Voters in November will decide on a 2 percent increase in the hotel guest tax, the City Council unanimously decided Tuesday. If passed, the increase will bring the total hotel guest tax in Laguna Beach to 14 percent.
Increasing the hotel tax was an idea fortified by the results of a voter survey in June where 61 percent of the respondents said they would support an increase of as much as 4 percent.
According to the ballot description, the money will be used to support various community projects, including undergrounding neighborhood utilities, a $180 million, 10-year project. Undergrounding on Laguna Canyon Road is expected to require another $90 million, according to a report from a special council presentation in March.
If approved by voters, the tax increase is expected to garner an additional $2 million annually for city coffers, council member Bob Whalen said. The city holds an $11 million reserve in its $77 million budget for 2016-17, according to Gavin Curran, the city’s finance director. The city expects to generate $10.7 million from hotel guest taxes, according to the current city budget.
Whalen and council member Kelly Boyd met with Visit Laguna Beach, the city’s tourism promoter, and hotel executives. Whalen said they preferred a 1 percent increase because they now voluntarily provide 2 percent to the Business Improvement District tax, which guests pay in room rates. The money helps promote tourism and supports arts organizations.
“Why are you pussy-footing around?” asked downtown businessman Sam Goldstein. “The only income we have in this town is from visitors. Why be afraid to increase the taxes appropriately? We can’t get the money to do bonds in order to get things done unless we get a sizable amount of money in taxes from our visitors. This is way overdue.”
A constant stream of revenue, such as a hotel guest tax, will enable the city to secure repayment of a substantial future bond issue, according to a utility undergrounding report presented March 22. An annual revenue stream of $13 million, for example, can be used to borrow about $234 million, according to the undergrounding report.
While Visit Laguna Beach says annual visitors to town have doubled to 6 million over the past few years, the city’s largest source of income – one third – remains property taxes.
The hotel tax ballot measure, titled Vital Services Measure, states that the money will be used to “protect beaches from pollution and provide fire, police protection and emergency response, parking, utility undergrounding to prevent fire and power outages and other services and improvements.”
Johanna Felder, president of the town-preservation group Village Laguna, said the statement is too broad and too vague. If the tax money will be used to secure and repay a bond, say so, she said. Felder also asked for a citizens’ oversight committee. “This money could be spent anywhere,” she said, referring to the word “other” in the description.
Felder said it was ironic that $1 million of the city’s $2-million Business Improvement District fund is used to bring more visitors to town while money from an increase in hotel guest taxes will pay for more city services, such as marine safety and police, necessitated by those same visitors.
Council member Rob Zur Schmiede said the list of needed services is becoming endless. ”We’ve got so many needs,” he said. “We’re inundated with these 6 million tourists a year. We probably need additional revenue measures.” Zur Schmiede mentioned a tax on food and beverage for future consideration.
“As long as I’ve lived here, I haven’t had the feeling I’ve had this year,” said Mayor Pro Tem Toni Iseman. “It’s the tipping point.” Iseman said the increased crowds are due to new housing in nearby towns.
Mark Orgill, Visit Laguna vice chair, said an increase of more than 2 percent in hotel guest taxes would adversely affect “group travel.”
“That segment of traveler has such a huge impact and their expendable income on all of our businesses in town is so important. I would hate to lose our competitive advantage as we market to group travel,” Orgill said.
Newport Beach and Dana Point hotels charge a 10 percent guest occupancy tax where Anaheim and Garden Grove near Disneyland charge 15 percent. The average hotel room in Anaheim and Garden Grove costs $120 a night; the average hotel room in Laguna costs $311, according to Ashley Johnson, president of Visit Laguna Beach.
Whalen said the council is putting building blocks in place “one at a time” to ensure the expansion of city services, starting with increasing parking rates two years ago. The city receives 100 percent of the hotel taxes, known as the Transient Occupancy Tax, according to City Treasurer Laura Parisi, while receiving only a portion of state sales tax and property taxes.
Council member Kelly Boyd warned against taxing people too much. “As much as we love our community, I don’t think we can tax ourselves to death,” he said.
Parklet Pilot Ended
The council also decided not to extend the city’s first parklet at Alessa Italian restaurant, 234 Forest Ave., for another 60 days, despite an appeal by owner Alessandro Pirozzi. The parklet’s initial 60-day trial expires on Aug. 3.