Regular City Council and Housing Authority* - Regular Meeting

WE'RE BACK. SO HERE WE ARE AGAIN. WE CONTINUED FROM LAST NIGHT'S MEETING TO RIGHT NOW AND WHERE WE LEFT OFF IS NEW BUSINESS Madam Clerk, could you, we're all here by the way, let the record reflect, all seven of us dragged our weary bones out here today again. And thank you to staff for being here. And thank you also to the members of our team and our consultants who stayed last night. I'm sorry for your inconvenience. But with all that said, please read the title and we'll get moving.

Thank you, Mr. Mayor. The city ballot initiatives pertaining to business license reform and transient occupancy tax. Beginning the presentation tonight will be our city manager, Ms. Gallardo-Dailey.

Ms. Gallardo-Dailey, you have the floor.

All right, thank you. Good evening, Mayor and City Council. I'd like to first start by introducing the team of city staff and consultants that are here tonight to help present on this item. It's the... same group from our June 9th study session. From finance, we have Anna Acosta and Mark Kuh, We also have our Public Works Director, Rajasetha Raman, and our IT Director, Steve Ely, and our consultant from FM3 Research, Dr. Richard Bernard. Tonight's presentation will include information that was requested by the City Council at the June 9th study session. City Council asked for revisions to the proposed business license rate that made no changes for businesses that have the lowest gross receipts. The council authorized conducting a second community survey whose results will be presented tonight. The council also requested a five-year financial outlook to understand what the city's future financial needs are and to include the annual costs of funding the recently completed facility and parks and needs assessment. Tonight our city staff and consultants will present on these items. While staff provided two revenue measures for the council's consideration at the study session, an increase in the transit occupancy tax and reform of the city's business license tax rate, concerns were expressed by the council at the meeting about a TOT increase making Costa Mesa hotels less competitive. And Travel Costa Mesa and the city's hoteliers were concerned with losing bookings to neighboring cities with the TOT increase. WITH MODEST SUPPORT FOR A CHANGE TO THE TOT, STAFF IS RECOMMENDING THE CITY NOT PURSUE A TOT INCREASE BUT INSTEAD FOCUS ON UPDATING THE 41-YEAR-OLD BUSINESS LICENSE RATE. AND I WILL NOW TURN OVER THE PRESENTATION TO ANNA ACOSTA. THANK YOU. THANK YOU.

Good evening, Mayor, Mayor Pro Tem, Council Member, City Manager. Tonight's staff is presenting the recommended actions regarding the potential ballot measures that Council has been considering over the past several months. Since our June meeting, staff completed additional analysis requested by Council, including updated community polling, further review of the proposed business license reform, and additional information regarding the City's long-term financial outlook and infrastructure needs. At the conclusion of tonight's presentation, staff will request council direction on placing the business license reform measure on the November 3rd, 2026 general election ballot. Council has been evaluating potential revenue measures in response to the city's long-term financial needs. While the city's primary revenues continue to grow, those revenues have generally increased at a slower pace than inflation and the increasing costs of providing core city services. In December 2025, Council directed staff to evaluate both a business license reform measure and transient occupancy tax measure. At the June 9th council study session, staff presented options and received additional direction from council. Tonight's recommendations reflect that direction and the additional work completed since then. This evening, we'll briefly review updated community feedback, the recommended approach for the transient occupancy tax, the revised business license reform proposal, the city's financial outlook and future capital needs, and conclude with staff's recommendations for council action. We will begin with community feedback. The city retained the services of FM3 research, and at this time, I will hand it over to Dr. Richard Bernard from FM3 Research.

