Category: Tourism

LB Visitor Economic Impact Report

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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

Guest Article – Coastal Short-Term Rental Supporters Ignore Historic Nuisance Laws

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Coastal city Short-Term Rental proponents ignore legally-binding land use
concepts, typically using meritless, fatally flawed arguments at hearings.
They’re good for business? Unfortunately, coastal trends since 2000
are “Commerce first, residents second.” By residents I mean those NOT
owning potential STR parcels.

Favoring commerce over 40+% of the population who rent year-round plus
percentages of full-time owners not wishing to acquire permits, that constitute
an incontestable majority, the commerce tail is wagging the communal quality
of life dog.

Beyond permit fees, there’s no proof that more STR would appreciably increase
general municipal revenue via boarders spending significant taxable amounts
at businesses. Often tenants are extended families and friends. They’ll be
saving money by cooking and drinking at the rental, not out.

They increase or assist public access to our beaches? A classic straw man
argument. Yes, a few hundred more people will be ensconced, but the Cal
Coastal Commission is dead wrong on this one. Otherwise, why allow more and
more parking meters, increasing rates plus climbing violation fees? Aren’t
limited time meters a form of infringement, inhibition or visitation disincentive?
Coastals increasingly allow increased intensification of use for restaurants and
bars without demanding increased onsite parking. Why doesn’t the CCC object
to that, these sites eat up yet more public parking, thus decreasing access,
don’t they?

STR’s homes are their castle, limitations constitute a de facto taking? That
ignores the basics of common civility, public and private nuisance laws traced
back to King Henry III:

“Private nuisance: An unreasonable, unwarranted invasion, where actions of
the defendant cause a substantial interference with another’s use/enjoyment
of their property. Public nuisance: The defendant’s actions materially affect
the reasonable comfort and convenience of life of the community.”

No one has the inalienable right to use their property to the diminishment of
their neighbor(s). Yes, some operators are vigilant and do not abuse the terms
and conditions. The nightmares abound, absentee owners are trying to
maximize income to offset, mitigate their taxes and maintenance. They bought
the parcel without STR rights: Enhancing private revenue models is NOT the
community’s problem.

The sales industry knows this, the Real Estate Disclosure Act of 1987 is explicit:
Seller MUST disclose any adverse condition that COULD affect the value. Listed
housing is theoretically forced to reveal the obtrusive potential if in proximity.
STR actually diminish property values, now THERE’S a fiscal infringement,
irregular taking including tort (litigation) exposure.

*Roger E. Bütow is a professional land use consultant and 46-year
resident of Laguna Beach