties and operating cost. Staff has received several inquiries about the monthly TOT remittance and requests to postpone collection. To be clear, the request the payment of taxes collected on behalf of the City until August 31, 2020 and avoid any otherwise applicable late penalties that would be assessed consistent with adopted city policies. Recommended Action In an effort to assist the lodging industry during these daring times, staff recommends to delay otherwise applicable late fees and penalties on delinquent TOT remittance for February (due on March 31, 2020), and March (due on April 30, 2020), until August 31, 2020. August 31, 2020 is the latest date that these payments can be delayed while still recording the revenues to the applicable fiscal year. A question may arise, what about other taxes. TOT is one where the City has plenary authority to otherwise waive late penalties. Whereas, UUT and Sales Taxes are collected by the State of California and later remitted to the City’s. Business license fees are due later this summer and Staff will be monitoring recovery efforts. The bottom line is that the City like any business needs to maintain its own cash flow and TOT seemed appropriate given the focus of the economic impacts of COVID-19 on hoteliers given the stay in home orders. Policy Context Transient Occupancy Tax is governed by the City’s Municipal Code under Chapter 3.04. Public Engagement This item will be reviewed during a public session of the City Council acting as the Disaster Council of the City of San Luis Obispo and is based on feedback from the lodging industry. CONCURRENCE The City’s Tourism Business Improvement Board has not been able to meet on this item as its board meeting occurred on March 11, 2020. ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to the recommended action in this report, because the action does not constitute a “Project” under CEQA Guidelines Sec. 15378. FISCAL IMPACT Budgeted: Yes Budget Year: 2019-20 Funding Identified: Yes/No Fiscal Analysis: Funding Sources Total Budget Available Current Funding Request Remaining Balance Annual Ongoing Cost General Fund N/A State Federal Fees Other: Total $ N/A This action does not waive the requirement to remit TOT to the City. It only postpones the assessment of penalties and interest charges on the debt to the City until August 31, 2020. The estimate of delayed taxes is approximately $400,000-$600,000. Since the number of late payments is unknown, the impact cannot yet be assessed. Since the action is only applicable to the February and March remittances, the City has sufficient cash flow to continue its services to allow for this action. ALTERNATIVES 1. The City Council could decide to allow additional months to fall under this provision. This is not recommended as it could jeopardize the City’s cash flow as remittance for subsequent months will already be diminished due to the effects of the travel ban and “Shelter at Home” directives. 2. The Council could decide to allow postponement of TOT remittance altogether. This is not recommended as it would jeopardize the City’s ability to provide essential services. Attachments: a – Draft Resolution R ______ RESOLUTION NO. _____ (2020 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AUTHORIZING THE CITY’S TAX COLLECTOR TO DELAY LATE FEES AND PENALTIES FOR DELINQUENT TRANSIENT OCCUPANCY TAX RECEIVED FOR STAYS DURING FEBRUARY AND MARCH 2020. WHEREAS, On Tuesday, March 17, 2020, the City Council declared a state of emergency in response to the global health crisis and pandemic brought on by Covid-19 (Coronavirus); and WHEREAS, due to the immediate effect of the emergency shelter-at-home directive on the lodging industry, many hoteliers have inquired about the possibility to delay remittance of the collected transient occupancy tax; and WHEREAS, City staff has considered the projected COVID-19 losses and the possibility to assist the City’s lodging partners who are directly impacted by State and local shelter at home orders; WHEREAS, San Luis Obispo Municipal Code Section 3.04, provides that “Any operator who fails to remit any tax imposed by this chapter within the time required shall pay a penalty the amount of which will be set by resolution of the city council;” and WHEREAS, the Council wished to temporarily suspend the imposition of adopted penalties for late payment of currently due payments because the COVID-19 pandemic is acutely and disproportionately impacting the local lodging and hotel industry; and NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Pursuant to Municipal Chapter 3.04.080, otherwise applicable penalties applicable to late payments are hereby temporarily suspended and the Tax Collector is authorized to delay imposition of late fees and penalties for late payment to the City of Transient Occupancy Tax (TOT) revenues received by lodging establishments for February 2020 and March 2020 transient occupancy lodging services until August 31, 2020. SECTION 2. Nothing herein shall relieve any person or entity of its obligation to pay and to remit to the City amounts otherwise due pursuant to Chapter 3.04 and any late fees or penalties that otherwise would have become due for failure or refusal to pay amounts due for February and March 2020 shall be assessed and shall become due and payable to the City if the referenced TOT payments due to the City have not been made in full by August 31, 2020 Upon motion of _______________________, seconded by _______________________, and on the following roll call vote: AYES: Resolution No. _____ (2019 Series) Page 2 R ______ NOES: ABSENT: The foregoing resolution was adopted this _____ day of _____________________ 2020. ____________________________________ Mayor Heidi Harmon ATTEST: ____________________________________ Teresa Purrington City Clerk APPROVED AS TO FORM: _____________________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, 2020. ____________________________________ Teresa Purrington City Clerk