The Morro Bay City Council is expected to decide tonight whether it wants to put a measure on the June 2010 ballot asking voter approval to increase the city’s transient occupancy tax.
The measure would increase the tax to 12 percent from 10 percent and generate an estimated $375,000 in additional revenue a year. The tax is collected on all businesses that rent lodgings for 30 days or less.
Budget shortfalls caused primarily by the national recession are cited as the main reason for the increase. The state is also expected to take more revenue from local governments as a result of its budget crisis.
“Although the fiscal year 2010 budget is currently balanced due to budget reductions, the city must do more to maintain fiscal stability in the future,” City Attorney Rob Schultz wrote in his report to the council.
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In addition to the city’s 10 percent TOT, another 3 percent is collected and goes to the city’s business improvement district to be used for promotions for a total of 13 percent. This additional tax will drop to 2 percent on July 1, Schultz said.
If voters approve the June ballot measure, the overall levy would go up to 14 percent. If it fails, it will be 12 percent.
Raising the TOT is a trade-off, Mayor Janice Peters said. The city needs the additional revenue to advertise and compete with other tourist cities, but the increase may discourage some visitors from staying in Morro Bay.
“It’s a risk; we know that,” she said. “But we have to do whatever we can to help and maintain our businesses.”
The TOT accounts for 18 percent of the city’s funding and is second only to property taxes as the city’s most important source of revenue. Hotels and other businesses that collect the tax pay it monthly to the city.
Morro Bay’s TOT is already above the norm in San Luis Obispo County. The TOT is 9 percent for unincorporated areas of the county and 10 percent in San Luis Obispo, Paso Robles, Pismo Beach, Atascadero and Arroyo Grande, said Carrie Head, communications manager with the county Visitors and Conference Bureau.
The money goes into Morro Bay’s general fund to be allocated by the council through the budget process, Schultz said. Such a tax increase would require approval of four of the city’s five council members as well as a majority of the city’s voters.
The measure would go on the June 8 ballot.
Reach David Sneed at 781-7930.