City governments endorse rental tax measures ahead of election
Several Bay Area cities have transient occupancy taxes (TOTs) on the Nov. 8 ballot in an attempt to collect more taxes from hotels, motels, inns and share-rental sites such as Airbnb and Vrbo.
Proponents argue that their municipalities need to generate more revenue in the wake of economic impacts from COVID-19, but opponents question if now is the time to raise rates on an industry also hit hard by the pandemic -- hospitality.
One thing is certain, people are ready to spend their tourist dollars in California. According to the nonprofit Visit California, in 2021, travel-related spending in the state increased 43 percent over 2020, with tax revenues increasing by 23 percent. Total travel-related spending in 2021 in the state was a little over $100 billion.
Measures to increase TOTs are on the ballot in unincorporated areas of Santa Cruz County, the city of Alameda, and some cities of San Mateo County, including Belmont and Millbrae. Brisbane is asking voters to approve a tax on hospitality business owners, not on guests like the other Bay Area cities. In Healdsburg, Measure L wouldn't increase the 14 percent tax already collected, but earmarks for the money generated by the TOT would specifically go to capital improvements.
Proponents of the TOT increases say that the money is needed for essential services such as police, fire and infrastructure, though COVID-19 American Rescue Plan funds were specifically designated for such things and injected millions into local coffers. In most cities, if passed, money from the measures increasing TOTs would go into each municipality's general fund.
Alameda is asking voters to approve Measure F, a jump of its current 10 percent rate up to 14 percent, to keep it in line with Oakland and San Leandro's TOT rates.
Alameda City Councilmember Trish Herrera Spencer opposes the measure, questioning its timing after the pandemic. But the city's TOT hasn't been raised since 1990 and Alameda predicts that the additional money will generate between $700,000 and $900,000 per year that could go toward essential services like 911, fire and police, fixing potholes and maintaining parks.
In unincorporated areas of Santa Cruz County, supervisors put Measure B on the ballot. Though the money would go into the general fund, the board said it would apply the money toward affordable housing, mental health services and wildfire prevention.
Supervisors want to increase the current rate of 10 percent to 12 percent for hotels, motels and inns, and 14 percent for vacation rentals such as Airbnb and Vrbo, generating as much as $2.3 million annually. The argument in favor of the measure in the county voting guide says that the measure would increase needed county revenues without taxing residents.
San Mateo County cities Belmont and Millbrae are proposing measures K and N respectively, which would raise their TOTs from 12 percent to 14 percent, raising an estimated $660,000 annually for Belmont and $1.5 million for Millbrae.
Brisbane is taking a different approach -- raising taxes on hospitality business owners instead of raising its 14 percent TOT. Measure O would impose a tax on hospitality business owners of $2.50 per day per stay, generating an estimated $250,000 per year. According to the city, the current tax structure on the businesses is paid from gross receipts and only generates less than $2,000 per year.
The submitted ballot arguments for and against the measure in Brisbane are colorful. The Silicon Valley Taxpayers Association wrote the opposition and calls the move "theft."
"Basically, our public servants want a free ride, to stick out-of-towners with the bill and to compel esteemed local businesses to serve as tax collector," reads the argument. "Would you do that to your friends or coworkers? No! That would be immoral, as a form of theft."
In the ballot argument in support of the tax measure, penned by the City Council, the body describes the tax as "reasonable" and a way for businesses to "pay their share" in supporting essential services. The council also refers to the tax as "a modest proposal," perhaps unaware of the allusion to Jonathan Swift's 1729 satirical essay that suggested poor Irishmen sell their children to wealthy noblemen for food.
In the Sonoma County city of Healdsburg, voters will be asked to decide on Measure L, which keeps the TOT rate the same -- 14 percent -- but specifies that the money goes toward affordable housing and the issuing of bonds.