Thank you. Good afternoon or good evening. Next slide. No, this is not mine. Next slide. Yeah, there we go. All right, one more. All right, we conducted the survey between June 22nd and the 29th. It was a dual mode survey, which means a random half of the sample took the survey on the telephone, a random half took the survey online. We interviewed a random sample of 407 City of Costa Mesa registered voters who are likely to vote in a November 2026 election based on their past voter history or if they've recently registered to vote. I do want to point out that the folks who responded to the previous survey did not respond to this survey. So this is a fresh 407 respondents. For a margin of error of 407 of questions asked of everyone, the margin varies plus or minus 4.9 in a few small cases because we didn't want the survey to be too onerous on your voters. A random half of the sample were asked a few questions and random half others. They are the margin of error is a little larger. We contacted folks by telephone, email, and text, and we've had the privilege to work on behalf of the city on a number of occasions where we have tracking data that's relevant. We will show it. We offered the survey in English and Spanish, of which 5% opted to take the survey in Spanish. If you're very quick on math and notice something doesn't quite equal 100%, I blame that entirely on rounding. Next slide, please. So we wanna set the context before we get into showing the ballot question and the results. So as we did, next slide, as we did in the previous survey and the other ones prior to that, We asked folks if they thought things in the city were headed in the right direction or if they thought things were off on the wrong track. The blue is the right direction, orange is the wrong track, gray are the folks who said they were undecided, didn't know whether it was going right or wrong. Nonetheless, 45% of plurality think things in the city are headed in the right direction. And what's interesting for me, margin of error, the perception that things are headed in the right track, that has gone up a little bit by eight points. and the wrong direction has gone down. So whatever you're doing, keep doing it. Next slide, please. We also asked them a conceptual question, which we had asked in June and July of 2020 prior to the council at that time placing the cannabis measure on the ballot for voters to decide whether to support it or not. And then we asked in May as well. We asked them, do they think that the city has a need for additional funds to provide the level of city services that residents need and want? We offered them the option of great need, some need, a little need, no real need, or they volunteered, they didn't know. Compared to the June and compared to the May 2026 survey just a month prior, really no changes over time. One would not expect much of a change because you hadn't done very much outreach. And so there's a consistency, a very modest one in every two thinks that there is at least some need for additional funds with an extremely modest 13% that say great need. Why this is relevant? Well, we weren't asking them if we could tax them or raise their taxes. If they don't perceive there's a need, there's often a high correlation with willingness to support a measure. You will see that in a couple of slides in the presentation that there is a correlation in your city as well. This is a proof point that communication is very important to let the community understand the fiscal position of the city. Next slide, please. Now, next slide. I wanna introduce the ballot question that we presented to voters either on the phone or online. On the left-hand side was the May 2026 ballot question that we tested with them. We worked with Kim and your staff. Kim assures us that both questions are legally permissible. And what we tried to do was take the May results and improve the question for voters. One, with respect to clarity. Two, the council had directed staff to consider reducing the cost to 60 cents per $1,000 gross receipts to 50 cents per $1,000 gross receipts, which of course reduced the approximate amount of money that this is expected to generate in the first year. And we look back on the top priorities of your voters and integrated that into the ballot question in June 2026 to make it more in line with them. And we try to simplify the ballot question because as we learned in your survey, as in other surveys related to business license taxes, many people don't really understand what that is. something that they're confronting for the first time. And so making it as clear as possible certainly helps in their understanding. Next slide, please. So we gave them that ballot question and then we asked them as we did previously, if there were an election today, would you vote yes in favor or no to oppose? If we can look on the right hand side just for a moment, this is your most recent data. In June of 2026, the results of this survey I'm presenting, 63% said either definitely, probably or lean yes. 26% said definitely, probably or lean no and 11% were undecided. If you look back on the left hand side to the May 2026 numbers, you will notice a few important things. One is in a short period of time with, I would argue, an approved ballot question based on our learnings from the previous survey, support goes up 10 points. That's above the margin of error. That's important. The other probably equally or maybe more important thing is The definitely yes, which was at a modest 19% in May, is now at 30%, a jump of 11 points beyond the margin of error. Suggesting to me, at least in my analysis, having done a lot of business license taxes, that this, or reform measures, this is much clearer to them, and we're hitting the priorities of what your voters want. And if you think of this measure as a 50 plus one simple majority measure, if you consider the margin of error of 4.9 or maybe 5%, the 63% is above that threshold of 50 plus one, as well as above the margin of error for the survey. Next slide, please. I wanted to show you one cross-tabulation of the initial vote. So this slide that you see in front of you is looking at people who earlier in the survey, they said, well, they thought there was a great some need, a little need, or no real need for additional funds for the city to provide the level of city services that residents need and want. The blue bar are the folks who said definitely, probably, or lean yes. on that ballot question that I just showed you. The orange bar are the folks who said definitely, probably, or lean no on the ballot question I showed you. And the gray bar are the folks who said they were undecided. On the left-hand side, 51%, I'm reminding you, said great or some need. 77% are voting yes on this. If they thought of the 29% that thought there was a little or no real need, only 40% are voting for this and 49%, one in every two, are voting no on this, suggesting to me that the more they understand the need, the more likely they are to support the measure. Next slide, please. So I'm going to sort of show you the simulation of an election in real time. First, on the left-hand side was the initial vote that I've shown you before. It was just ballot title and summary at 63 yes, 26 no. We introduced some educational statements. As you know, the city can't advocate, but it can certainly educate. So we talked about how this measure is intended to ensure that larger businesses pay their fair share, and we also talked about the fact that this tax will not increase taxes on residents, it's entirely intended to go to businesses, among other educational statements, and then we re-asked that ballot question that I had presented earlier. This is intended to say, well, if the city goes out and does some education, this is the potential of where it can go. So having seen that it started at 63 yes, 26 no, and giving them some education about it, support goes up five points overall to 68%. That's just outside the margin of error, but I'd say it's on the high end. But more importantly, that definitely yes, which was at 30%, is now at a much healthier 48% on the definitely yes. And if you think about it, or the threshold is 50 plus one and you have after education in the survey folks almost there on the definitely yes so there's not you don't have to heavily rely on the people who are like well I'm not quite sure maybe I'll vote for this that education has moved the bulk of the folks over again it's above that margin of above the threshold of 50 plus one and way above that margin of error at a 68 percent total yes but As you would want me to do, I introduce some critical statements because no measure goes unscathed. And so, next slide please. I'm now gonna show you in simulation in the survey an election in real time. The left hand side was that initial vote with just ballot title and summary. You've now seen it a couple of times. It's 63-26. Telling them your story in a non-advocacy way raises support to 68%, but more importantly, the definitely yes is at 48%. And normally I see the floor of a definitely no at about 20%, so it's close to there. Introducing messages like, the city has plenty of money and if they just cut waste and mismanagement and they say this to every city not specifically yours so you should know that um and also that you'd have enough money to pay for all the programs and infrastructure that you're interested in doing in this measure as well as the fact that this will hurt businesses because it's a business tax Additional opposition arguments were read to them or they read it if they were online and we re-asked that ballot question you saw earlier. So after education you saw it was 68 yes, 22 no. Producing or providing them with critical statements led to a decrease of 10 points from 68 to 58. and the definitely yes drops to 34. Not quite where it was initially, but more importantly, the definitely no really doesn't go above that floor that I would have expected at 20%. So at 58% yes, with a margin of error of plus or minus approximately five, on the high end, The survey suggests that the measure will be either at 63% or 53% above that 50 plus one threshold. But this assumes a few things. One, it assumes that the city does education and it assumes that there is an opposition effort as well as part of it. If those simulations do not occur, then there may be some changes to the expected results. Next slide please. So here you will see the May votes on the left hand side. You'll remember that I asked that ballot question both in the first survey and this survey three times. The first column, the initial vote, is the top numbers are the 53, 33, 14. are the total yes total no and undecided on the left hand side in may you'll notice as we go through the survey in may it's sort of like a triangle so it's a lower start and it gets up high to 71 and then it drops to 55. On the June survey, it starts higher. In other words, that most important element, which is that ballot question, because many people will not even know anything about this until they get into the ballot booth or they fill out their absentee ballot on their kitchen table. The first time they read it, that ballot question, without any advocacy, has to speak to them. It has to identify the priorities and it has to be simple enough for them to understand what this is about. And the result is that the 58-31, that differential, if I subtract on the last vote on June, is 27 point differential. Supporters need 50 plus one, opponents need 50%. So having that big differential is certainly helpful in the likelihood of passage. Next slide, please. So in conclusion, first of all, thank you for being so patient. The business license reform small business protection measure is viable for further planning, assuming substantial communication with voters and stakeholder outreach. Of course, it's in your hands as to whether you move forward on it, but the data from your voters suggests that they're supportive. The baseline survey has helped refine the measure presented in the follow-up survey to make it more in line with voter sentiments. We've seen a 10-point swing in level of support on the initial vote. Initially, on this survey, they're at 63%. Yes, simulating education lifts the measure to 68%, to two-thirds. But most importantly, that definitely moves up from 30 to 48, suggesting that people are much more comfortable when they hear the story of supporting this. And then of course, simulating opposition knocks down the measure, but to 58%, suggesting that it could sustain some opposition, and it's still above that threshold and margin of error. And just finally, ensuring larger businesses pay their fair share and that the measure will not increase taxes on residents are among the leading reasons to support the measure. I'm happy to answer any questions or I can certainly, I'm here all night. So whenever you'd like to ask me, I'm happy to do that.

I hope not.

With no disrespect. But you have a lot of cities that are envious, Costa Mesa. I had to push them out for you guys. So happy to do it.

Whatever you'd like to do. Yeah, sure. Why don't you just push through with a transient hop? Sure.

