CC 2020-04-14_11c Waiver of Late Payment Penalties_TOTMEMORANDUM
TO: CITY COUNCIL
FROM: MICHAEL STEVENS, ADMINISTRATIVE SERVICES DIRECTOR
SUBJECT: CONSIDERATION OF A RESOLUTION AUTHORIZING WAIVER OF
LATE PAYMENT PENALTIES AND INTEREST FOR TRANSIENT
OCCUPANCY TAX (TOT)
DATE: APRIL 14, 2020
SUMMARY OF ACTION:
Authorizing the Administrative Services Director to waive any late payment penalties and
interest associated with unpaid Transient Occupancy Taxes (TOT) during March and April
2020.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The Resolution does not propose to waive TOT payments, yet extends the payment
deadline for two months in response to impacts due to the Coronavirus pandemic. The
financial impact of waiving and not collecting the otherwise applicable penalties and
interest over the two-month period is negligible.
RECOMMENDATION:
It is recommended the City Council adopt a Resolution authorizing the City’s
Administrative Services Director to waive any otherwise applicable late payment penalties
and interest on delinquent TOT remittances for the months of March and April 2020 and
extend the payment deadline until August 31, 2020.
BACKGROUND:
On Tuesday, March 24, 2020, the City Council adopted a Resolution ratifying the
existence of a local emergency in response to the health crisis and pandemic brought on
by COVID-19 (Coronavirus). In an effort to slow the spread of the disease, the County of
San Luis Obispo has given the “shelter at home” directive for all non-essential services
and activities. In addition, the Centers for Disease Control and Prevention is urging all
people to follow social distancing measures. The impact of these historic measures has
had a significant impact on local economic activity, particularly with regards to travel and
Item 11.c. - Page 1
CITY COUNCIL
DISCUSSION AND CONSIDERATION OF RESOLUTION REGARDING WAIVER OF
LATE PAYMENT PENALTIES AND INTEREST FOR TRANSIENT OCCUPANCY TAX
(TOT)
APRIL 14, 2020
PAGE 2
tourism. Lodging properties throughout the County are experiencing reduced revenues
because of decreased occupancy.
ANALYSIS OF ISSUES:
It is in the best interest of the City to assist the lodging businesses that generate TOT
revenue, since these businesses contribute directly to the City’s financial well-being. This
action is considered temporary and the intent is to help lodging businesses impacted by
the Coronavirus get through this difficult time. However, the City like any business needs
to maintain its own cash flow and must weigh the financial impact of delaying current TOT
payments into the summer period. The Resolution would authorize the City’s
Administrative Services Director to waive any otherwise applicable late payment penalties
and interest on delinquent TOT remittances for the months of March and April 2020 and
extend the payment deadline until August 31, 2020. Most TOT payments are normally
due in the month after collection. Regular TOT payment deadlines would return beginning
with the May TOT collection, which is due June 30, 2020. Staff recommends that the
Council still require that lodging businesses submit their TOT forms on time so that staff
can accurately estimate the expected revenue due in the current fiscal year.
In order to qualify for the waiver of late payment penalties and interest for March and April
TOT payments, lodging businesses must:
File their March and April TOT returns based on standard deadlines. Payment of
TOT would be due August 31, 2020.
March and April filings must include payment of the Tourism Management District
(TMD) and Tourism Business Improvement District (TBID) assessments.
In the first six months of the current fiscal year, the City collected $632,406 in TOT
revenue, which equates to a 15% increase from the same period last year. The TOT
estimated payments from March and April 2020 are $57,385. However, the estimated
impact from waiving late penalties and interest from March and April is immaterial. In FY
2018-19, the total amount collected for TOT penalties and interest was $168.
ALTERNATIVES:
1. Adopt the Resolution authorizing the Administrative Services Director to waive late
payment penalties and interest for March and April TOT payments and extend the
payment deadline until August 31, 2020;
2. Modify the Resolution to waive late payment penalties and interest for a different
time frame;
3. Do not adopt the Resolution; or
4. Provide direction to staff.
Item 11.c. - Page 2
CITY COUNCIL
DISCUSSION AND CONSIDERATION OF RESOLUTION REGARDING WAIVER OF
LATE PAYMENT PENALTIES AND INTEREST FOR TRANSIENT OCCUPANCY TAX
(TOT)
APRIL 14, 2020
PAGE 3
ADVANTAGES:
This action will help lodging businesses impacted by reduced occupancy during the
Coronavirus by allowing them to delay TOT payments for the months of March and April
until the end of August without the City assessing penalties and interest.
