Market woes not reflected

Wall Street jitters may be plaguing investors and property owners’ nerves concerned about real estate industry woes, but City Hall has not been afflicted “” yet.

City revenue is up over estimates for the first two quarters of the fiscal year and expenditures have not exceeded expectations, according to the quarterly financial report, which covers July-December 2007. However, city officials and the business community are keeping wary eyes on the future because of indications that the revenue stream may level off, if not decrease, in the rest of the 2008.

“The city has issued the most recent quarterly report as requested by Mayor Jane Egly,” City Manager Ken Frank said. “Expenditures are pretty much as expected, and revenues are going pretty well.

“Property taxes are on target, and we are 5.7% ahead in bed taxes compared to 2007.”

However, the supplemental property taxes “” taxes attributed to the sale of property from Jan. 2 to Dec. 30 “” are only 43% of the estimate, reflecting the turndown in the housing market, both in sales and prices.

“That directly impacts us,” Frank said.

Furthermore, there is speculation that the bed tax, which flows directly into the city’s coffers for discretionary spending, will have slowed to about 1% in the third quarter of the fiscal year, January, February and March.

“We haven’t seen it yet, but that is what I am hearing,” Frank said.

Laguna Beach Visitor and Conference Bureau Executive Director Judy Bijlani said the bureau is predicting little or no increase in hotel occupancy “” on which the bed tax is based “” for the rest of 2008. But that doesn’t mean the future is all that grim.

“We are being cautiously optimistic,” Bijlani said.

The bureau looks at many indicators: from housing sales to travel trends to fuel prices, according to Bijlani.

Frank said that in the past economic turndowns surprisingly have been responsible for higher hotel occupancy here. Long-distance travel is curtailed.

“People spend their money nearer their homes,” Frank said. “And we are near 25 million people.”

Montage Resort & Spa, the city’s largest contributor to bed taxes, reportedly has seen no decrease in occupancy. However, the posh hostelry’s bed taxes are not included in the general fund bed taxes in the quarterly report. Montage bed taxes go directly into the city’s capital improvement fund.

“Bed taxes are God’s gift to local governments,” Frank said. “Not just here, but all across the country. “We don’t have to share it with the state or federal government. It doesn’t hit the residents, just the people who come here and use city facilities.”

Frank likened the bed taxes to parking meter fees, which he said are still less than rates in some other cities that also depend on tourists for some revenue.

He cited a parking garage in Newport Beach that charged $3 for 20 minutes “” with just a tinge of envy.

Similarly, bed taxes in Laguna are lower than some other towns.

“Anaheim charges 15%, and I think Palm Springs is up to 15%,” Frank said. “Monterey charges 12 or 13%.

Hotels in Laguna are obliged to tack onto their customers’ bills an extra 12%, which includes 2% for the Business Improvement District, which is distributed to art institutions and organizations that lure tourists to town and to the city’s Arts Commission.

Higher than expected BID revenue accounts for the higher than expected operating costs posted by the city’s Cultural Arts Department through the first two quarters of fiscal year 2008-09, according to the report.

The Marine Safety Department and the City Treasurer’s Office also exceeded 50% of anticipated operating costs 50% through the fiscal year. Salary increases upped the expenses for the Lifeguards and costs for hotel audits earlier in the year explained the treasurer’s excess.

All departments are expected to be on target by the end of the fiscal year, Frank said.

“With 50% of the year complete, general fund revenues are up 51.34% of the budget estimate and expenditures are at 47.19% of the budget,” Frank said.

The general fund accounts for about 63% of the city’s total revenue. General fund income includes property, sales, business license, and bed taxes (minus Montage); licenses and permit fees; penalties and fines; and charges for services, such as plan checks and recreational programs.

Total general fund revenue for fiscal year 2008-09 is expected to be $43,394,463. Total expenditures are estimated at $46.015,399, with the discrepancy covered by a starting balance of $6,162,597.

For more information about the quarterly financial report, contact the city’s Administrative Services Department at (949) 497-0315.