Based on the feedback received from the hotel and business community along with councils previous discussion staff is not recommending a transient occupancy tax measure at this time Instead staff recommends focusing the city's efforts on the proposed business license reform measure which addresses the city's long-term revenue needs while maintaining protections for small businesses Council requested staff look into how we treat short-term rentals and collection of TOT. Staff identified more than 100 active listings across various platforms such as Airbnb and VRBO, including both permitted home shares and prohibited short-term rentals. The resulting estimated TOT revenue that the city could potentially receive is approximately $500,000 from the active listings, which include both the allowed home shares and the prohibited short-term rentals. No code amendment is required. However, costs associated for the implementation and enforcement is estimated at $100,000. At the June meeting, council provided direction regarding the business license reform measure. Council expressed interest in not impacting small businesses in the city. While there is currently no minimum for our business license tax rates and the recommendation from FIPAC was to set a minimum, council recommended we remain at zero and the structure remain unchanged for small businesses. The recommended structure maintains the current business license rates for businesses with $500,000 or less in annual gross receipts, ensuring that 72% of Costa Mesa businesses would see no change to their current business license tax rate. For businesses with gross receipts above $500,000, staff recommend a revised rate of $0.50 per $1,000 of gross receipts, along with the maximum annual business license tax of $15,000. The previous recommendation was at $0.60 per $1,000, and the revised rate reflects Council's direction. This modernizes a business license rate structure that has remained unchanged since 1985, while balancing the City's long-term revenue needs with Council's goal of protecting small businesses. The revised proposal is estimated to generate approximately $5.6 million annually, representing an increase of roughly $4.6 million over the current business license rate structure. Council also requested a comparison with neighboring cities. As shown here, Costa Mesa's business license structure has remained unchanged since 1985. The table here also shows the year of the recent update for these cities. The most recent update was Huntington Beach in 2026. For Newport and Irvine, it is based on per employee and it is adjusted annually for CPI. This table here depicts how the revised rate would compare to surrounding cities. Even with the proposed reform, Costa Mesa would remain generally competitive with surrounding cities. Council also requested additional information regarding the city's long-term financial outlook. At this time, I will hand it over to Budget and Purchasing Manager Mark Kuh.

Thank you, Anna. Good evening, Mayor, Mayor Pro Temp, City Council. At the June 9th study session, City Council requested additional information on the city's future budgetary needs, which includes the cost on the recommendations from the facilities needs assessment and the parks needs assessments. These assessments and other assessments identify the future investments needed to maintain the city's existing infrastructure. I will present a long-term financial outlook on the natural growth that occurs year over year to both the city's revenue and expenditures over the next five years. So the five-year long-term financial plan is a tool utilized by finance to inform decision makers and the public on the outlook of the city's future revenue and expenditures. It does not factor in additional revenue streams that have not been approved, nor does it include costs above the current funding levels related to the facilities needs assessment, parks needs assessment, pavement condition assessments, or the information technology strategic plan. The various assessments will be presented by Public Works Director Raja Sethuraman and IT Director Steve Ely in the forthcoming slides. The City of Costa Mesa has three primary sources of revenue, which includes property tax, sales tax, and transient occupancy tax, in addition to other revenue sources from various fees. In total, the city's revenues grow by approximately 3% annually, while expenditures grow by 4% annually. So if you look at the FY27-28 column, revenue growth from property tax sales tax is projected to remain steady. while TOT is projected to be flat compared to the prior year. Overall in FY27-28, revenue is projected at 206.3 million. Expenditure in FY27-28 includes funding for labor, capital asset needs, which is the 5% contribution from the general fund, and IT needs a 1.5% contribution, as well as scheduled repayments from prior year deferrals to the CAN and the IT needs. It also includes a repayment of the one-time deferrals and operational costs in FY26-27, as well as included costs related to self-insurance premiums. Staying on the expenditure side on FY27-28, there will be a reduction to our bond payment for the Lions Park, by 1.7 million and an election related expense of 250,000 and that would be beneficial to the city. So those expenses will go away next year. The expenditures in FY27-28 is projected at $208.3 million or a shortfall of approximately 1.9 million compared to projected revenue. And looking ahead to 28, 29 through FY 30 to 31, the city will continue to gradually fund areas in the budget that have been underfunded in the past, such as utilities and increasing costs to park time hours in the parks department to provide enrichment programs and services. Historically, these programs have not been fully funded and were often right size or funded at the end of the year using salary savings. The five-year financial plan takes a more sustainable approach by providing incremental funding over the next several years to gradually incorporate these ongoing needs into the city's operating budget. So when you look at the 2829 column, revenues are projected at 212.2 million compared to expenditures at 216.4 or approximately a $4.2 million shortfall. Moving over to the next column in FY29-2030, revenues are projected at 218.3 million compared to a projected expenditure of 223.3 million or a shortfall of approximately 4.9 million. And in FY 30 and 31, the last of the five-year projection, revenues are projected at 224.6 million compared to an expenditure projected at 229.5 million with a projected shortfall of 4.9 million. It's important to note that this forecast reflects only the city's existing ongoing budget. It does not include the additional investments identified in the facilities needs assessment, pavement management plan, parks needs assessment, or information technology strategic plan, which we'll discuss next. So in summary, These projections demonstrate that while the city's revenue continue to grow, they are not keeping pace with the increased costs of providing core services. And at this time, I'd like to hand it over to Public Works Director Raja Setharaman.

Thank you, Mark. Grafman Council. Mayor and Council. We did several assessments over the past year based on direction from City Council. The first one is the facility needs assessment. This was conducted in the previous, started in the previous calendar year and we did come to Council at a study session earlier this year where we presented the draft plan. Now, the facility needs assessment looked at both the maintenance, ongoing maintenance needs, as well as future upgrades that are required at most of our facilities, which were built between 1960s and 1980s. Currently, this facility assessment identified that for the maintenance of facilities, we need approximately $3 million a year. They looked at about $60 million in needs over the next 20 years. In addition, several major facility upgrades were identified for a total of $60 million, and these include the replacement of Fire Station 2. That's currently under bid right now. replacement of living quarters for Fire Station 4, renovations at Stations 3, 5, and 6, a full replacement of Westside substation, and the upgrade of our Tenure Center. At present, based on review of budgets over the past 10 years, we are spending about $4 million a year towards various maintenance as well as upgrades. Considering the needs from this assessment, which is approximately $9 million, there is a shortfall of about $5 million approximately per year. Moving on to Pavement Management Plan, we undertake this study every two years. We look at the citywide study of how the pavement condition is and we have a value of PCI and The current PCI value is 82.6. Now our goal is to get this up to 85. 82 is actually pretty good. 82.6 is a good category, but we want to get it higher. Currently we spend about $9 million a year. To get up to maintain and to make some improvements, the total need is approximately $12 million a year. Now, the increase in cost is because the construction costs have been going up over the past many years, especially since COVID. So there is a need of about 3.2. That will keep us at this good or close to very good category. Park Assessment is another one that was recently completed. We actually went to Parks Commission with this report back in February and we did provide a copy of that report to Council. The total cost of all the playground improvements is estimated at $20 million. Now, looking again at the past few years, We've been investing approximately $1 million a year towards park upgrades. Please note that I'm not counting the $15 million in grants that we received. That's kind of unusual, but typically looking at what our general fund and park implement funds, development funds, we've been spending about $1 million a year. And now to make all these improvements, let's say we want to get all the $20 million worth of improvements done in the next 10 years, we need another million dollars a year. Now this does not include new parks that I think our council is interested in making sure we get new park development, especially in park poor areas, and also improvements that go beyond the current amenities at the parks. So it's basically upgrading the existing playground, existing amenities in the parks. With that, I'll transfer this to Stevie.

