LA voters get help unpacking the fiscal impact of county ballot measures

This measure would establish a permanent half percent (0.5%) sales and use tax to reduce and prevent homelessness and provide affordable housing. This measure would repeal the one quarter percent (0.25%) sales and use tax enacted in 2017 that would otherwise expire in 2027. In accordance with the Elections Code, the scope of this fiscal impact statement is limited to the measure's effect on revenues and expenditures.

The net effect of this measure is to increase the sales and use tax rate by one-quarter percent (0.25%) on all taxable sales occurring in the County, and to make the increase permanent. Based on California Department of Tax and Fee Administration records for the period September 2023 through August 2024, the half percent (0.5%) sales and use tax is estimated to generate approximately $1.076 billion in local government revenue in the first year. Local government expenditures are expected to increase by a similar amount as these new revenues are used for the purposes specified in the measure.

The measure allows for not more than one half percent (0.5%) of the gross tax amount collected (estimated to be approximately $5 million in the first year) to be used for reasonable costs to collect and distribute the tax. Under the allocation plan specified in the measure, net local government revenues generated by the tax (estimated at approximately $1.071 billion in the first year) must be apportioned for the following programs, as defined in the measure:

• 61.25% (approximately $656 million in the first year) to the County for Comprehensive Homelessness Services, the Local Solutions Fund, Homelessness Solutions Innovations, and Accountability, Data, and Research;
• 35.75% (approximately $383 million in the first year) to the Los Angeles County Affordable Housing Solutions Agency for Affordable Housing and Prevention; and
•  - 3% (approximately $32 million in the first year) to the Los Angeles County Development Authority for Local Housing Production.

The measure also allows the Board of Supervisors to change this apportionment beginning in Fiscal Year 2030- 31. Of the 61.25% apportioned to the County, at least 15% must be used for the Local Solutions Fund which will be distributed to cities, councils of governments, and to the County on behalf of its unincorporated areas, via a formula based on the point-in-time count required by the United States Department of Housing and Urban Development and/or similar measures of people experiencing homelessness, as the Board of Supervisors determines in consultation with cities within the County.

All the sales and use tax revenues will be restricted to and must be spent on the purposes specified in the measure. In addition to the costs to collect and distribute the tax which are accounted for in the measure, certain costs will be incurred to monitor compliance. However, those costs would be met by the increased revenue associated with the measure.

This Charter Amendment would make changes to the structure of County government. In accordance with the Elections Code, the scope of this fiscal impact statement is limited to the Charter Amendment’s effect on revenues and expenditures.

Overall, this Charter Amendment will likely result in additional future costs in two categories — for implementation of the Charter Amendment, and for the ongoing costs of operating the new offices and positions it creates.

The Charter Amendment requires that implementation costs be funded with existing County funding sources and result in no additional costs to, or taxes imposed on taxpayers. Accordingly, implementation costs including, but not limited to, the office and space requirements of the four new Supervisorial districts, establishing new departments and officials as outlined in the Charter Amendment, and additional technology and election costs may be addressed by reallocating funds from other County functions/programs, setting aside future growth of existing funding sources, and/or realizing savings from operating efficiencies. Overall, estimates indicate onetime implementation costs could be $8 million or more, depending on future policymaker decisions.

Ongoing costs of the Charter Amendment would include salaries and benefits for newly created positions and offices, ongoing costs for office space, and other administrative and support needs. However, the amount of these future costs and their funding source(s) cannot be estimated since some of the changes will not begin until 2030, and their impacts are contingent on future policymaker decisions. The financing of ongoing costs as opposed to implementation costs is not addressed in the Charter Amendment. Ongoing costs are not subject to the same requirement that they be funded with existing County funding sources and offset by cost savings. They may be funded by reallocating existing resources, reserving future revenue growth, achieving operating efficiencies, or by utilizing alternative and/or new funding sources. Ultimately, policymakers will determine the mix of new and existing funding sources to pay for ongoing operating costs, as well as the impact on the operations and finances of other County functions/programs.

Our estimates were based on cost information provided by County departments and projections regarding the operational impacts of this Charter Amendment and are subject to uncertainty. If the actual impact differs significantly from our projections, costs could be higher or lower than our estimates.