In a special meeting, City Council discussed a proposed repeal of the hotel tax deferral it created two years ago. It also received presentations on tax revenue projections and on the proposed budget, which is now online.
The three hotels in Galt have been allowed to defer payments of the transient occupancy tax (TOT) since a Council ordinance in May 2020. If the city were to end its state of emergency or repeal the deferral, the hotels would have until the end of the next quarter to pay.
Vice Mayor Paul Sandhu, owner of the Best Western hotel in Galt, recused himself from the discussion.
According to City Manager Lorenzo Hines Jr., two of the hotels have chosen to defer payments amounting to about $280,000 to $300,000, while the third has continued to pay.
Should Council approve the repeal, staff recommended setting the effective date for July 1, the start of the third quarter. This would give hotels through December, the end of the fourth quarter, to pay the deferred taxes.
An additional staff recommendation was to consider the tax deferral and the local emergency separately so that Sandhu could participate in discussion on the latter.
Hines said that, based on occupancy numbers, staff had not noted any “hardship” at the hotels.
Lozano asked whether staff had contacted the hotel owners about their ability to pay. Economic Development Manager Amie Mendes said they had not been contacted, but “they are aware that the deferral has the potential of going away.”
Mendes added that one of them had “shared some concern” over the payment timing. She said she could talk with interim City Attorney Frank Splendorio about possible “flexibility.”
Lozano suggested informing the owners of the deliberations and inviting them to speak at a Council meeting.
Mayor Shawn Farmer said the hotels may have been using the money from deferred payments to cover pandemic impacts, so “even though occupancy’s good right now and they’re back on their feet, (it) doesn’t mean that they necessarily have all that money.”
The matter was set to come before Council again on June 7 for more discussion.
Staff held a study session on the draft 2022-24 budget, announcing that the budget book is now available online. It can be accessed at bit.ly/GaltBudget (case sensitive).
“It’s a much more advanced process than our previous manually filed book,” Finance Director Matthew Boring said, “and we’re excited because we’ll be able to update it with future budget cycles instead of having one book we create every two years and then it sits there on a shelf.”
For fiscal year 2022-23, the city projects about $62.5 million in revenue and $54.5 million in expenses. For fiscal year 2023-24, it projects roughly $60.9 million in revenue and $57 million in expenditures.
Representatives of the firm that provides the city with long-term sales and property tax projections gave presentations on their methodology.
Wayne Padilla, a principal with HdL Companies, emphasized his and his colleagues’ previous experience as city finance directors.
Addressing sales tax, Padilla said that the biggest sources of Galt’s sales tax income are general consumer goods, gas stations, and county and state tax pools — each 18% of revenue. Business and industry make up 16%, and restaurants and hotels account for 12%.
Padilla noted that, unlike the Great Recession, which seriously reduced the city’s sales tax income, the pandemic has resulted in increases.
Nichole Cone, vice president of HdL affiliate HdL Coren & Cone, spoke about property tax. She said it can take as long as two years for a taxable change in a property to filter through the assessment process and affect the city’s property tax income.
Proposition 13 has made property tax more predictable, Cone said, by limiting it to 1% of a property’s value, and mandating that a property’s assessed value can grow by 2% or measured inflation, whichever is lower, each year. The exceptions to the inflation increases are new improvements and transfers of ownership.