Good evening, Mayor. Mayor Pro Temp in City Council. I'm going to talk to you about the IT strategic plan phase two. For the next five years, the IT department has adopted a conservative fiscal stance by imposing a $1.7 million annual project spending cap to fund 30 projects. So through workshops and some surveys, we identified 64 initiatives totaling about 19.8 million. 30 of those projects out of the 64 are currently funded that I mentioned earlier. 34 projects remain classified to be determined. Those 34 unfunded projects require an additional 11.3 million across the next five years. And just as an information I wanted to bring across to you, we are going to be holding a study session on the ITSP phase two in this fall with council. And with that, I'm going to turn it back over to the finance manager.

Thank you, Steve. Collectively, these assessments identify approximately 11.5 million in annual funding needs to preserve existing infrastructure and maintain current service levels. At this time, I will hand over to our city attorney, Kimberly Hall Barlow.

Thank you, Ms. Acosta-Riaz. Council, mayor and members of the council, if I may, we have before you this evening several recommended resolutions the first attachment one is the Resolution that will order the submission of the measure to the qualified electors of the city of Costa Mesa Attachment two is actually the draft code amendment that the voters will be approving in IT IS IN THE FORM OF AN ORDINANCE AS REQUIRED BY LAW. ATTACHMENT 3 REQUESTS CONSOLIDATION OF THE MUNICIPAL GENERAL ELECTION WITH THE STATEWIDE GENERAL ELECTION AS REQUIRED BY LAW. and attachment four authorizes written arguments for or against the measure sets priorities potentially for those written arguments may determine the author of the written arguments and directs the city attorney that's me to prepare an impartial analysis under ab1416 which is a law which is govern state ballot measures and can be adopted county by county. It's been adopted in Orange County. In addition to the ballot language with the yes or no and the title, there will also be printed on what they call the ballot label That is what the voters will see when they're in the voting booth, not necessarily in the booklet, but what they're actually seeing. And it will identify the organizations which are supporters of the measure and which are opponents of the measure. There are some restrictions on who those can be in the law, a supporter or an opponent, cannot be listed unless it is a nonprofit organization that has existed for at least four years, was not created as a committee to either support or oppose a candidate or a bill. If a business is a supporter, then that business has to have been in existence for at least four years and have at least one full-time employee during that time. Also current or former elected officials may be listed along with their title and in addition to that any individuals who are supporters or opponents may be listed. There is a word limit of 125 words and we may shorten titles of organizations if necessary to meet that limit. Political parties are not permitted to serve as supporters or opponents of ballot measures. This fourth attachment, the resolution, could allow the council to author an argument. However, it may be preferable in this instance to allow the business community to provide the support, the arguments in favor of the measure rather than the council doing so. The council could adopt as a stopgap the ability to do that and if so we will word it accordingly. Attachment 5 authorizes the filing of rebuttal arguments for the proposed ballot measure. Without that last resolution rebuttal arguments will not be permitted. So our recommendation. recommendation is that you place the business law uh license reform measure on the november 3rd 2026 ballot by adopting the following resolutions and i will read them by title to save the city clerk doing so adopt resolution 2026 dash do we have a number yet nope xx ordering the submission to the qualified electors of the city of costa mesa the Costa Mesa Fair Business License Reform Small Business Protection Measure at the general election to be held on Tuesday, November 3rd, 2026, as called by resolution number 202621. Adopt resolution 2026XX. requesting the Orange County Board of Supervisors to consolidate a general municipal election to be held on Tuesday, November 3rd, 2026, with the statewide general election to be held on that date pursuant to Section 10403 of the Elections Code. Adopt Resolution 2026XX either as presented or as modified. You need it. to direct me to prepare the impartial analysis, but you may delete the portion permitting the council to author an argument if you so choose. That resolution is titled Resolution Authorizing Written Arguments for or against the proposed measure, the Costa Mesa Fair Business License Reform Small Business Protection Ordinance, sorry, measure. setting priorities for filing written arguments, determining the authors of the written arguments, and directing the city attorney to prepare an impartial analysis. And finally, adopt resolution number 2026XX, authorizing the filing of rebuttal arguments for the Costa Mesa Fair Business License Reform Small Business Protection Measure. Though the measure to go on the ballot under the terms of Proposition 62 requires a two-thirds vote of this body. That is 4.66 of you. Since I can't divide you up, that means five. And the final recommendation is that you receive and file a report pertaining to the potential transient occupancy tax measure. Staff and our consultants are all available to you for questions at this time.

Okay. Anybody have any questions? Council Member Buehler, are you reaching for it?

I'm reaching for it.

Okay, you got it.

I really just want to appreciate staff, all the effort everybody's put into this and obviously we've had a study session on it and I appreciate city manager and everybody getting us together with these non-Brown Act violation groupings. So with that wind up, I just had a couple of questions. There's SB 122, which is the statewide sales and use tax that went into effect, I think January of this year. Do we have any idea how much revenue that's gonna generate for the state and how much of any of that will flow down to our coffers?

Not at this time, but as soon as we find out, we'll come back to council.

We have any kind of a ballpark? I mean, can we expect significant revenue?

Not at this time. We're working with our legislative public affairs team as well as our consultant to get a ballpark number, and when we get that, we'll come back to council.

Okay. Okay, that was it. Like I said, I got a lot of information in our prior session, so thank you.

Council Member Reynolds.

Thank you. I appreciate the presentation and pulling the numbers together. I just want to confirm in terms of the budgetary needs analysis you added up some numbers to get to oh sorry I guess there's numbers from two places there's the without all of the additional I don't know who I'm looking at I'm going to look back and forth between BUSINESS AS IS, WE'RE LOOKING AT BUILDING A BUDGET GAP UP TO I THINK IT WAS 4.8 IN FIVE YEARS FROM NOW. IN ADDITION TO THAT IF WE WANT TO BE DOING THE NECESSARY INVESTMENTS, MORE PROACTIVE INVESTMENTS IN FACILITIES AND PARKS AND SO ON, THAT'S 11.5 PER YEAR. SO THIS BALLOT MEASURE AS PROPOSED WOULD GET US 4.6 SO IT'S ONLY A FRACTION, IT'S LESS THAN HALF. depending on what you look at, of what we know we need. Just want to make sure I'm understanding this correctly. OK. And then we have a public comment letter that came in. making some points about the potential concerns on restaurants, which they're saying fall in the 1 million to 5 million category. What analysis did we do on impacts on businesses with high or low profit margins? Again, I don't know where I'm looking. And did we engage with the chamber and get any feedback on that?

council member Reynolds we did engage with the chamber to talk about the revenue measures under consideration specifically about business license reform. They understood the city's position in needing to update the rate but didn't provide any guidance on What types of businesses they thought would be impacted more than others, but just offered the city their chamber meetings as a platform between now and the election to Provide information and answer questions from the businesses about the impacts Okay and The the there's no slide number the comparison of impacts to or what I

this proposed measure would result in to other cities is really helpful. I'm looking at that category mentioned in the letter. We'd still be a bit less than Santa Ana, but we would be landing higher than Orange or Anaheim. I'm just sort of reflecting. Maybe this is probably a question for the city attorney. If we find out that, oh shoot, there is a small margin category within one of these revenue buckets, maybe a priority category because in Costa Mesa our business markets is a really, really important part of our economy. If this measure passes, we always have the opportunity to kind of adjust downward, right?

