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Jun 23, 2023

San Diego revenue ideas: paid beach parking, more meters

San Diego officials are exploring several new potential revenue streams for the

San Diego officials are exploring several new potential revenue streams for the cash-strapped city, including more parking meters, a rental car business tax and parking fees for non-residents at beaches, Balboa Park and Mission Bay Park.

Other potential sources of new cash for the city are higher parking citation fines, new fees to launch boats, allowing more advertising in tourist areas and a new tax on parking garages.

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A 25-page analysis of these options recently released by the city's independent budget analyst says the most feasible options are boosting parking meter revenue and charging non-residents to park at major city destinations.

The IBA stresses that each revenue idea comes with potential drawbacks. For example, non-resident parking fees at tourist destinations could push vehicles into nearby neighborhoods or damage the destinations by leading to a decline in visitors and tax revenue.

Some of the ideas would also require approval by the state's Coastal Commission, which aggressively scrutinizes any new fees that make it harder for ordinary residents to access the coast affordably.

The commission last week approved a new requirement that restaurants in San Diego's beach areas restore any on-street parking spots they eliminated during the pandemic to make way for outdoor seating.

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The amount of revenue any of the options under consideration would generate is relatively small based on the city's $2 billion annual general fund budget.

Raising prices at existing city meters is expected to raise an estimated $9 million per year, while charging non-residents to park at tourist destinations would raise $5.7 million annually.

The IBA's analysis says the parking garage tax could raise $30 million a year. But the analysis contends there are too many unknowns to provide reliable estimates for the rental car business tax or allowing corporate ads in tourist areas.

Despite the relatively small amounts of revenue, City Council President Sean Elo-Rivera said last week that San Diego needs to explore all options for new cash because the city needs every bit of help it can get.

"While there is no silver bullet that will individually correct for the structural budget deficit here, there are opportunities to chip away at it," said Elo-Rivera, who requested the IBA analysis of possible new revenue streams last summer.

San Diego is facing more than $350 million in projected budget deficits over the next five years as federal pandemic aid runs out, pension costs rise and the city catches up on millions of skipped contributions to its reserves.

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The city is facing more than $350 million in deficits over the next five years, despite annual revenues projected to surpass $2 billion for the first time

Those deficits will become significantly larger if there is a recession, which would sharply reduce city revenue from sales tax and hotel tax.

But the projections don't include roughly $80 million a year the city will start getting in 2025 when it begins charging single-family homes for trash and recycling services. Voters’ approval of Measure B last month allows it to do so.

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City leaders say they are still facing a "structural" budget deficit, contending that long-term expenditures are projected to be consistently larger than long-term revenue.

That was Elo-Rivera's motivation for asking the IBA to analyze new revenue opportunities, particularly ones that impact tourists more than city residents.

"Our goal is to adequately resource our city to provide for the needs of our residents while being mindful of adding costs to San Diegans," Elo-Rivera said. "We want to ensure that those who are visiting San Diego, whether from a neighboring city or elsewhere, are paying their fair share to make San Diego a world-class city that provides world-class services to our residents."

Data from the state comptroller show that San Diego lags behind other large cities in per-capita revenue.

San Francisco, with a population of 875,000, generated $12 billion in revenue in fiscal 2020. Los Angeles, with 4 million people, got over $17 billion. San Diego, at 1.4 million residents, had just $3.55 billion in revenue.

That's nearly $14,000 per person in San Francisco, more than $4,000 per person in Los Angeles and about $2,500 per person in San Diego.

The cities have key differences; Los Angeles operates its own electric utility, and San Francisco is both a county and a city.

But Elo-Rivera said San Diego must focus on increasing city revenue.

The IBA says San Diego could start charging non-residents to park in city beach parking lots, the 5,900 parking spaces in Mission Bay Park and the 6,850 parking spaces in Balboa Park.

It could use the same method it does for neighborhood parking districts, where residents apply for a permits, or it could use online residency verification for discounts like city golf courses do.

The $5.7 million estimate of annual revenue is based on charging non-residents $5 to park at the tourist destinations. A higher fee would generate more revenue.

The IBA says it's unclear whether San Diego might be limited in what it can charge by Proposition 26, which bars cities from charging more for a service than it costs to provide.

But even if Proposition 26 applies, the city could likely charge substantial fees for the infrastructure and maintenance costs of creating and maintaining the city parking lots, the IBA says.

Another possible drawback is the burden to residents of acquiring permits for the destinations, especially those who infrequently visit the beaches or Balboa Park.

Other new revenue streams that would come mostly at the expense of tourists include newboat-launch fees in Mission Bay, higher boat-mooring fees and a new rental car business tax. The IBA says the boating ideas wouldn't produce significant revenues, but the rental car tax could.

The IBA analysis says it's not legal in California to tax rental car customers directly but notes that a 2003 city attorney report said San Diego could create an additional business tax to be imposed on rental car agencies. The tax would need approval by city voters, the IBA says.

Several of the ideas for new revenue focus on parking meters: adding more of them, raising meter fees, extending the hours meters are in effect and making citations for meter violations more expensive.

Viewing meters as a revenue source would be a shift for the city, which has traditionally viewed them as a way to boost parking availability in busy areas by accelerating the turnover of spots.

Most of the city's 3,800 parking meters charge $1.25 an hour. Doubling that to $2.50 would generate $9 million a year, the IBA says.

A new 10 percent tax on revenue generated by parking garages could generate $30 million, the IBA says. San Diego doesn't have such a tax, but other large cities do.

The 10 percent rate is what Los Angeles charges, but San Francisco charges 25 percent, New York 18.38 percent and Seattle 14.5 percent.

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Another possible revenue stream is allowing more ads in tourist areas and other places, but the IBA warns that loosening the city's sign ordinance could jeopardize other restrictions, which could include rules restricting billboards.