By Jim Danziger
Part I (last week) explained how our city government and Laguna residents have subsidized the costs of day-trippers by more than $34,000,000 every year since 2017 (and now probably more than $40 million per year). In the seven years since our citizen research team provided the detailed quantitative analysis that documented this subsidy, we have encouraged/challenged city leaders to implement a strategy to capture a significant amount of new revenue from the day trippers. They have done nothing.
So John Thomas and I developed an approach to generate substantial revenue that would come largely from the day trippers. The approach is based on revising Laguna’s Business License Fee system, which is thirty years old and hopelessly outdated. We proposed adjusting this fee, focusing only on the fee for bars and restaurants. Why? Because, apart from parking revenue, this is the most direct connection between day trippers and a revenue source that the city can feasibly and easily tap. The best data we can find from an independent consultant study suggests that perhaps 70% or more of the total annual revenue of our bars and restaurants comes from non-residents. We proposed phasing in the fee increase over a few years. It would be applied as a small percentage of the bar and restaurant bill. If it reached 3% of gross revenue, for example, it would generate more than $10 million per year from day trippers.
Are there objections to such a fee? Of course. Would some day-trippers still pay nothing? Yes. And wouldn’t residents also pay this fee when dining in town? Yes, but at least a substantial amount of money would come from visitors. Won’t bars and restaurants suffer? Minimally, because a state law passed last January allows bars and restaurants to add any type of charge at the bottom of the bill. Our idea is that a 3% “city fee” would be added to the bill, just above the sales tax charge. It would not affect menu prices or the profitability of the bar or restaurant owners because they would pass on the increased business license fee as a minor charge paid by their customers and sent to the city. If someone bought an $8 taco, there would be a 24-cent additional charge just above the sales tax. If a bar tab was $40, the bill would include $1.20 more. A $100 restaurant bill would add $3. The owners of bars and restaurants (many of whom benefit greatly from all the ways the city helps them prosper) would merely act as collectors of this fee from customers, largely non-residents, and they would transfer those fees onto the Laguna government’s revenues.
We presented and discussed a detailed version of this idea with the city council and staff. We asked councilmembers to allow a public debate and a citizens’ vote on the issue, even if they personally opposed it. Most citizens who spoke or wrote to council were in favor of the idea. George Weiss, Bob Whalen and Mark Orgill also supported putting this on the November ballot. We believe the city manager also supported such a vote. But the mayor and vice mayor took it upon themselves to block a vote by Laguna residents. One seemed to care mostly that it might hurt the considerable profit margin of bar and restaurant owners. The other also put restaurant owners first and confided that s/he simply did not believe the data and analysis that residents subsidize day trippers very much. Their two votes blocked the measure from placement on the ballot.
Due to the election cycle, we now must wait at least two more years before council can even allow Laguna’s residents to consider any serious revenue-generating measure focused on day-trippers. That will be ten years since council first acknowledged the deep subsidy to visitors, at a total cost to our city and residents of more than $300 million in just that period. Meanwhile, these council leaders are hyping a PR campaign that visitors should be “considerate.” That will not reduce the lifeguard interventions, the police and fire activities, the accidents, trash, and the many other costs mainly due to day-trippers. And the PR messages will actually alert even more day-trippers that Laguna is a great destination. I am convinced by the data that residents and the city are now subsidizing day trippers more than $40 million every year. An increasing number of residents are deeply frustrated by the complete failure of our city council to implement a single policy that would meaningfully reduce that subsidy. What do you think?
Danziger is a professor emeritus of political science and former dean at the University of California, Irvine. His extensive, award-winning research has primarily focused on local government.
