City Council
Report
City Council Meeting: December 13, 2022
Agenda Item: 5.P
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue Subject: Adoption of a Resolution Establishing March 1, 2023 as the Implementation Date of the Transient Occupancy Tax Rates in Measure CS Recommended Action
Staff recommends that the City Council adopt a resolution setting the implementation date for Measure CS (increasing the City’s Transient Occupancy Tax rate by 1 percentage point for hotels and by 3 percentage points for home-shares) as March 1, 2023.
Summary
At the November 8, 2022, General Election, a majority of Santa Monica voters approved Measure CS, which increases the City’s Transient Occupancy Tax (TOT) to 15% for hotel stays and 17% for home-share stays. The vote was certified by the City Council on December 6, 2022, and per Elections Code Section 9217, the measure becomes effective 10 days later (December 16, 2022). However, to allow sufficient time for hotels, home-share platforms, and home-share properties to update their billing and reservation systems, marketing materials, and complete any other required administrative changes, staff recommends an implementation date of March 1, 2023, for the new rates. This date will coincide with the date set by Measure CS for establishment of an advisory committee whose role would be to make non-binding recommendations regarding the expenditure of the incremental funds raised by the measure.
Discussion
At the November 8, 2022, General Election, a majority (over 73%) of Santa Monica voters approved Measure CS, which amends Santa Monica Municipal Code (Code) 2 of 3
Chapter 6.68 to set the Tax on Transients for Occupancy (Transient Occupancy Tax or TOT), paid by persons visiting Santa Monica for 30 days or less as a percentage of the total amount paid for room rental, at 15% for hotels and at 17% for home-shares.
This is an increase of one percentage point for hotels and three percentage points for home-shares. In addition, the approved ordinance makes minor adjustments to Chapter
6.68 of the Code to clarify existing language and align outdated sections with existing practices.
On December 6, 2022, the City Council certified that the voters approved Measure CS.
Per Elections Code Section 9217, the effective date of the amendments to the Code is 10 days after certification (December 16, 2022). However, staff recommends that collection of the additional tax would begin on March 1, 2023. This will allow time for the City to provide appropriate outreach to all businesses impacted by the rate increase, as well as allow the hotels, home-shares, and home-share platforms, such as Airbnb and Homeaway, sufficient time to make necessary changes to their billing and reservation systems, marketing materials, and other associated administrative changes.
Measure CS also calls for an advisory committee to provide non-binding recommendations for use of the additional funds generated by the new tax rates. The measure requires that the committee be established by resolution of the Council by February 28, 2023, which coincides with the recommended implementation date.
Environmental Review
This is not a project for the purpose of CEQA.
Financial Impacts & Budget Actions
Staff expects the higher TOT rates will increase General Fund revenues by approximately $1.4 million in FY 2022-23 reflecting the March 1, 2023 implementation date, and approximately $4.1 million per year in the following years.
There is no anticipated financial impact associated with the other ordinance revisions. 3 of 3
Prepared By: David Carr, Assistant City Treasurer
Approved Forwarded to Council
Attachments:
A. Measure CS Resolution