Half Moon Bay voters will decide in November whether to raise the taxes paid by overnight visitors after the City Council unanimously approved a ballot measure that seeks to raise revenue without burdening local residents.
The City Council considered raising the transient occupancy tax from 12 to 15 percent in one fell swoop during its July 21 meeting. That would have put the bed tax — paid by hotel, bed and breakfast and short-term rental guests — among the highest in the California. Instead, members were swayed by local hotel executives who argued this is the wrong time to make their jobs any more difficult.
After a lengthy discussion, the City Council decided to ask voters to raise the rate to 14 percent beginning in July 2021. The rate would automatically jump to 15 percent a year later unless the council voted otherwise at that time.
Councilmembers leaned on the advice of a consultant who suggested each 1 percent bump in the tax rate would bring in about $500,000 a year in extra general fund revenue. That was enticing to elected leaders who have overseen furloughs and layoffs and delayed capital improvements indefinitely in the midst of a global pandemic that has crippled the tourism industry.
Increases to the TOT are always intriguing to local officials because they are paid by people who do not ultimately vote for or against them. Half Moon Bay gets about 40 percent of its income from the TOT. The other major sources of income are property and sales taxes, which are paid mostly by local residents.
“We need money. We just straight up need money for the town,” explained Mayor Adam Eisen, who is himself a sales executive for the hotel chain Marriott International. “We are shaking the trees to go after whatever revenue is possible.”
City surveys suggest about 75 percent of Half Moon Bay voters approve of an increase in the tax and everyone involved expects it to pass.
Krystlyn Giedt, president and CEO of the Half Moon Bay Coastside Chamber of Commerce and Visitors’ Bureau, suggested the increase be “tiered” rather than come all at once and that idea took hold at about 10:30 p.m. — more than five hours into a marathon night of City Council meetings.
While elected leaders seemed to think the increase would mean little to the relatively upscale tourist that typically comes to town, hotel executives said any increase could drive away the more lucrative conference business.
“What I’m here to tell you tonight is that 65 percent of our rooms revenue comes from group business at our property and group business is all but decimated this year,” said Joel Costa, director of sales and marketing for the Ritz-Carlton, Half Moon Bay. He said the resort is expecting that business — driven by cost conscious professional planners — to be off 50 percent in 2021 as well. He said increasing the TOT to 15 percent would have left the local Ritz at a “severe uncompetitive advantage.”
Whether any increase in the TOT ultimately raises money in the wake of a global pandemic that has stalled the hospitality industry is anyone’s guess. The TOT was budgeted to bring in $6.8 million to Half Moon Bay coffers in Fiscal Year 2019-20. Now, city leaders hope to collect $5 million from it. They were expecting only $2.3 million the next year before voting to raise the tax, and some in the industry think any increase in the tax rate could drive business elsewhere, effectively undermining the goal of raising revenues.