DISADVANTAGES:
This action will delay TOT payments and reduce cash flow until August. It is not
anticipated that the delay in TOT payments for the two months will significantly impact the
City financially.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Item 11.c. - Page 3
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
ARROYO GRANDE AUTHORIZING THE
ADMINISTRATIVE SERVICES DIRECTOR TO WAIVE
LATE PAYMENT PENALTIES AND INTEREST FOR
DELINQUENT TRANSIENT OCCUPANCY TAX RECEIVED
FOR STAYS DURING MARCH AND APRIL 2020 AND
EXTENDING THE PAYMENT DEADLINE UNTIL AUGUST
31, 2020
WHEREAS, a local emergency relating to the COVID-19 pandemic has been declared in
the City of Arroyo Grande; and
WHEREAS, the Centers for Disease Control and Prevention, the California Department
of Health, and San Luis Obispo County have all issued shelter in place orders to enforce
social distancing, prohibited group events, and taken other precautions to protect public
health and prevent transmission of this highly communicable virus; and
WHEREAS, the effects of the various orders and actions needed to slow the spread of
COVID-19 have resulted in significant economic effects on lodging businesses in the
City, and hotel and motel room reservations have dramatically decreased; and
WHEREAS, hotels, motels, and other lodging businesses in the City provide not only a
place for visitors to stay while in the City, but also generate additional revenue in the
form of increased sales tax dollars from visitors’ purchases at local stores and
restaurants; and
WHEREAS, if hotels, motels, and other lodging businesses in the City were forced to
close permanently as a result of the decrease in room reservations, there will be at
minimum a significant delay in such businesses reopening, and there may be a
permanent reduction in the number of hotel rooms in the City, resulting in reductions in
City revenue and the elimination of an essential amenity for visitors to the City; and
WHEREAS, hotels, motels, and other lodging businesses in the City are subject to
Chapter 3.24 of the Arroyo Grande Municipal Code, which requires those businesses to
collect from their guests a 10% occupancy tax, referred to as the transient occupancy tax,
which then must be remitted to the City; and
WHEREAS, Arroyo Grande Municipal Code Section 3.24.080 provides that “Any operator
who shall fail to remit any tax imposed by the provisions of this chapter within the time
required shall pay a penalty in the amount of ten (10) percent of the tax in addition to the
amount of the tax”; and
Item 11.c. - Page 4
RESOLUTION NO.
PAGE 2
WHEREAS, the City Council wishes to temporarily waive penalties and interest for late
payment of currently due transient occupancy taxes due to the COVID-19 pandemic that is
acutely and disproportionately impacting the local lodging and hotel industry.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Arroyo Grande
as follows:
1. The recitals set forth herein are true, correct and incorporated herein.
2. The Administrative Services Director is authorized to waive late payment
penalties and interest imposed by Chapter 3.24 of the Arroyo Grande Municipal
Code for Transient Occupancy Tax (TOT) revenues received by lodging
establishments for March 2020 and April 2020 transient occupancy lodging
services and to extend the payment deadline until August 31, 2020.
3. In order to qualify for the waiver of late payment penalties and interest for March
and April TOT, lodging businesses must:
a. File their March and April TOT returns based on standard deadlines.
Payment of TOT will be due August 31, 2020; and
b. March and April filings must include payment of the Tourism
Management District and Tourism Business Improvement District
assessments.
4. Nothing herein shall relieve any person or entity of its obligation to pay and to
remit to the City amounts otherwise due pursuant to Chapter 3.24 and any late
payment penalties and interest that otherwise would have become due for
failure or refusal to pay amounts due for March and April 2020 shall be
assessed and shall become due and payable to the City if the referenced TOT
payments due to the City have not been made in full by August 31, 2020.
On motion by Council Member _________, seconded by Council Member _______, and
on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
The foregoing Resolution was passed and adopted this 14th day of April, 2020.
Item 11.c. - Page 5
RESOLUTION NO.
PAGE 3
___________________________________
CAREN RAY RUSSOM, MAYOR
ATTEST:
KELLY WETMORE, CITY CLERK
APPROVED AS TO CONTENT:
JAMES A. BERGMAN, CITY MANAGER
APPROVED AS TO FORM:
____________________________________
TIMOTHY J. CARMEL, CITY ATTORNEY
Item 11.c. - Page 6