Overnight visitors in Laguna Beach could soon pay more in tourist taxes as city officials look to find new revenue — a problem other OC cities are dealing with.
Laguna Beach City Council is considering adding a tax increase measure to the ballot this November that would increase the transient occupancy tax – more commonly known as a hotel tax or a bed tax.
It could “provide the city with an additional $3.5 million annually based on current rates and occupancy levels,” according to a staff report.
At a city council meeting on June 11 results from a survey showed that of the 400 residents surveyed, 62% of them were in favor of a 2% transient occupancy tax increase which would bring it to 14%, while 48% of people were in favor of a 3% transient occupancy tax raise which would bring the total to 15%.
According to Probolsky Research, the company that issued the survey, neither group of respondents was aware of the other group’s tax percentage question.
“There is support for a TOT tax increase. You can shift columns one way or another and get a different result. But 62% is pretty clear,” said Councilman Bob Whalen.
Mayor Sue Kempf and Councilman Alex Rounaghi raised concerns that if they were to hike up the tax too high, hotels like Surf and Sand and The Montage, both upscale hotels, could potentially steer tourists to other cities rather than businesses in Laguna.
While the city’s current budget projects roughly $145 million in overall revenue, council members have appropriated $124 million in citywide spending. The budget also shows revenue increases are roughly even with expenditure increases compared to last year.
Currently, the transient occupancy tax sits at 12%, which goes into the city’s general fund.
The hoteliers also have a 2% self-assessed room tax – half of that goes to pay for the Laguna Beach Tourism Marketing District, the city’s tourism bureau, and the other half goes to city art initiatives.
Kurt Bjorkman, chief operating officer at The Ranch, a resort in Laguna Beach, spoke during public comment at length about the potential harm to tourism in the city if occupancy taxes increase.
Bjorkman is also vice chair of Visit Laguna Beach, to which he said they took “a neutral position on anything taxwise.”
Laguna Beach Council members then began asking Bjorkman questions about hotel taxes in Huntington Beach.
“This is low hanging fruit. I can see it, it’s easy money. Just charge the non-residents more money and you’re going to get 3.5 million dollars,” Bjrokman responded during the June meeting.
Meanwhile, the tax increase being considered in Huntington Beach would bring the total to 16%, which would make it the highest in Orange County compared to cities like Anaheim and Garden Grove which are currently at 15%.
On the lower end of the spectrum, La Habra, Villa Park and Rancho Santa Margarita are at 0% while the majority of OC sits in the midrange at 10%, according to a staff report.
[Read: Huntington Beach Considers Increasing Hotel Tax for Tourism Advertising]
Bjorkman said the occupancy rates in Laguna Beach are “around the low 70s.”
“We’re down. All of California is down. We’re calling it the great flattening. Last year was decent, we beat 2019 numbers. Laguna Beach is trending the same way,” Bjorkman said.
The item to consider putting the tax increase on the ballot is set to return to the city council on July 23 with the council city staff expected to discuss the item with hotels in Laguna.
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