Item 30 - Fiscal Year 2026-27 Budget Work Study Session

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Fiscal Year 2026-27 Budget Work Study Session May 5, 2026 Page 4 One-time contribution to the Pension Stabilization Pension Stabilization Account $1,500,000 Section 115 Trust One-time support for the Service Stabilization residential street sweeping $900,000 program Remaining Available (for To be determined by the City $3,000,000 City Council priorities) Council Total One-Time Resources $9,400,000 The following section provides additional details in response to questions and feedback received during early direction. As requested, staff has included updated information and clarifications to support further discussion and potential next steps. Transient Occupancy Tax (TOT) Overview The City's Transient Occupancy Tax (TOT), also known as Hotel Visitors Tax or HVT in the Santa Ana Municipal Code, is currently set at 11% and is applied to short-term stays at hotels. The City currently has 33 active hotels generating TOT revenue. In recent years, TOT has remained a stable revenue source, ranging from a high of approximately $10.5 million over the past four years, depending on occupancy levels and economic conditions (see table below). As part of the discussion during Early Direction, the City Council expressed interest in understanding how Santa Ana's rate compares to neighboring cities. Staff has included Exhibit 1, which compares TOT rates across selected Orange County cities. For reference, each 1% increase in the Santa Ana TOT rate is estimated to generate approximately $900,000 in additional annual revenue, based on current collections. FY25-26 FY 24-25 FY 23-24 FY22-23 Estimated Actual Actual Actual $9,500,000 $9,475,393 $9,504,727 $10,477,648 The City continues to work collaboratively with the hospitality sector to strengthen overall operating conditions and maintain its competitiveness as a visitor destination. While an increase would generate additional revenue, the overall impact would be relatively modest. Animal Shelter To control animal services costs in the short term, staff will review the Shelter contract and the City's municipal code to identify opportunities for changes. An example is potentially imposing requirements for stray animals dropped off over the counter and charged to the City. Recent statistics indicate this particular type of transaction accounts for as much as 68% of charge-days apportioned to Santa Ana. Staff has been researching options for a long-term solution to control costs and potentially improve service.