That's correct. The vote of the people allows you to set the highest whatever that is included, but it does not prohibit you from either reducing the rate for a particular income category, or for that matter, establishing a separate rate for a particular type of business. In our existing code, for example, we have a fixed fee for contractors. We have other kinds of business specific. So that is something that we could consider if the measure passes and if it appears that it is having a bigger impact on that particular type of business.

OK. And do we have, that's really helpful, thank you. I assume we have the data internally to know, you've included in the presentation the number of businesses in each of these gross receipts categories. We would also be able to go a level deeper and understand the types of businesses. I'm not asking you to do that right now. I'm just asking that we have that data. We must have that data, right?

The data is based, well, right now there's a couple types. It's admin office, and we have some data, but right now that's based on what we have currently in our system of all registered businesses at this time.

All registered businesses have some categories, so we would be able to identify 50% of the businesses or restaurants, for example. Yes, that's correct. Okay, thank you.

I just have a quick one, John. Yes, go ahead, Councilmember. So just why does the ballot language say, quote, without taxing residents?

I can answer that. This is a tax that affects businesses and business registrants only. It does not require residents to pay any increased tax. And so we felt that it was important for residents to understand who would be affected by the tax and who would not.

So do you guys acknowledge that the businesses may pass some of the costs on to residents?

It's certainly possible that that could potentially happen. Part of the reason that the smaller businesses are not experiencing any change is to not unduly impact them or the residents. Those are the majority of the businesses in the community. MANY OF THE BUSINESSES IN THE COMMUNITY THAT WILL SHOW INCREASES ARE CERTAINLY FINANCIALLY ABLE TO ABSORB THEM. AND PERHAPS ANDERL IS A GOOD EXAMPLE. THOSE TYPES OF BUSINESSES ARE NOT LIKELY TO PASS ON SIGNIFICANT COSTS TO THE to the members of the public, particularly given that we have a cap of 15,000 per year. So per person in the city, that's a penny, less than a penny.

Do we analyze profit margins by industry? Or you just referenced the big guys. Do we analyze how it would impact other industries? Arliss touched on it a little bit.

We didn't analyze industry by industry. This is a revenue level measure. And the gross receipts, how it's defined is existing in our code. So we didn't want to monkey around with, you know, what we have been doing and what businesses are used to.

Do we ever consider a sunset date or timeframe?

We did not.

No.

Okay, that's all I have for now. Thank you. So I just have a couple real quick questions. So one thing that was mentioned was that there are some cities that have a CPI adjustment AND I DON'T THINK IN THE CURRENT DRAFT WE HAVE A CPI ADJUSTMENT. BUT HOW, IF WE WANTED TO DO THAT AND INCLUDE IT IN THIS ORDINANCE, HOW WOULD IT WORK? AND HAVE WE ANALYZED WHETHER IT WOULD BE, HAVE THE IMPACT OF IT AND WHETHER IT'S WORTH IT?

MR. MAYOR, MEMBERS OF THE COUNCIL, I CAN START I THINK ON THAT. We did look at a potential for a CPI increase because the five pack did ask us to consider that and what we felt was that as as revenues increase for businesses through inflation or success whatever it might be that the amount of paying is naturally going up. And so we did not feel it was necessary to include a CPI increase in there, particularly since their gross receipts, again, it's going to change over time. therefore their revenue is going to change over time, therefore the tax that they pay will change over time. The one area where you could potentially do a CPI, although we did not test it and it would completely change the language that we have presented to you, would be on the existing cap. We potentially could add that to the ordinance But then our ballot language would not reflect that. And we did not feel that it was necessary to do that. If there comes a time when $15,000 is as valuable as $15, I think the voters will address it then.

IT'S KIND OF A RISING TIDE LIFTS ALL BOATS TYPE IDEA AND THE CPI IS SOMEWHAT EMBEDDED INTO THE REVENUES OF THE BUSINESSES WHO ARE GOING TO BE SUBJECTED TO THE ADDITIONAL CHARGE.

THAT'S HOW WE LOOK AT IT, YES. OKAY.

FAIR ENOUGH. Then the other question I have is, I've never noticed this before. We've done a few of these since I've been up here, but when you look at the attachment four to tab five, and you've got the situation where we have to authorize members of the body who are going to sign the written argument, I remember back in the day before I was up here, I was involved in the charter a lot. Those those arguments. It's been a while. But so what do we have to do? Is that something we have to make a motion and say that we can, for example, hypothetically Mayor Pro Tem Chavez can sign in favor and I can sign in favor, Council Member Maher, Pettis against, however people vote, I'm just throwing it out there. Do we have to lay that out in our motion?

If you are going to include council members as authors of arguments, they should be identified. Okay. Frankly, it's probably preferable if you let the business community take this one on.

Well, I mean, I heard what you said before. Yes. It seems a little, and, you know, I WOULDN'T NECESSARILY TALK ABOUT THE BUSINESS COMMUNITY. I THINK THERE'S OTHER PEOPLE THAT WOULD BE BETTER PROPONENTS. FOR EXAMPLE, SOME OF OUR EMPLOYEES ASSOCIATIONS. CERTAINLY. BUT I JUST WANT TO HAVE SOME FLEXIBILITY. BECAUSE I REMEMBER BACK IN THE CHARTER DAYS, THIS WAS A BIG DEAL. I MEAN, WE CAME INTO THE I THINK Brenda was there. We would go, we'd huddle up in 1A and we'd make sure our word count was right and then we'd call all the people in to sign it. We'd get Coach Art Perry in there. Signed it. Yeah, you signed it. You know, all the different things we would have, the prominent people in the community like Council Member Maher back then and me, I used to sign those things before I was up here. WHEN PEOPLE USED TO LIKE ME. AND IT WAS A FUN THING, BUT I NEVER REALIZED THAT IT WAS SOMETHING THAT WE HAD TO ADDRESS WHEN WE VOTED ON IT.

MR. MAYOR, CAN I ASK A FOLLOW-ON QUESTION? SO CITY ATTORNEY, CAN YOU DESCRIBE HOW WOULD THIS WORK, RIGHT? IF WE WANT TO SOLICIT MEMBERS OF How is council supposed to address that up here? Are we going to give staff our recommendations? Are we forming a subcommittee? Are you doing it?

