Council advances drafting of ballot revenue options — taxing illegal cannabis shops and multiple hotel/short-term rental tax options

The Los Angeles City Council on Tuesday authorized staff work that could put several revenue measures before voters and voted to send others back to committees for more study.

Budget and Finance members asked the city attorney to draft ordinances for possible June ballot measures that would: (1) allow the city to apply its gross-receipts business tax to unlicensed cannabis shops (closing an existing geographic/exemption in the current code), (2) consider two transient occupancy tax (TOT) increase options — a 4% increase that steps down to 2% after the Olympics or a lower 2% increase stepping down to 1% — and (3) close a platform/online-travel-agent loophole so TOT is collected on the price paid by consumers.

Committee materials included an early, speculative estimate from staff that taxing the universe of unlicensed cannabis shops could yield up to about $70 million in early years; Budget staff and finance leaders warned collection will be difficult and much of the work would be field-based discovery, notification and collections, potentially including civil litigation. "These efforts are pretty successful," said Matt Crawford of the Office of Finance describing collections efforts generally; he cautioned that identifying ownership and enforcing against mobile illegal operators will require boots-on-the-ground work with LAPD and other departments.

Councilmembers debated enforcement cost and fairness. Several members supported adding a new tax lever to bring illegal operators into compliance and create additional enforcement tools; others stressed the importance of channeling resources toward shutting down illegal shops and not creating incentives that could appear to legitimize them. Councilmember Rodriguez urged tighter fiscal discipline before asking taxpayers for new revenue and pushed measures that would focus increases on short-term rental platforms rather than hotels.

Separately, Council voted to refer the parking-occupancy-tax proposal back to Budget and Finance for additional study and sent recommendation 5 (the vacation-rental review) to Planning and Land Use Management (PLUM). The council also recorded votes to place elements of the package on the agenda for drafting: the city attorney was asked to prepare draft ordinances and resolutions by the Jan. 28 deadline so the council can act by Feb. 11 if it chooses to pursue any measure for the June ballot.

Votes and procedural outcomes recorded on the record included passage of the cannabis-tax change as amended (final recorded tally 13 ayes, 1 no on the package as presented) and multiple votes to bifurcate and reconsider components of Item 17; parking-occupancy proposals were referred back to committee for further review.