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City hears RSG fiscal forecast that models a structural deficit and shows hotel (TOT) tax could close the gap
Summary
RSG consultants presented a 15-year fiscal model projecting a potential structural gap driven by slower sales and hotel-tax growth; the analysis shows each 1% increase in the city's 12% hotel tax would yield about $900,000 annually and modeling indicated a 17% rate could close the projected gap over 15 years; staff said a ballot measure could be considered with a July 14 deadline for November placement.
Finance Director Felicia Lopez introduced Jim Simon of RSG Solutions, who presented a long-term fiscal model showing that, absent policy changes, Hawthorne could face a structural deficit over the next 10–15 years as expenditures outpace revenue. "For a city government, a long-term financial plan serves as a strategic blueprint for managing the municipality's finances over many years," Simon said.
RSG's model estimates annual city revenues of roughly $114 million, with sales tax the largest single component (about $37 million) and hotel taxes contributing about $5.5 million currently. Expenditures for 2025-26 were cited at about $109 million. Simon said the model projects revenues growing roughly 3.2% to 4.8% annually and that each 1 percentage-point increase in the city's 12% transient occupancy tax (TOT) would raise approximately $900,000 a year. "We highlighted the 17% threshold because that is where you would essentially be eliminating the structural deficit for the foreseeable future," he said.
Councilmembers discussed policy design: whether short-term rentals should be included (left to council discretion), how to craft ballot language, whether temporary surcharges during large event weeks are feasible, and how to audit hotel revenues. Staff said poll work (item 14 on the manager's consent calendar) would measure voter appetite and that a proposal could return in June for council review; staff noted a July 14 deadline to place a measure on the November ballot.
No decision was made to place a measure on the ballot; council directed staff to return with a more comprehensive report including polling and draft language.