What's the process? We cannot solicit supporters. That's something you can do in your own time. And they would be then in a position to author the argument with or without your input. The people who author the argument are supposed to be the signers of that argument. And, pardon me, if we receive more than one argument in favor, then there are statutory priorities that the city attorney, I'm sorry, the city clerk will select based on those statutory priorities and that's one of the reasons why some councils even if there is no intent on the part of council to actually write the argument and have their names appear might reserve that right through a designation like this in the event that there is no argument submitted in support or it's not a good argument.

So are you looking for that recommendation in the motion to that we are relinquishing in effect our authority to write the support argument to the community?

What I'm asking you to do is to choose whether you want to designate someone to author an argument in favor of the measure and if so among the council and if so who and then that those members don't have to write that argument but it is an option then and then you can take it up with members of the community who you think would be supportive. And I think Dr. Bernard would like to address that point.

I know you weren't directing a question at me, but I want to remind you from your previous survey, when we asked about the favorability of some organizations or individuals, we asked about local small business owners. 85% had a favorable view of local small business owners compared to 3% that didn't, with 50% saying very favorable. And while you should know we did not ask about any one individual on the council as a body, of which you have a plurality of favorability at 41%, which is a good number at a time when people are kind of negative towards government. But it does suggest that perhaps folks who are a little bit outside of the venue of people who think there might be a self-interest may not want to sign it.

I mean, I like neat coffee more than I like us. So I get it. That's all good. You're not hurting our feelings.

I'll leave it at that.

OK. Mr. Mayor, I think I interrupted your line of questioning. I apologize. I'll give it back to you.

No, I appreciate that you jumped in, because we have to understand that. And that's fine. OK. I'm done with my questions. Those are my only two questions. OKAY. SO I GUESS WE OPEN IT UP TO THE PUBLIC.

A RESIDENT AND SMALL BUSINESS OWNER AND I ACTUALLY WROTE THE LETTER THAT COUNCIL MEMBER REFERRED TO EARLIER. I was afraid it was going to get lost in the public comments of last night's meeting, so I actually came and slogged through the whole six and a half hours. So here I am. So if I run a couple seconds over, please indulge me. Anyway, I just want to paraphrase a few points and add a couple additional notes after listening to the presentation. If one asks AI for types of businesses in Costa Mesa, California, with a million to five million revenue, the very first sector that comes up is restaurants. an average restaurant generates between a million and five million. In gross receipts, the 200 current flat fee would increase between 700 to 1,250% under the new structure. Under the business license reform measure, it states the proposed business license rate structure designed to avoid impact on smaller businesses. As proposed, this is simply incorrect. The Small Business Administration defines a small business as a privately owned, for-profit entity that is independently operated, is not dominant in its field, and meets specific industry-based size standards. Generally, this means fewer than 500 employees and annual revenues under 7.5 million. So I would say 700 to 1,250% increase is a huge, not a non-issue for those small businesses. This is compounding burdens already increased on small businesses. Restaurants operate under incredibly thin margins. It is so unfortunate that restaurants were not represented in this community outreach. I actually received the survey but had no idea how to follow up on it once I got wind of something going down the pipeline. So that's all I knew about it. Restaurants operate under incredibly thin margins. Unlike many other industries, restaurants can typically run 3% to 5% on margins. It's a constant struggle to keep these razor-thin margins intact. A tax tied to gross receipts rather than profit disproportionately impacts these businesses at a time when many restaurants are already operating on the margin of viability. As Councilmember Chavez noted at the June 9th study session, there is a real risk in setting a rate that discourages businesses from operating in the city. Restaurants and small businesses with these small margins in a highly competitive market have to take a steep one-time jump in fixed costs that may push some to relocate, forego investments and hiring, or to simply close. So I ask the council to consider the following before placing this measure on the ballot. A lower per thousand dollar rate for true small businesses, especially within the million to five million dollar gross receipts range. A reduced tier or cap for low margin industries such as restaurants. And again for public engagement with the restaurant and small. Further with anyone's help, thank you.

Thank you very much.

Anybody else? Anybody on Zoom?

No, Mr. Mayor. Closed public comment?

All right. Oh, so I'll make a motion to accept the staff recommendation as read into the record by the city attorney and I'm still not sure what we need to do with respect to the ballot initiative, but, um, I, I don't, if any, if any council member wishes to reserve the right to sign the ballot initiative, uh, you know, I'm willing to include that in the motion. Anybody. No. Okay. Then we wouldn't have the council members be part of the ballot argument.

Just for the record, Mr. Mayor, then that would mean that this section one of the existing resolution would not be included in the title would be revised accordingly.

That if you say so, that sounds right. Okay. Do I have a second? Mayor Pro Tem Travis. Thank you very much to the staff and to our consultant. THIS IS THE LAST TIME WE'RE GOING TO WORK TOGETHER. YOU'VE DONE A GREAT JOB. I'M NOT GOING TO BE AROUND. I CAN'T SPEAK FOR THE REST OF THEM. BUT THANK YOU. YOU'VE DONE A GREAT JOB IN THE PAST AND IT'S ALWAYS WONDERFUL TO WORK WITH YOU. AND THANKS FOR ALL THE GREAT INFORMATION AND ANSWERING ALL OF OUR QUESTIONS. I DO THINK THAT THIS IS A REASONABLE THING TO DO UNDER THE CIRCUMSTANCES. IT'S BEEN 41 YEARS SINCE WE'VE INCREASED THIS AND WE'RE PUTTING IT ON THE BALLOT FOR THE for the voters and the voters can decide what to do. Definitely appreciate the feedback of our public speaker, you know, as we go forward with this, um, definitely should look, we should look at that. And as was pointed out in response to council member Reynolds questions, if we need to make a downward adjustment, the council, if this passes, we'll have the, uh, discretion to do that. This is just provides the upper limit. So, um, I, I'm not interested. We, as, as, as the, uh, COUNCIL, AS THE STAFF POINTED OUT, FINANCE STAFF, PUBLIC WORKS, I.T., THAT WE'RE RIGHT ON THE, WE'RE DONKEY ON THE EDGE RIGHT NOW WITH OUR MONEY. AND WE'RE STRUGGLING TO BALANCE THE BUDGET EVERY YEAR. WE SHOULD ALWAYS LOOK FOR WAYS TO APPROPRIATELY ADJUST OUR REVENUE AND HAVE PEOPLE PAY THEIR FAIR SHARE. businesses, there's two ways to look at it. If somebody increases your rent, to use an analogy, and you've been playing below market rent for 20 years, and then you pay a market rent and your rent goes up, you might say, well, that was the terrible thing. My rent went up so fast. that's one way to look at it the other way to look at it is you've been playing below market rent for 20 years and i mean right now through no fault of their own and i'm not being i mean i wouldn't expect any business to pay any more than a penny a penny more than what we require but some of these very large businesses are paying really a disproportionately low amount of money uh and and um You know, it's been mentioned and roll. I mean, we've got I was just at the 25th anniversary event for Baker Hostetler, which is a huge law firm. We have so many huge law firms. We have Kirkland and Ellis, which is the largest law firm in the United States of America. They pay a $200 fee to the city. I mean, even the partners at Kirkland and Ellis. I mean, that's 15 minutes of time for a paralegal at Kirkland and Ellis. It's just ridiculous. So, you know, we have... BEEN SUPPRESSING THIS BUSINESS LICENSE FEE FOR YEARS AND YEARS AND YEARS AND NOW IT'S JUST TIME TO RIGHT SIZE IT AND NO BUSINESS, NO RESPONSIBLE BUSINESS, NO RESPONSIBLE CITY, NO RESPONSIBLE FISCAL ENTITY HAS KEPT THEIR PRICES THE SAME FOR 41 YEARS, RIGHT? AND I CONSIDER THIS TO BE A REALLY RESPONSIBLE CITY AND THIS IS THE RESPONSIBLE THING TO DO. Council up here that used to talk about running the city like a business and there's you can't always do that The city is not a business but certainly the city shouldn't maintain the same price for 41 years while every charge that we're expected to pay has steadily increased during that time. It just doesn't make any sense. So this is responsible and I think reasonable and I do believe based on what we heard from and I will definitely support it out there at the time when it's appropriate to do so. So we've got Councilmember, or Mayor Pro Tem Chavez, do you wish to say anything?

