City Council votes to further discuss proposed increase of hotel bed tax

The Morro Bay City Council will hold a third hearing in July on a proposal to increase the city’s hotel bed tax.

At a meeting Monday, the council voted to consider a scaled-back increase on what is officially called the transient occupancy tax in July with a possible ballot measure during November’s general election.

“We are not going for the June ballot,” Mayor Janice Peters said.

Instead of a 2 percentage-point increase — about 17 percent — in the tax, the council will consider a 1 percentage-point increase — about 8.3 percent.

The new approach accomplishes several things, Peters said.

First, it will delay an election until after the busy summer tourist season. Second, the 1 percentage-point increase would replace a 1-point drop in the tax scheduled for July 1 for no net gain.

Currently, the city devotes 3 percentage points — just over 23 percent — of its 13 percent transient occupancy tax to promoting Morro Bay as a tourist destination. The tax is scheduled to go down to 12 percent on July 1.

The council was originally scheduled to decide in December whether to put the 2-point increase on the June ballot. That decision was postponed to Monday so the council could have more time to study the matter.

The 2-point increase met with stiff opposition from hotel owners and others in the tourism industry. They said the increase could price Morro Bay out of the tourism market.

The tax is an important source of revenue for the city’s general fund, which pays for most municipal services such as police and fire protection.Like many cities, Morro Bay has been facing budget cuts in recent years.

Reach David Sneed at 781-7930.