City Council Recap | Items Discussed: November Ballot Issues, Building Height, UUT Renewal, Hotel Tax

 

South Pasadena City Council members this week discussed the pros and cons of a set of prospective ballot measures for this November. Decisions on which items to include won’t be made until the Council meets Aug. 5, but the session gave members an opportunity to test sentiments on the renewal of the Utility Users Tax, a new hotel tax that would also apply to the short-term home rental market, and a very controversial proposal to raise the 45-foot building height limit adopted by voters in 1983.

City staff is recommending an increase to the height limit that would allow one or two extra stories only for residential buildings in certain areas of the city, though the staff report did not say where. This is seen as a compromise between the community’s desire to preserve one of the fundamental characteristics of South Pasadena with the enormous pressure for more affordable housing from both citizens and as reflected in the state’s demand that the city adopt plans to accommodate 2,062 new housing units under the latest cycle of the Regional Housing Needs Assessment (RHNA).

Council member Richard Schneider said letters, calls and email suggest the public is against a building height increase by 2 to 1, and so is he. “We really don’t want to have our town destroyed by a bunch of high-rise development.”

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City Planning and Community Development Director Joanna Hankamer has estimated the city could accommodate about 1,100 units without raising the limit, Schneider said, but “I think we should look into fighting” the RHNA determination. “It’s an unreasonable amount of houses for a small city” not least because of how disproportional the RHNA allocations are. San Marino, which is five times larger than South Pasadena, is only being required to provide 27 units, he asserted, though the actual figure is considerably higher. “I’m opposed to complying with this.” But he conceded the city has not done enough to ensure more affordable housing in recent multi-family developments such as Mission Bell, which has none.

Council member Diana Mahmud, who has been lamenting the RHNA allocations for months, said the city has a tough job ahead to educate residents and even “some of our council members” about this issue. She noted the RHNA numbers are the result of an allocation produced by the Southern California Association of Governments (SCAG) pursuant to a state mandate pushed by the Governor and noted they have not actually been finalized and won’t be until February.

There appears to be very little sympathy in the state legislature for the city’s situation and all indications are it is “very unlikely” any administrative appeal to SCAG will be granted. Even if it were, it won’t happen in time to spare the city from being penalized if it does not meet the RHNA targets. That could result in a loss of eligibility for state grant money, which would be “huge final blow” that could result in the city having to adopt dramatic increases in property taxes.

She noted the city’s Planning Commission is having a special meeting July 21 to discuss how to approach the building height issue that will be folded into the city’s pending General Plan update, which includes the “housing element” that will in turn be used to determine if the city’s is complying with RHNA. In the meantime, citizens must “keep an open mind and consider the ramifications of failing to demonstrate compliance.” 

Council member Mike Cacciotti complained the RHNA figures are based on “totally inaccurate population and demographic numbers” and that if advocacy does not work, the city should challenge them legally, even as it did the 710 freeway extension. “Unfortunately, there are a number of developers looking to exploit the RHNA numbers and force an increase in building height limits. “They’ve been calling me, trying to meet with me. This is their opportunity to build multi-story, high-density buildings. They just want to make money at the expense of our community.”

Cacciotti said everyone agrees there’s an affordable housing crisis and the General Plan needs to address. But it should be in a way that does not involve increasing the height limit but by increasing density without impinging on open space or neighborhoods. “We’ve got to protect our small-town community which is why almost everyone moved here.”

“There is a lot of misapprehension about us turning the city into Glendale,” Mahmud complained. “That is not what’s being proposed.”

“None of us are cozying up to developers,” Council member Marina Khubesrian implored. “Let’s put some of the conspiracy theories and paranoia to rest.” The fact is there is a mandate, “and we are not going to be able to get around it.”  Yes, the city fought the 710, but it cost a lot of time and money and left the city so far behind in street work, that “we will never catch up with our street repairs.”

“We are a poor city right now. We don’t have any money to fight or get sued by the state.” She said the city could consider something as small as a five-foot increase. Noncompliance with RHNA would also trigger increasingly draconian planning requirements, she said.

Mayor Robert Joe said they city needs to “vet out” all its options, such as changing the light industrial zoning along a portion of Pasadena Avenue to housing. There are other areas the City Planner has also explored. “Let’s maximize all of these areas before we look at the height limits.” He questioned the wisdom of going to court but said the city should appeal the allocations set by SCAG. He argued South Pasadena has good case because it is the only city that set its building height limit by a citizen vote and must therefore turn to the voters to change it. That’s why “it might make some sense why our appeal could work.”

On the future of the city’s UUT, which is set to expire in 2022, Mayor Joe summarized the sentiment of the Council by saying all agree it should go on the ballot, but how long it should stay in effect and whether it should be increased remain undecided.

The UUT is currently set at 7.5 percent and at $3.4 million, is the city’s second largest revenue source. Staff did not make a recommendation on whether or how much the tax should be increased. City Manager Stephanie DeWolfe said every one-half percent increase brings in about $225,000.

Mayor Joe said he believes the rate should be increased 1 percent or 1.5 percent. Khubesrian asked DeWolfe to confirm the UUT is a diminishing revenue source. DeWolfe affirmed, noting it taxes things like water usage — which people have been learning to conserve — and cable TV, which people have been abandoning in favor of streaming. Revenue from the UUT has gone down gradually and will continue to do so, she said. Mahmud asked if it was possible to tax streaming under the UUT, an issue staff said it would investigate.

Schneider said any increase in the UUT would surely doom its renewal at the ballot box. Mahmud agreed this is not a prudent time to raise the tax. Cacciotti said he could not decide absent complete information about at what rates the UUT is being collected in neighboring cities, data staff promised to provide at the Aug. 5 meeting.

As for duration, DeWolfe said experience indicates voters prefer taxes that remain in place until they themselves act to repeal them rather than terms that automatically sunset after five or 10 years and then require voter reauthorization.

Mahmud said reauthorizations would lead to “tax fatigue” and reported the co-chairs of the UUT citizen committee prefer a no sunset approach. Khubesrian agreed. Mayor Joe said he’d like to extend the tax into perpetuity or at least for 10 years.

The Council also discussed the potential for a vote on a 12 percent to 14 percent “transit occupancy tax” or “hotel tax” assessed on guests staying less than 30 days and applicable to properties rented through services such as AirBnB, which are not currently legal in South Pasadena.

“Staff has estimated there may be more than 50 sites in South Pasadena based on a search of just one site like AirBnB,” according to the staff report. It also said previous surveys have shown very strong support for a TOT since it is not assessed against residents and because legalization of short-term rentals can be an income source for owners.

Council member Schneider said he did not think a TOT was worth pursuing because it would not bring in enough money, would pose enforcement problems, would face opposition and confuse voters due to ballot fatigue.

Mahmud said a 12 percent tax would be “more reasonable” than 14 percent. Khubesrian supported a TOT. She rejected the notion it would confuse voters but said the City could put it off until 2022, especially as the pandemic is likely to restrict the amount of revenue to be realized in the near term. She also said affordable housing advocates are not opposed to it.

Cacciotti said housing advocates are opposed to it, but that he might consider a TOT if the city ever gets a hotel. He also agreed it could overload voters working their way through multiple ballot issues.

Mahmud said since many owners are illegally offering short term rentals, passage would “smoke them out. It’s money on the table” and passage would be a means “having them become legitimate,” making it easier to enforce, especially if the city can work a deal with the various short-term rental service marketers.

Mayor Joe said he was opposed to putting a TOT on the November ballot because it would “pushing too much” on voters to decided.

A final decision on which issues will be on the ballot and with what details will be made August 5.