Hotel owners fret likely passage of bed tax hike
With only 15 percent of the 66 precincts reported, a 2 percent tax hike on local hotel fees appeared to be passing by local voters early Wednesday.
At 1:40 a.m., Measure N had 17,451 in favor and 5,746 against with 40 precincts out of 66 reporting. If approved, Santa Monica’s hotel bed tax would be raised in January from 12 percent to 14 percent. The tax increase would bring in about $3.5 million extra every year for City Hall.
The measure, unanimously placed on the ballot this summer by the City Council, will increase nightly rates at local hotels by an average of about $4.
The estimated revenue increase is roughly half of the amount City Hall needs to cover its stated ambition of giving local schools $6 million this year. The tax hike also would put Santa Monica on par with Beverly Hills, West Hollywood and Los Angeles, which all charge 14 percent. Marina Del Rey charges 13 percent.
City officials decided to send the tax hike proposal to voters after they were forced earlier this year by a large group of parents to give a minimum of $6 million annually to the school district. The City Council was reluctant to give additional money to local schools without a new revenue source.
Measure N had no formal opposition and appeared on the ballot with no argument against it. Despite that, the measure had widespread support in the community, some industry officials were vocal in criticizing the initiative because it doesn’t specify where the additional revenue will be spent. Currently, the hotel bed tax, which will generate about $18.5 million this year for City Hall, is spent on police, fire, paramedics, parks and recreation, environmental protection and afterschools programs.
While city officials have earmarked $3 million of the tax revenue for the local school district, they haven’t specifically said exactly how the remaining amount would be spent. They’ve indicated that the estimated annual $500,000 might go to the Santa Monica Visitors and Convention Bureau to promote tourism, but that’s unclear. Some of the larger luxury hotels would like to see some of the money spent on public safety, particularly to police the vagrant population along the beaches which hotel managers say drive tourists away.
Small hotel officials say the tax hike would turn away some potential business, especially travel agents who buy package deals in bulk. Those agents often chose Santa Monica because the bed tax was traditionally lower here than in surrounding areas, including Beverly Hills, Marina Del Rey and West Hollywood.
Others have speculated the tax hike would deal a significant blow to medium-sized Santa Monica hotels that have booked foreign visitors in travel packages at set rates. For large hotels that do not offer such packages, individual tourists will pay the increase in tax as they rent out new rooms. At the medium-sized hotels that do, hotel owners will have to pay the tax out of their own pockets for all the packages they have already sold, because they can’t renegotiate those packages to accommodate for the new tax level.
For Hotel Carmel on Second Street, which does 60 percent of its business in pre-sold packages to international tourists, the tax increase would mean losses of tens of thousands of dollars. Hotel Carmel has packages pre-sold until March 2006.
Other cities — like Hermosa Beach, Manhattan Beach and Redondo Beach — have kept their bed tax at a 10-percent rate, the same as Santa Monica’s until it was upped to 12 percent in 1989.
Originally published in the Santa Monica Daily Press print edition on November 3, 2004. Read the original PDF.