LB Visitor Economic Impact Report

As the City of Laguna Beach struggles with issues related to escalating tourism and related costs and impacts, local residents are working to be part of a smarter visitor management approach. The following information and public document report is offered for our readers.

Laguna Beach Visitor Economic Impact Report

On May 23, 2017 the City Council formed a subcommittee of Councilmembers Bob Whalen and Rob ZurSchmiede to look into “more effective ways of having visitors pay for the costs generated (by visitors)”.  This is also described as the “imbalance between revenue the city receives from visitors and what it costs the city to provide the extra services attributable to so many visitors.”

On July 6, 2017, UCI Economics Professor, former Chair of the USC Department of Economics, and former dean of the Graduate School of Management, University of California Irvine Dennis Aigner; UCI Political Science Professor, former UCI Dean of Undergraduate Education, and former Chair of the UCI Department of Political Science  Jim Danziger; Harvard educated Laguna Beach Planning Commissioner Roger McErlane; and University of Michigan MBA John Thomas presented the attached information to the subcommittee in a two hour public hearing.  The Sub-committee was presented with a written report and a PowerPoint. The information was based on information available at the time including the city’s fiscal year 2016-2017 and fiscal year 2017-2018 city budgets. The report was never presented to the full City Council.

The essence of the report was that an allocation of revenue and costs attributable to visitors based on the fiscal year 2017-2018 city budget resulted in the difference or “gap” being $23,116,000 – meaning revenue collected by the City attributable to visitors was over $23,000,000 less than the additional costs the City incurs due to the visitors.  Allocation of revenue attributable to visitors was based on a detailed line-by-line review of the City budget estimating revenue the City receives due to visitors and revenue the City would receive if there were no visitors.  Allocation of costs attributable to visitors was largely based on a comparison of operating costs for the City of Laguna Beach compared to other California cities with similar population but with little tourist impact on their operations.  The difference was stark.  Operating costs for Laguna Beach were 256% the operating costs of the other similar population cities in the comparison.  While visitors were credited with being responsible for 35% of City revenue, visitors were estimated to be responsible for 60% of the costs of operating the city.  The shortage was approximately 25% of the total city budget. The report also stated that the cost of operating the City of Laguna Beach is increasing faster than revenue to the City, implying that if no action were taken to correct the imbalance, in dollar terms the shortage would be likely to increase in the future.

The sub-committee agreed with the premise that revenue from visitors is not covering costs attributable to visitors.

In an effort to stimulate a discussion of possible solutions, the report offered eighteen possible ways to reduce the shortage, and the sub-committee was encouraged to solicit other solutions from experts and the public.

There were subsequent sub-committee meetings and the sub-committee members reported talking to an attorney and a consultant outside the sub-committee meetings.

It is likely that the shortage is greater today than at the time of the report.

The report is available here. Balancing the Costs and Revenues From Visitors To Laguna July 6 2017.pdf