Del Mar transient occupancy tax will stay at current rate

Del Mar transient occupancy tax will stay at current rate
City Council decided at the Sept. 16 meeting not to raise the transient occupancy tax paid by hotel guests until they speak with those who operate the six hotels in the county’s smallest city. Photo by Bianca Kaplanek

DEL MAR — Council members opted at the Sept. 16 to first seek input from hoteliers and data from neighboring Solana Beach before increasing the transient occupancy tax paid by hotel visitors to the seaside city. 

During the spring budget workshops, staff presented a number of revenue-generating ideas, including increasing the TOT, to help fund a list of about 20 capital improvement projects.

Because it’s a tax, any increase would require voter approval. That occurred in the November 2008 election, when voters OK’d increasing the TOT, which was 10.5 percent at the time, to a maximum of 13 percent. Council members raised it to 11.5 percent in June 2009.

About a year later council also authorized establishment of a Tourism Business Improvement District that added another 1 percent to the TOT — although that money goes to hotel operators to market Del Mar and not the city – bringing the total tax to 12.5 percent.

Because voters approved a maximum TOT of 13 percent, council can raise it to that amount without another election.

By comparison, Carlsbad, Encinitas, Oceanside and Coronado all have a 10 percent TOT. The TBID fee in Oceanside and Coronado is 1.5 percent and .5 percent, respectively.

Encinitas has no TBID. Carlsbad charges an additional $1 per room plus a voluntary $2 per room golf course assessment.

Solana Beach, which has the highest TOT in the region, charges hotel visitors 13 percent, but has no TBID.

Del Mar currently receives a little more than $2 million annually in TOT funds. Raising it by a half percent would increase that by an estimated $87,450. A 1 percent hike would add $174,900 to city coffers and the maximum 1.5 percent increase would mean an additional $262,150.

Resident Jacqueline Winterer said she supports the proposal, especially if the money would help build a new City Hall.

“You need new sources of funding,” she said. “The TOT looks like a good beginning.”

Councilman Don Mosier, noting three of the city’s six hotels were recently renovated, said TOT money increased but that was a result of higher priced rooms, not greater occupancy.

“I’d like to see both TOT and room rates go up together,” he said. “So it’s sort of a sensitive time to raise TOT and raise the cost per room when the hotels haven’t achieved the occupancy rates that they’d like to.

“I understand we have revenue needs but there always is a tradeoff if you increase the room rates, particularly when they’ve just been raised, and then you’re adding onto that room cost,” Mosier added. “You run risk of being at a competitive disadvantage.”

He said he’d like to reconsider charging the TOT to short-term rentals, a plan that was rejected by voters a few years ago. Mosier said Del Mar is one of the few cities in the state where the TOT doesn’t apply to short-term rentals.

He said he’d like to garner input from the hotel operators before moving forward with a TOT increase. He said he would also like to see what happened to occupancy rates in adjacent Solana Beach after that city raised its TOT.

Councilwoman Sherryl Parks agreed, while Councilman Al Corti supported raising Del Mar’s TOT to the maximum allowed.

“To not do that, I think we’re leaving money on the table,” said Corti, who also supports an occupancy tax on short-term rentals.

“It’s one of the few revenue streams available to us that the visitor to San Diego can really start to pay a fair share,” he said. “Taxpayers are … contributing a lot into the revenue stream and giving up, I think, services.”

Corti said he saw no benefit to seeking input from hoteliers.

“They control the occupancy by the rate they charge,” he said. “I think they need to pay their share.”

Had the council set the TOT at 13 percent, Del Mar would have had the highest overall rate in the county when combined with the 1 percent TBID fee.

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