Editorial: Morro Bay is wise to mull bed tax

Tourism — particularly bed tax — is key to the economic health of Morro Bay, and we would hate to see anything jeopardize that. So we’re glad to see the Morro Bay City Council isn’t rushing into a proposal to put a 2 percent bed tax increase on the June ballot.

The council discussed the idea on Monday night, but decided to continue the item until Jan. 25 so it can gather more information.

City officials should consider this carefully. Bed tax is one of the city’s largest sources of revenue — second only to property tax — and especially in this economy, the city needs to carefully guard that revenue base.

On the one hand, it’s tempting to look to tourists to help make up budget shortfalls by tacking on an extra percent or two to the bed tax rate.

On the other, in a depressed economy when hoteliers say they’re already struggling with high vacancy rates it may not be the best time to increase taxes to 12 percent, which would be among the highest rates in the state.

By and large, we don’t believe that tourists quibble over paying an extra buck or three in bed tax. But there does come a point when visitors say enough is enough, and take their business elsewhere.

Would a 2 percent increase in the tax be the breaking point?

Probably not. But to be on the safe side, we would urge the city to put a sunset clause in a bed tax measure, if it does decide to put it to a vote.