Thank you, Mayor Stephens. I did not want to second the motion, but I can't leave you hanging. But not to say I don't believe in this initiative, because I do. And the truth is, this is kind of like the ultimate act of what I think our roles as Councilmembers are, which is to be stewards of our community up in arms at a potential cut for a program they're used to called ROCS. This is what happens when we wait 41 years to update a business license tax. I am 31 years old. This has not been updated since I've been alive. That's ridiculous in my opinion. And it's our job as stewards to ensure that we have adequate revenue so that the resources our community is accustomed to can still exist. I view this measure as a proactive measure. Because for those that don't know, I do work in the city of Irvine, part of that, I work in the County of Orange as a field rep. I've seen a lot of city councils, a lot of city budgets. The cities that are caught flat footed are the ones that are struggling right now with a bunch of deficits. Let's not put our city in that situation. I think this is a very reasonable approach. This is long overdue. And again, our residents will see things that they expect from us deteriorate like infrastructure, like programs. So let's get ahead of the curve. And let's move forward with this measure and give it to the voters to let them decide. Because as I so graciously remind, I'm not going to be here in a year, but you will. And you'll be dealing with these consequences if we don't address these now. So I think it's a very reasonable measure. I hope voters support it. And I'm happy to be a second and support the mayor in moving this forward.

Mr. Mayor.

Yes, ma'am.

Can I ask a couple of additional questions? Sure. And thank you so much for coming. I'm so sorry you had to sit through six and a half hours last night. But I think you raised some really valid points. And I want to set the next council up for success. So bear with me as I scare staff here for a second. Is there, so it strikes me that the way that the ballot measure is written and our proposed ordinance is written is that there is no wiggle room later for council to come back and carve. If we're implementing this schedule on page nine, then we're implementing the schedule. We're not saying, we're not providing any existing wiggle room to say next council you can interpret $5 million, the rate for $5 million differently for restaurants than for Andoril.

As I say, the council is always, the restriction in a measure like this is the top. If you remember, the cannabis tax was originally set at, I think, 7%.

I'm not asking about the rate. I'm asking about the discretion to distinguish between building types or restaurant types. Nope. Business types. Yes.

Business types. So our existing code does that. A warrant, as long as the rate structure has been authorized by the voters, there's no restriction in how you can potentially adjust that in appropriate cases. How do you? If you were interested in doing that. Yes. WE COULD POTENTIALLY NO, THAT'S NOT GOING TO WORK.

THIS REMINDS ME OF A DISCUSSION IF I COULD. I THINK YOU WERE INVOLVED IN THIS. I KNOW HE WAS TALKING TO THE CITY MANAGER. WE HAD THIS QUESTION ABOUT WHETHER A CERTAIN NONPROFIT HAD TO PAY A DOD TAX. WE LOOKED AT THE LAW AND SAID THEY DID BECAUSE THERE WASN'T AN EXEMPTION.

RIGHT.

AND I MIGHT BRING THIS ON THE AGENDA SET SOME LATER DATE ABOUT WHETHER TO CREATE A TOT EXCEPTION FOR CERTAIN CATEGORIES. AND WHAT WE LEARNED WAS WE CAN DO IT JUST BY VOTING A MAJORITY VOTE. RIGHT, CECILIA? WE DETERMINED THAT? I think that it sounds to me like that's what we could do potentially or the new council could do down the road is to say, okay, if they feel like the restaurants are being pinched and they get that data to their satisfaction, they could create an exemption for restaurants potentially. Is that right?

I mean, is that cleaner than adding? A COUPLE OF WORDS THAT SAYS THAT DISCRETION REGARDING BUSINESS TYPE WILL CALL TO THE COUNCIL?

YOU'RE SAYING A COUPLE OF WORDS IN THE ORDINANCE?

I KNOW YOU GOT IT MESSED UP.

YOU DON'T HAVE TO PUT IT IN THE LANGUAGE. YOU CAN PUT IT IN THE ORDINANCE, RIGHT?

YEAH. YOU CAN PUT IT IN THE ORDINANCE.

YEAH. I CAN PUT IT IN THE ORDINANCE.

All right. Would the maker of the motion support additional language granting future council explicit authority to provide discretion based on business type?

Yes. Yeah. Yes for the second. You've got to put on your mic. Yes.

Okay. Second thing. Again, I'm not suggesting we do this, but I want to understand does a future council could also exert their discretion to ease into that $15,000 cap over time. I don't think you need to change the ordinance. I just want to say that out loud. So we could get approval from the voters to go to 15,000 but we could say in 2027 the max is actually going to be 5,000 and then in the following year It could increase.

You could do that. You would probably want to consider the financial implications. Absolutely. Right.

Yeah. I mean, and I do think that's part of, sorry, just while I have the floor here, I do think that's part of the rate, right? I'm not sure if you, the public caught this, but we actually reduced the rate per thousand for that upper tier to accomplish two things. One, to allow us to hold businesses under 500K at no change and then two to try to still attempt to meet the revenue demand and the shortfall that we have right now. So we did tinker with that 50 cents per thousand. I think staff recommendation was initially higher. And that's part of it, right? If a future council wants to carve out restaurants for example, it just means less revenue coming in the door because that rate can't be changed. Yeah. Okay. I'm mostly saying these things out loud. Before I yield, I just want to say thank you to staff and consultants and especially folks who were here after midnight last night. I'm sorry. I know that was a lift. I wish if I could have voted earlier in the night to push this, I would have. But apologies for that. So thank you for bearing with us. I'm a little disappointed we're not moving forward with TOT. I understand the rationale. I will get on my soapbox and talk about short-term rentals and the potential revenue there. And actually, let me just formalize it. Would the maker of the motion support requesting staff to come back with a more detailed analysis of what would be required to enforce an actual short-term rental TOT collection?

