Occupancy tax raise might be forthcoming

DEL MAR — Council members are poised to raise the transient occupancy tax, but not before deciding how the money will be spent as well as the fate of the Tourism Business Improvement District.

At the request of Mayor Al Corti, staff presented at the July 20 meeting a list of potential projects totaling millions of dollars that could be funded with the additional revenue.

It included everything from the ongoing City Hall replacement and Shores property projects to building a permanent lifeguard tower at North Beach.

Because TOT money is unrestricted it could also be used to pay for services such as street sweeping and road maintenance.

There was consensus among council members that the money should be earmarked for a specific purpose. Since it is a fee paid by hotel visitors they said they would rather use it to improve or fund services impacted by tourists, including beach cleaning and park maintenance.

The last TOT increase was in 2008, when 62 percent of Del Mar voters approved a jump from 10.5 percent to a maximum of 13 percent. Because the economy was weak at the time council only raised it to 11.5 percent.

Five years ago they authorized the Tourism Business Improvement District, or TBID, which charges hotel visitors an additional 1 percent.

So in addition to the room rate, hotel visitors now pay 12.5 percent more as a result of the combined TOT and TBID.

TBID money, which is a fee and not a tax, is collected by the city as part of the TOT but must be used to promote Del Mar’s six hotels. The district is up for renewal this year. Council must approve it by the end of September or it will automatically expire.

In recent discussions about the renewal some council members questioned whether the TBID, with restrictions on how the funds are spent, is the best use of the money raised.

Hoteliers said they would support a one-half percent TOT bump if the money were spent on downtown improvements or promotions.

The city expects to bring in about $2.2 million in TOT revenue this year.

Based on projected hotel revenues from July 2014 to June 2015, each one-half percent TOT increase yields another $106,000.

According to the staff report, a 1 percent increase from the current 11.5 percent would result in a $213,000 increase. Raising the TOT to the maximum allowed 13 percent would increase revenues by $319,500.

The Solana Beach TOT rate is 13 percent but most other cities in the county are lower.

Business owner and Del Mar Village Association board member KC Vafiadis said she did not support the increase because it would put Del Mar on the high end of the spectrum.

“I don’t think our hotels compete with Solana Beach hotels,” she said. “They’re a different caliber and a different animal. But we do compete with Coronado. We do compete with San Diego” where the TOT is about 10 percent.

She said the additional tax likely would not discourage people visiting the city for one or two nights in the summer. But it could deter group business.

“That’s what we depend on in the off season,” she said.

The tax is not paid by residents who rent out their homes or condominiums in the summer for less than 30 days, as Bruce McDermott does.

Instead of increasing the TOT, he said he would rather have it applied to those 200-plus short-term rental units.

“I would have no issue because I’ll just add it on to what we charge,” He said. “It’s new-found money. It shouldn’t affect anything because people want to come and stay here.”

“I’m in support of increasing the TOT to the full 13 percent,” said Corti, who was prepared to raise it immediately. “I’m not a big supporter of just raising taxes … but I do think that this is one tax that’s beneficial to Del Mar and it’s the ability to get a fair share for providing some of these services.”

His colleagues agreed with the logic for the increase but preferred to wait.

“Don’t do it right away,” Dwight Worden said. “Let the dust settle on the TBID.”

Worden said he would also like input from the finance committee and assurance Del Mar would remain competitive.

“(There are) very few ways we can ask visitors to pay even some small portion of the cost of services, and the TOT is a very important one of those,” Worden said.  “It’s a great way to raise money to do good things in the city with for once not having to ask our own residents to pay the bill.”

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