(May 19, 2003) -- LB's Aquarium of the Pacific, which City Hall once portrayed as an expected self-supporting facility, is draining LB tax dollars collected from filled downtown hotel rooms ("transient occupancy tax") to cover bond payments the Aquarium itself cannot make, causing city management to project that City Hall's Special Advertising & Promotion Fund will be upside down in the coming fiscal year.
The revelation comes in an otherwise rosy mid-year budget performance memo agendized for the May 20 City Council meeting by Director of Financial Management, Robert Torrez.
City Hall's Special Advertising and Promotions fund supports the LB Area Convention & Visitors Bureau (CVB), Junior Concert Band, Public Corporation for the Arts (PCA) and other City promotions. Under a formula also approved by a past Council that the current Council has not chosen to reexamine, only half of LB's 12% hotel room tax ("transient occupancy tax" or TOT) is given to the General Fund. The other half is split between the Redevelopment Agency (RDA) and City Hall's Special Advertising and Promotions Fund (SAP). [The memo actually calls it the "SAP" fund, it's not a comment from us.]
The RDA gets TOT (hotel room tax) from hotels in the downtown RDA area. The SAP gets TOT from the rest of LB's hotels.
The RDA portion of the TOT is pledged to back Aquarium bond payments, then to repay a Habor Dept. loan provided for Convention Center expansion. Beyond those two items, RDA TOT funds are available to augment SAP funds...and City Hall has used them for the past few years to bolster SAP funded programs.
But that's no longer an option...because of the Aquarium -- or more precisely, previous projections of Aquarium revenue accepted by a past Council when it voted to back Aquarium bonds with the downtown portion of LB's hotel room tax.
"Beginning this fiscal year...all of the RDA TOT funds are needed to support the Aquarium bond payments," Mr. Torrez writes, adding "Due to the lack of available RDA TOT, the SAP fund is projecting a structural budget deficit in FY 04."
Mr. Torrez says "Staff is assessing the extent of the gap and is working on identifying options to address the structural deficit in this fund."
Based on a separate mention in city management's previously proferred, Council approved, three-year budget deficit reduction plan, it has been speculated that City Hall, and/or interests getting Special Advertising and Promotions Fund revenue (the CVB gets roughly 70% of its budget from the SAP) would eventually mount a campaign seeking voter approval to raise LB's hotel room tax to make up the difference. This has not been officially floated...yet.
Other parts of City Hall's mid-year budget performance report were more positive.
Subject to several caveats, Mr. Torrez indicated City Hall's General Fund revenue could come in as much as $5 million higher by Oct '03 than the Council assumed when it adopted the current budget in Sept. '02.
Nearly a quarter of the $5 million in newly projected revenue results from roughly $1.2 million more than expected in electric utility users tax. "To date, through March, receipts are on a trend to close the year approximately $1.2 million over budget. Discussions with Southern California Edison (SCE) indicate that increased consumer usage coupled with new development coming online have had a positive effect on electric energy revenues and related taxes. SCE views its information as proprietary and staff has not been able to obtain detailed energy usage estimates on planned development projects. Further, staff has reported previously that SCE has submitted a package of rate reductions for Public Utilities Commission approval. If approved, the rate reductions will average approximately 15 percent, and will reduce revenues from the electric franchise fee and electric utility users tax," Mr. Torrez writes.
And expenses are on a trend to come in up to $5 million less than had been assumed, primarily as a result of a City Hall hiring freeze.
Mr. Torrez notes that the resulting $10 million will be needed to satisify part of the three-year budget deficit reduction plan that requires carrying over $11.7 million from the current fiscal year to help balance the FY '04 budget. Mr. Torrez's says the current trends indicate this is achievable.