SANTA CRUZ — In a unanimous decision, the Santa Cruz City Council on Tuesday placed a measure on the November ballot to increase the tax on hotels, motels, inns and short-term residential rentals within city limits.
The ballot measure would increase the rate of the current Transitional Occupancy Tax for commercial accommodations such as hotels and motels, from 11% to 12%, and for short-term residential rentals, such as those facilitated by venues. Vacation Rental Web, the rate would rise 11% to 14% citywide if passed by a majority vote this fall.
“We see this tax as an opportunity to use Santa Cruz’s large tourism industry as a source of revenue to fund essential services here in the city,” Santa Cruz Mayor Sonja Brunner said Tuesday at the town hall meeting. municipal Council.
Brunner is a member of the city’s ad hoc budget and revenue committee, which composed the measure and also includes Vice Mayor Martine Watkins and Councilwoman Sandy Brown. The city’s proposed measure aligns with Santa Cruz County’s Measure B, which passed in June with 69 percent of voters in favor of the tax increase. Measure B increased the county’s commercial lodging tax from 11% to 12% and the residential lodging rate from 11% to 14%. The county rate increase will take effect for unincorporated areas of Santa Cruz County in early 2023.
The cities of Capitola and Watsonville both voted to increase their transitional occupancy tax rates to 12% in 2018. Santa Cruz’s current transitional occupancy tax rate was last increased in 2012 from 10% to 11%. The council committee projects annual revenue from the proposed increases, which like the county measure would take effect Jan. 1, 2023, would be about $1.38 million a year — with residential rentals bringing in about $382,000 and commercial housing contributing about $998,000 in new revenue. The money would fund essential city services such as forest fire prevention, public safety, city maintenance and affordable housing.
“It creates parity with the county and fair and equal conditions across the region. It also ensures that tourists and visitors pay their fair share for city services,” Brunner said. “It also provides flexible funding, which allows the city to adapt to changing community needs over time.”
Members of the public such as Ron Pomerantz felt the proposed measure did not raise the tax rate enough, as he said in an email to council.
“There’s no way the small amount is deterring visitors from staying at the Mecca of Santa Cruz,” Pomerantz wrote.
At Tuesday’s council meeting, members of the public such as Keith McHenry expressed concern that the rate hike would negatively affect the homeless community that relies on hotels and motels to shower a few times per month. Casey Beyer of the Santa Cruz County Chamber of Commerce said he felt there wasn’t enough awareness among hotel owners and that the tax increase could cause business groups to accommodation in neighboring towns with lower rates.
“That extra cost depends on whether or not they’re coming to Santa Cruz as a group or going somewhere else,” Beyer said. “These business groups come in the shoulder season, not the summer, and they supply our downtown restaurants.”
Council members, such as Brown and Brunner, said they reached out to hotel owners and said similar measures were discussed as early as 2019, but were delayed. City Manager Matt Huffaker said outreach and engagement with hotel owners will continue.