SLO County city won’t raise hotel tax this year — but it may in the future
Arroyo Grande hotel guests could be on the hook to pay more taxes to the city following the most recent City Council meeting — but not in the current election cycle.
On Tuesday, the Arroyo Grande City Council held a study session on whether the city’s transient occupancy tax — the nightly tax paid by guests of hotels, vacation rentals and short-term rentals — should be increased or remain as is in 2026.
The Council was presented with a choice between leaving the city’s current TOT at 10% or starting the ballot measure process for a 1% or 2% increase.
It also was presented with the option to have city staff keep an eye on other municipalities’ implementation of Senate Bill 346 — which allows cities to enact ordinances requiring short-term rental hosting platforms to provide quarterly booking and revenue reports — to better inform future Council decisions on TOT.
But despite general support for increasing TOT by most of the Council members, the City Council opted to kick the can down the road on the tax increase, largely due to economic and electoral concerns.
Council member Jim Guthrie said he would be supportive of the tax measure in general, but not in an election in which the San Luis Obispo County of Governments is pushing to introduce a half-cent sales tax measure.
“If it weren’t for the county going forward in with their tax measure, I’d be in favor, actually, of going ahead,” Guthrie said. “I believe that this would pass — I don’t believe that it has a negative effect on the hotel business.”
With the rest of the council echoing Guthrie’s sentiment, the measure won’t appear on the 2026 ballot, but that doesn’t mean it won’t be introduced at a later date.
Arroyo Grande has some of SLO County’s lowest TOT rates
Any change to Arroyo Grande’s TOT would mark the first increase in the city’s TOT in just over 25 years.
Since Dec. 4, 2000, the city has only charged the 10% TOT that was approved by voters in that year’s general election, even as other San Luis Obispo County cities such as Pismo Beach, Grover Beach and Paso Robles enacted increases within the past 10 years, according to the staff report.
Only unincorporated San Luis Obispo County hotel guests pay less in TOT than Arroyo Grande visitors, paying 9% of the nightly hotel cost to the county.
Even factoring in additional fees imposed by the Arroyo Grande Tourism Business Improvement District and the San Luis Obispo County Tourism Marketing District, Arroyo Grande hotel customers pay the second-least in fees in the county, tied with Grover Beach and San Luis Obispo at 13.5%, slightly more than the unincorporated county’s 12.5%, according to the staff report.
According to the staff report, an increase of 1% would put Arroyo Grande’s overnight rates on par with most other cities in the area.
Each 1% increase in TOT is estimate to generate between $150,000 and $165,000 each year for the city, while a 2% increase would generate between $300,000 and $330,000 depending on how often the units are occupied and other factors related to the flow of tourism, according to the staff report.
According to the staff report, data collected by the city via a FlashVote survey in December indicated that there is general support among residents for increasing the TOT rate.
Of the 429 respondents of the 443 total participants in the survey who answered a question on whether they would support increasing the TOT rate, 34% said they would “strongly support” an increase, another 28% somewhat supported an increase and 14% were neutral.
Council: TOT increase could be harmful during worsening economy
Despite the relative overall support for a TOT increase, the council expressed trepidation at the idea of asking residents for a higher tax in a time of economic uncertainty.
The Council voted 4-0 to delay a TOT vote until after the current election, with Mayor Caren Ray Russom recusing herself because she owns a short-term rental.
Council member Aileen Loe said she saw the upside of the TOT income but wasn’t ready to levy new taxes, while Council member Jamie Mariviglia said she wants to wait to see how the economy goes in 2026 before putting any new taxes on the ballot.
“I want to see what (2026) is showing,” Marigviglia said. “Knowing that we’re seeing a huge drop in international travelers, I think those numbers are going to look slightly different, so I just don’t think we have the best data right now as well.”
In the future, a TOT increase will be more reasonable way to generate tax revenue than increasing local TBID fees — but not for now, Council member Kate Secrest said.
“If we’re not ready now, then maybe we just table it, but it looks like there’s room for us to bump it up, just to be kind of more in line with the neighbors,” Secrest said. “In some ways, I don’t feel like an incremental shift is going to be that difficult, but given the same level of effort that it takes to put it on the ballot then maybe not now.”
This story was originally published January 17, 2026 at 5:00 AM.
