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Home My WebLink About03 - Transient Occupany Tax & Visitor Service FeeCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 3 August 11, 2009 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Administrative Services Department Dennis C. Danner, Administrative Services Director (949) 644 -3123 or DDannerANewportBeachCA.gov Glen Everroad, Revenue Division Manager (949) 644 -3144 or GEverroadCa NewportBeachCA.gov SUBJECT: TRANSIENT OCCUPANCY TAXI VISITOR SERVICE FEE ORDINANCE UPDATE RE: THE PAYMENT OF TAX AND FEES PRIOR TO SEEKING JUDICIAL REVIEW ISSUE: Should the City update the Uniform Transient Occupancy Tax ( "UTOT) and Visitor Service Fee ( "VSF ") Ordinances such that the payment of those taxes and fees are a condition precedent to judicial review? RECOMMENDATION: Staff recommends Council introduce the attached proposed ordinance amending Chapters 3.16 and 3.28 of the Newport Beach Municipal Code relating to the payment of UTOTs and VSFs prior to seeking judicial review, and pass to second reading. DISCUSSION: Background: UTOTs and VSFs produce the third largest General Fund revenue source, totaling nearly $12 million annually. The UTOT has been imposed by the City since 1965 and the provisions for its application are established in Newport Beach Municipal Code Chapter 3.16. The rate is 9 %. In 1993, the City established a one percent (1 %) Visitor Service Fee (Chapter 3.28). Chapter 3.28 provides that the incidence and application of VSF is the same as UTOT. UTOT and VSF are owed by hotel guests. Guests satisfy their obligations by paying the hotel operator, who is required by the UTOT and VSF ordinances to collect the combined rate of 10% on the amount paid by the guest to occupy the hotel room. UTOTNSF Ordinance Update August 11, 2009 Page 2 Newport Beach Municipal Code Sections 3.16.090 and 3.28.055 establish the assessment appeals processes for unpaid UTOT and VSF, respectively. Assessment appeals are heard by a hearing officer, who reports findings of fact and conclusions of law to the City Manager. The City Manager considers the hearing officer's information and must render a decision within fifteen days. The Municipal Code provides that the City Manager's decision is final. California law, however, provides that the City Manager's decision may be appealed to the Superior Court. California Constitution (§ 32 of Article XIII) provides that an appellant shall "pay first and litigate later" ( "PFLL" ): "No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin the collection of any tax. After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature." While this section applies to the State, arguments have been raised that this section does not apply to municipalities. While City staff considers this section of the Califomia Constitution to apply to the City, to ensure that PFLL applies to the UTOT and VSF City staff is suggesting that the City Council adopt the attached proposed ordinance which would add sections 3.16.100 and 3.28.057 to the Newport Beach Municipal Code. Environmental Review: Not applicable. Public Notice: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Prepared by: Glen Everroad Revenue Manager Attachments: Proposed Ordinance Submitted by: Dennis C. Danner Administrative Services Director ORDINANCE NO. 2009- AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH ADDING SECTIONS 3.16.100 AND 3.28.057 TO THE NEWPORT BEACH MUNICIPAL CODE REGARDING THE PAYMENT OF UNIFORM TRANSIENT OCCUPANCY TAX AND VISITOR SERVICE FEE ASSESSMENTS PRIOR TO SEEKING JUDICIAL REVIEW. WHEREAS, Chapter 3.16 of the Newport Beach Municipal Code establishes a Uniform Transient Occupancy Tax (UTOT) rate of 9% and sets for the application of the UTOT, including assessments and appeals; and WHEREAS, Chapter 3.28 of the Newport Beach Municipal Code establishes a Visitor Service Fee (VSF) rate of 1% and sets for the application of the VSF, including assessments and appeals; and WHEREAS, the UTOT and VSF revenues represent the third largest General fund revenue source; and WHEREAS, California Constitution provides that tax assessment appellants shall pay the tax assessment prior to filing an appeal of assessments with the Courts; and WHEREAS, the City Council of the City of Newport Beach desires to clarify in Chapters 3.16 and 3.28 that appellants are obligated to pay UTOT and VSF assessments prior to filing an Court appeal of such assessments. NOW, THEREFORE, the City Council of the City of Newport Beach ordains as follows: SECTION 1: Section 3.16.100 of the Newport Beach Municipal Code shall be added to read: 3.16.100 Payment Required. No injunction, writ of mandate or other legal or equitable process shall issue in any suit, action or proceeding in any court against the City or an officer thereof, to prevent or enjoin the collection of taxes sought to be collected pursuant to this chapter. Payment of all tax, interest and penalties is a required condition precedent to seeking judicial review of any tax liability. SECTION 2: Section 3.28.057 of the Newport Beach Municipal Code shall be added to read: 3.28.057 Payment Required. No injunction, writ of mandate or other legal or equitable process shall issue in any suit, action or proceeding in any court against the City or an officer thereof, to prevent or enjoin the collection of fees sought to be collected pursuant to this chapter. Payment of all fees, interest and penalties is a required condition precedent to seeking judicial review of any fee liability. SECTION 3: The Mayor shall sign and the City Clerk shall attest to the passage of this ordinance. The City Clerk shall cause the same to be published once in the official newspaper of the City, and it shall be effective thirty (30) days after its adoption. SECTION 4: This ordinance was introduced at a regular meeting of the City Council of the City of Newport Beach, held on the 11th day of August, 2009, and adopted on the _ day of 2009, by the following vote, to wit: AYES, COUNCIL MEMBERS NOES, COUNCIL MEMBERS ABSENT COUNCIL MEMBERS MAYOR ATTEST: CITY CLERK APPROVED AS TO FORM: OFFICE OF THE CITY ATTORNEY: By: A ate_ C . 9 e � David R. Hunt, City Attorney