Sunday, April 10, 2011

The Tough Slog To Increase Revenue

In tough times, it’s always tempting to think that you can solve all your financial problems by finding some magical way to increase revenue. After all, spending money is always more fun than cutting the budget yet again. But the truth of the matter is that in this economy finding more revenue – especially in a way that doesn’t place an additional burden on our already overburdened taxpayers – is a tough slog.

Last week the City Council held a workshop where we discussed some of the possible ways we might generate more revenue. We talked about everything from “crash taxes” (charging out-of-town people involved in auto accidents) to selling or leasing city property as a way of raising cash to putting another proposed sales tax increase on the ballot. Not surprisingly, none of these ideas got much traction. But we did talk about range of other ideas – and, in the end, we voted to pursue a few things that seem worth a try, including:

  1. Hiring an outside firm to help us make sure all businesses in the city pay business license tax.
  2. Conducting on audit of our hotel bed tax collections to ensure all hotels and motels (and vacation rentals) are collecting this tax.
  3. Renegotiating city leases to increase revenue where possible.
  4. Ramping up efforts to obtain private donations, especially for capital projects in parks and other public locations where naming opportunities exist.
  5. Continuing to focus on making our Auto Center a stronger retail destination.
  6. Increasing our grant-writing capability.

The truth is that all these efforts won’t generate an enormous amount of money – at least not in the short run. Our best hope for an immediate pop is keeping a closer eye on compliance for business license tax and hotel bed tax.

I know first-hand that many businesses don’t get business licenses – about 20 years ago, I was one of those business owners! And I’m confident that with more compliance, we can increase business license tax revenue by 10-20%. However, that would amount to somewhere between $150,000 and $300,000. That’s a good chunk that will help us, but it’s not going to solve all our problems.

Similarly, it’s pretty clear that some smaller motels and vacation rentals don’t pay hotel bed tax. But most of the big hotels already pay, so we’re talking about a pretty small amount here too.

The other efforts are probably longer term – but we can’t lose sight of them just because we’re hurting now. The Auto Center did well during the boom – at our peak, we had 13 dealerships and the same auto sales as Oxnard – but we’re hurting badly now, mostly because there’s no surrounding retail in Ventura as there is in Oxnard. Even so, most retailers are pulling back on expansion plans now, so it’s unlikely we’ll get anything soon.

And you don’t get big philanthropic gifts for parks and public projects overnight. But we have two good examples in the Pier and the Community Park, both of which have raised more than $1 million in private donations. Just think how reassuring it is to know that if a storm damages the Pier, we have more than $1 million in private funds to draw upon and don’t have to take money away from some other City project! These kinds of donations are going to be really important in the next few years, because we are not going to have General Fund money for capital projects in the parks, as we have in the past.

Although this wasn’t in the motion passed by the Council, I’m also a big advocate of promoting Business-to-Business (B2B) transactions as a way of generating more sales tax for the city. Every business in town buys lots of goods subject to sales tax. If they buy those goods in town, then we get more sales tax. If you look at a map of where our sales tax comes from, you’d be amazed to see how much comes out of the Market/McGrath area – supposedly an industrial area, but in reality a place where many businesses buy products from other businesses. That’s why I was so excited recently when the Chamber’s Young Professionals Group had a mixer that brought together the start-up businesses in our incubator with the young small business owners in town.

And what about tax increases? After losing two sales tax measures recently – one in 2006 and one in 2009 – I have to say I think we’re done with that for now. There are a number of small measures that may have a chance of passage if they were combined into one ballot measure, including an entertainment ticket tax, an increase in the hotel bed tax, and maybe an increase in the Lighting and Landscaping District assessments. (Currently, you don’t pay enough in Lighting and Landscaping assessments to cover the cost of the streetlights, so we have to subsidize that with $400,000 from the General Fund.) But even all put together they won't raise that much money, and I don’t think our voters have any appetite for even these tax increases now.

Over the past three years, as we have struggled to reduce costs and increase revenues, we’ve heard literally hundreds of ideas. We’ve looked at them all, and implemented some of them. But, in general, I’ve found that every idea falls into one of four categories:

  1. We’re already doing it.
  2. It’s impossible to do for some reason (impractical, illegal).
  3. It’s a great idea and we should do it right now, but it will only raise or save a little bit of money.
  4. It’s a great idea and it will raise or save a lot of money, but it will take a long time to do it and we won’t see much immediate benefit.

The business license and hotel bed tax compliance efforts fall into category #3. Everything else falls into category #4. My bottom line is this: We’ve done a good job of cutting when we’ve needed to cut during the downturn. Our services have taken a huge hit but we are solvent and shouldn’t have to cut much more. So now is the time to start laying the groundwork for more revenue when the economy begins to perk up. We’ll keep looking at small, painless ways to raise revenue – and we’ll keeping working on long-term efforts to stabilize and improve our revenue base by increasing business generally.


  1. Cut excessive city manager, police and fire pensions! No one should should be able to retire at 90% of their salary or better. That's onscene! Want money, modify city staff retirements.

  2. I understand and sympathize with the difficulties of meeting the revenue requirements to fulfill the services we all expect in this economic climate. Some of those problems are due to our lack of development and foresight to the variations in economic stability, the balance to the overall economy. My greatest concern is that we will not take advantage of the opportunities of a recovering economy as it occurs. If the city is left behind to a recovery, it will be unforgivable.

  3. Mr. Mayor;
    In review of the suggestions from the Council meeting, I would like to add my opinion to a couple of points.

    1. Hiring an outside consultant to make sure businesses are paying their license fees. (Why is this not done with current City Staff? Is this not the responsibility of City Staff? Why spend the extra money when salaries are already being paid?)

    2. Auditing the Bed tax is a great idea. Those that are not paying their taxes should then also be warned and the next time it is discovered that they are not paying they should receive a fine.

    5. Increasing retail near the Auto Center is a great idea. Once businesses begin to expand marketing this open space is brilliant. It is viewable from the Freeway and will not increase traffic on the City streets that can become over-burdened like Victoria currently is and will become once larger retailers are in place.

  4. To Don,

    We don't actually pay a fee to the outside consultant for the business license fees. What we do is reach an agreement with a firm that specializes in this activity (believe me, our staff does not have the time or expertise to comb through and combining databaes, etc) and then they take a commission on the resulting revenue.


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