Bay Area Cities Seek To Raise Hotel Taxes To Pay For Infrastructure Improvements
Voters in several Bay Area cities will decide whether to increase their local lodging taxes on Election Day this year in a bid to funnel more money to infrastructure maintenance and repair.
Increases are on the ballot in Alameda, Brisbane, Millbrae and Belmont.
For Alameda, the tax is slated to increase from 10% to 14%. The Alameda City Council voted to approve the increase in July, but the change is subject to voter approval. The tax would apply to guests at hotels and motels, as well as short-term rentals like Airbnbs.
If approved, this would bring the city’s transient occupancy tax, or TOT, in step with neighboring Bay Area cities San Francisco, Oakland and San Leandro. The increase is estimated to generate between $700K and $900K per year.
The proposed increase in Alameda has relatively little opposition, with one city council member, Trish Herrera Spencer, opposing the measure on the grounds of timing, as hotels have only recently started to recover from the pandemic.
Alameda’s infrastructure needs have been a major sticking point for the city since 2020, spurring the ballot measure. According to the Alameda Post, while the city’s general fund revenue is in good shape, the city had over $200M in deferred maintenance for citywide infrastructure and another $597M at Alameda Point, a former naval base that is a hotbed of development.
The city council rejected a $95M bond measure for infrastructure, instead settling on a lodging tax. Other solutions considered included increases to the business license tax for medium and large businesses, as well as taxing cannabis business gross receipts at a rate of 4%.
Belmont and Millbrae’s measures would function similarly to Alameda’s, but with a smaller increase requested. Both cities want to raise their TOT rates from 12% to 14%. The increase is estimated to raise an additional $660K annually for Belmont and $1.5M for Millbrae.
Brisbane’s Measure O, however, would function differently, imposing a tax on hospitality business owners of $2.50 per day of each stay, generating an estimated $250K per year. The current tax structure generates $2K per year, the Napa Valley Register reported. If approved by voters, the new tax would go into effect in 2024.
Hotel traffic in the Bay Area has recovered somewhat from the depths of the pandemic, but international and business travel, typically the bread and butter of area hotels, remain depressed.
The California Economic Impact of Travel report for 2021 shows tourism spending on a statewide basis up since the height of the pandemic, with the largest direct travel spending occurring in the San Francisco Bay Area at $21.5B, 31.3% of the state’s total.