Yes. Second? Second?

I'm debating it. OK, sorry. I DON'T THINK WE'LL SUPPORT IT EVENTUALLY, BUT SURE.

THANKS. OKAY. THAT'S ALL I HAVE FOR TONIGHT. THANK YOU.

OKAY. I GOT THAT. JUST. YEAH. COUNCILMEMBER PETTIS. MAYOR, THANK YOU. SO I RECOGNIZE THAT COAST MESA HAS A REAL LONG-TERM INFRASTRUCTURE AND PENSION OBLIGATIONS AND OTHER THINGS. I ALSO RECOGNIZE THE IMPORTANCE OF MAINTAINING POLICE, FIRE, STREETS, PARKS. The city currently has a balanced $200 million budget with growing revenues. The projected shortfall is largely the result of expenditures growing RATHER THAN REVENUES. STAFF HAS NOT PROVIDED COUNCIL WITH A SERIOUS REDUCTION ALTERNATIVE IS ONE OF MY ISSUES. RECENT EXPANSIONS ARE BEING TREATED AS PERMANENT BEFORE COUNCIL HAS EVALUATED THEIR AFFORDABILITY. I'M NOT PREPARED TO ASK BUSINESS AND ULTIMATELY THEIR CUSTOMERS TO PAY MORE UNTIL THE CITY DEMONSTRATES IT'S PRIORITIZED CORE SERVICES AND EXHAUSTED REASONABLE efficiencies i guess a permanent tax should not be the last it should be the last option i should say not the option used to preserve every existing program so i guess in a nutshell what i'm saying is we have a structural spending problem not uh not an immediate revenue emergency therefore i won't be supporting the motion thank you okay does any other councilman wish to be heard uh councilman reynolds

um yeah thank you uh staff um consultants everyone who's been involved in this process um thank you councilmember maher for the additional suggestions i'm um regret that we haven't done some more analysis. I'm actually surprised that that didn't come through the finance committee. I would prefer to have additional analysis, but recognize today's our last option to vote on this. And so I'm not ready to TANK IT GIVEN THAT OVER 41 YEARS COSTS DO INCREASE AND WE NEED TO BE REALIZED THE REALITY OF THAT AND MAKE SOME ADJUSTMENTS. BUT I DO RECOGNIZE THAT AS THE MAYOR SAID SOME BUSINESSES HAVE VERY LARGE PROFIT MARGINS AND WOULDN'T EVEN FEEL TOUCHED BY THIS AT ALL. THERE ARE SOME BUSINESSES THAT WE RECOGNIZE AS AN ESSENTIAL PART OF OUR VIBRANT COASTA MESA ECONOMY. PART OF THE TOURISM DRAW THAT HELPS GROW THE TOT WHO DO RUN ON VERY TIGHT PROFIT MARGINS AND I LIKE THE WAY COUNCILMEMBER MAUER PHRASED IT. WE WANT TO SET UP THE FUTURE COUNCIL FOR SUCCESS SO IF THIS WHEN AN ORDINANCE IS ESTABLISHED THE INFORMATION IS THERE TO MAKE AN ADJUSTMENT IF NEEDED BASED ON SOME ADDITIONAL BUSINESS TYPE LEVEL ANALYSIS. A QUESTION FOR THE CITY MANAGER. I WANT TO MAKE SURE THAT ANALYSIS IS DONE AND AVAILABLE. IS THIS SOMETHING THAT YOU WOULD NEED TO BE INCLUDED IN THE MOTION TO YOU KNOW, LOOK AT THE DISTRIBUTION OF BUSINESS TYPES AND GET SOME ESTIMATES ON TYPICAL PROFIT MARGINS WITHIN EACH OF THOSE CATEGORIES THAT ANALYSIS IS AVAILABLE. IS THAT SOMETHING THAT WE CAN DO FAIRLY QUICKLY? I WANT TO MAKE SURE I DON'T RUN INTO A FOUR-HOUR MAX WALL.

I'M SORRY. I DON'T THINK I UNDERSTAND THE REQUEST. WHAT IS YOUR TIMING?

WELL, FOR WHEN THE COUNCIL WOULD BE DEVELOPING THE KIND OF FINAL I guess what we call adopting the updated business license if the measure is passed. So November.

I think that and maybe the city attorney can clarify this what the council is adopting is the resolution which includes the ordinance and it's the voters that would adopt the ordinance.

If the voters approve the measure, yes, they are adopting it. However, it is the certification of the election by the city council after the acceptance of the results after they've been certified that actually begins the timing of implementation. So I think you're saying when we are. A council can immediately say, hey, we want to make a tweak to this. When the election results are certified and it comes back.

Yeah, yeah, yeah.

I think it's a fairly simple analysis.

I mean, right now we have a number of businesses in each bucket. We're looking at breaking that up by business type.

So we have a number of businesses in each business type. We do typically, though, the meeting in which you certify the election results is typically only that and then you're all SAYING FAREWELL AND NEW MEMBERS ARE BEING SEATED.

I'M ACKNOWLEDGING THAT IT WON'T BE US MAKING THAT DECISION. YES. I WANT THE COUNCIL MAKING THAT DECISION TO HAVE THAT INFORMATION IN FRONT OF THEM. SO YOUR QUESTION WAS TIMING. IT'S THREE MONTHS TO PUT THAT TABLE TOGETHER.

AND YOU'RE TALKING ABOUT BUSINESSES WITHIN EACH OF THE CATEGORIES?

BUSINESS TYPES WITHIN EACH CATEGORY. OKAY.

YEAH. THAT'S INFORMATION THAT WE CAN PUT TOGETHER. I THOUGHT I HEARD YOU REFER TO PROFIT MARGINS. SO I MISHEARD. THANK YOU. YEAH. WE CAN DO THAT. Okay.

Yeah, I'll be supporting the motion. The rates that we charge residents to rent a room for a birthday, to reserve a park, the rates that we have to pay to have our buildings cleaned, all of those have gone up in the last 41 years. It makes sense that we need to make an adjustment here. And it only... It's a fraction of the gap between revenues and costs, and I do think there needs to be some additional analysis on where we might be able to bring costs down through other services. That's for another night, maybe for another council, but I'll be supporting the motion. Thank you.

Do any other council members wish to be heard before we call for the question?

Okay.

We're good. Let's call for the question.

Motion carries 5-2 with council members Pettis and Buehle voting no.

Okay, good. Motion carries. All right, so we're adjourned. Thank you, everybody.

To the point of why Costa Mesa, I'm Joseph Hatch. I'm one of the owners. We're super excited about this. And I know this is maybe an extracurricular question. It doesn't have to do with code or anything really related to the conditional use. So my family's from Southern California. The ownership is actually up here in Utah. But we went through a series of over 100 a hundred different spaces that we looked at. I specifically toured 19 or so buildings in California. And then at the end of the trip, then we ended up at the Gonzales Market. And if you've ever been there, it's seriously some of the best Mexican food ever. And at