The move is designed to stave off projected budget deficits in the city's near future and increase revenue without raising or adding taxes for city residents. The election is scheduled for Feb. 5 and is limited to city voters.
Calls for a higher TOT, the "bed tax" paid by visitors for short stays in hotels, motels, bed-and-breakfasts and mobile home parks, are not new in the city. In 2002 the City Council decided against a 1 percent hike in the TOT to be used expressly for the purpose of buying open space. Council members opposed the increase for "economic reasons," according to published reports at the time.
 Louise Denny of London, left, gives a thank you kiss to her Aunt Dolores Marciel of Pleasonton for giving her diamond earrings and a necklace during breakfast at the Ritz-Carlton, Half Moon Bay, in 2006. Guests will have to pay a little more if a tax increase passes. |
In March the council unanimously authorized $50,000 to hire local consulting firm Godbe Research to help bring a TOT increase to the ballot.
The council considered two options to approach the increase, according to staff reports. The first, a "general purpose" tax, with proceeds available for unrestricted use, would require the declaration of an emergency based on deficit projections - and a simple majority of city voters to pass.
But the council opted for a "special tax" option, which does not require an emergency but needs a two-thirds majority to pass. Proceeds from a successful special tax would be restricted to library services, police, youth and senior facilities, parks and recreation, and street work.
Mayor Naomi Patridge and Councilwoman Marina Fraser make up the council subcommittee formed to study the increase. In previous remarks on the subject, Patridge has acknowledged that she is the main proponent of a higher TOT and said she believes other cities in the county will follow a Half Moon Bay increase with their own hike.
Half Moon Bay officials have spent much of the year tracking the progress of other cities' TOT rates and the ways in which increases are brought successfully to the ballot.
"Other cities use a similar process," said City Manager Marcia Raines. She noted that Palo Alto just passed a TOT increase from 10 to 12 percent in their recent general election.
"They passed it by an 80 percent margin in their general election," said city Finance Director Jud Norrell of the Palo Alto increase. Norrell acknowledged that 12 percent was high in San Mateo County, "but not high compared to many, many cities in California."
California cities with TOT rates over 10 percent include Los Angeles, San Francisco and Beverly Hills with 14 percent. Sacramento, East Palo Alto - and now Palo Alto - stand at 12 percent. South Lake Tahoe charges 10 percent, plus a blanket $1.50 per night for transient occupancy, and Carmel raised its rate to 10 percent five years ago and narrowly defeated a further increase in 2005, according to city reports.
"Our 10 percent rate has been in place since 1991," said Norrell. "But more important, we have a structured general fund deficit which needs to be addressed."
A five-year forecast shows inevitable hits to the city's finances unless revenue is increased. The 2 percent raise would bring in $620,000 a year and would address those shortfalls, said Norrell.
The increase would have a small, but noticeable, impact at the front counter. A hotel patron with a $100 nightly tab would pay $112 for the room instead of $110 with the current 10 percent tax. The local business improvement district levies a $1 charge, said Norrell, bringing the hypothetical rate to $113.
But representatives at the city's largest hotel - and top revenue producer - say an increase is not sound fiscal policy.
"I do not believe that raising the occupancy tax should be the vehicle in which the city uses to balance its budget," wrote Pete Ells, general manager of the Ritz-Carlton, Half Moon Bay in an e-mail message to the Review. "It becomes a slippery slope when cities start to replace sound fiscal budgeting policies with continual increases in the occupancy tax.
"Burdening the visitors and groups that come to Half Moon Bay with a 2 percent increase will drive business away from Half Moon Bay and, in the long run, reduce revenues to the city and increase budget shortfalls," he said.
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BALLOT LANGUAGE
Here's how the proposed increase in the Transient Occupancy Tax will appear on the ballot in February:
City of Half Moon Bay Maintenance of Local Services Measure.
To provide for and maintain city of Half Moon Bay's library services; youth and senior facilities, programs and services; police services; park and recreational facilities and programs; and city streets; shall an ordinance be adopted increasing the transient occupancy tax, which is a tax on the cost of hotel rooms paid by the person renting the room, from 10 percent to 12 percent of the room rate, and designating the new revenue be used only as outlined above?
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