Supervisors prepare to put TOT on ballot

07/18/2018

The Board of Supervisors on Tuesday decided unanimously to press ahead with the transient occupancy tax increase for West Marin, preliminarily approving an ordinance that puts the issue on the November ballot. 

The original proposal, brought by District Four Supervisor Dennis Rodoni in January, outlined a 50 percent increase in the tax that short-term renters pay to the county, from the current 10 percent to 15 percent. 

The revised proposal would charge 14 percent, following updated economic projections that maintain that the revised rate will still generate up to $1.3 million per year. 

The board’s final reading of the ordinance is scheduled for July 31—the last step before the matter comes down to a vote in November by the residents of West Marin. 

The funds generated by the tax increase would be split equally between affordable housing and emergency services to benefit the coastal areas of the county exclusively. Because the monies are earmarked for specific purposes, the measure requires a two-thirds majority to pass.

When Supervisor Rodoni introduced the proposal, he said the most urgent concerns expressed by his constituents were the availability of affordable housing and the diminishing resources provided to emergency services, both a testament to the “hollowing out” of coastal communities.

For the first time since unveiling the proposal, on Tuesday Supervisor Rodoni had real numbers to back up his assertion that businesses will not be severely impacted by the tax increase. 

A report released by the Marin Economic Forum this month stated that the hike is “unlikely to reduce hotel demand significantly.” Yet it also acknowledged some impacts to hoteliers and made a few recommendations to monitor impacts.

Per those suggestions, Supervisor Rodoni has committed to forming a working group of hoteliers to discuss lessons, concerns and gains from the tax increase and, if there are problems, to raising funds to conduct marketing—which was something the report characterized as “critical” to keeping the county competitive and maintaining the same level of overnight visitors. 

Yet the public speakers at Tuesday’s hearing largely remained divided, with emergency personnel and local affordable housing advocates voicing strong support for the proposal and the owners of longstanding bed and breakfasts and hotels criticizing their supervisor for not protecting their businesses. 

But a few individuals from the hospitality industry crossed over and voiced support, including the longtime owner of Seadrift Realty, Katie Beacock, whose business also deals in short-term rentals. 

"While this proposal is not perfect—it may need to be fine-tuned—we have many crises in West Marin due to the increased number of people, and the first of my concerns, quite frankly, is fire and safety," Ms. Beacock said. 

But hotel owners and innkeepers showed increasing frustration. For the first time, many revealed that business has in fact been down in recent years. 

The longtime owner of the Abalone Inn in Inverness Park, Dona Larkin, said she has had to continue lowering her prices and attributed the need to increased competition from sites like Airbnb—a sentiment that was echoed by a handful of others. 

Supervisor Kathryn Sears pointed out that traditional bed and breakfasts were not going to be unfairly targeted in the tax, as all short-term operators must enforce the higher rate. Yet she also asked the county’s finance director, Roy Given, to address remaining compliance issues with operators who use sites like Airbnb.

Mr. Given said that, earlier this year, the county signed an $80,000 contract with Host Compliance, a Silicon Valley short-term rental monitoring consultant, to get up-to-date numbers on short-term rentals in Marin to aid with compliance. 

“As the T.O.T. ordinance stands now, to enforce collection of revenue is difficult,” Mr. Given acknowledged. “There are no teeth in it. If someone is not collecting the T.O.T., I have to take them to small claims court to collect it.” 

He added that he plans to come before the board in the coming weeks to propose additional ways to change the proposed ordinance to include more effective ways of collecting the tax.

Under the proposed language of the T.O.T. ordinance, it won’t just be short-term rental owners who have to comply with the tax but also campgrounds, which were previously exempt from the tax. They will be charged at 4 percent. 

The manager of the Olema Campground, Ed Strausser, spoke on Tuesday and said that visitors often stop by, look at prices, and move on along the coast. For a summer weekend, rates are now $63 for an R.V. site and $49 for a tent spot. 

He argued that the price points for campgrounds are more sensitive than for short-term rentals and pointed to the fact that the Marin Economic Forum report did not analyze campgrounds specifically. 

Yet Supervisors Sears and Rodoni, who together form the board’s short-term rental subcommittee, said they had looked into the issue extensively. In Sonoma County, campgrounds are paying a 12 percent T.O.T. 

For Lawson’s Landing, the largest private campground on the Marin coast, the tax would boil down to a $2 per night increase, which the supervisors considered negligible. 

Compared with previous hearings during which board members picked at the proposal’s details, the four other supervisors seemed largely on board with Supervisor Rodoni, who called the idea his “baby.” 

Supervisor Damon Connolly said he thought it was high time the residents of West Marin had a chance to vote. He also drew special attention to the economic report and its recommendations. 

The importance of tourism in West Marin, especially for the employment of many residents, was not to be overlooked, he said. 

According to the report, “research suggests the effects of increasing the T.O.T. rates are generally low, but the increases can undermine hotelier revenue to some extent.”

It continues that, “the local government may find that a slight reduction in hotel stays is ok given the additional T.O.T. revenue provided by the new, higher tax rate.” 

But, for the hotelier, the dynamics are more complex, the report continues. “If hoteliers lower their room prices to stay regionally competitive after T.O.T. [hikes], hoteliers now help pay more of the rising tax rates to mitigate cost increases for visitors,” it states.

The economic forum report also says the amount that revenue might fall is “debatable,” and that an oft-cited ratio is that six-sevenths of the tax burden is passed on to visitors, while hoteliers pay the remainder. 

In Marin, there may be some room to raise room rates, the report argues. Marin’s average daily rate for hotel pricing in 2017 was $180 per night, while Sonoma was $170, Napa was $260 and San Francisco was $280. 

Most of the California counties that raised their T.O.T. rates after the last recession saw revenues rise, though the report noted that “it is difficult to surmise how much of the growth is due to advertising, more hotel rooms supply due to new construction, economic recovery, or price inelasticity.”

Regardless, the report emphasizes the importance of marketing to offset any negative impact from higher prices in Marin. 

It also states that Marin’s T.O.T. revenues are closely tied to those in Sonoma and Napa Counties. The logic is that these regional destinations drive the demand for overnight stays in Marin, not the other way around. 

As far as its own marketing, West Marin short-term rental operators have historically supported opting out of paying the 2 percent business improvement district tax that in eastern Marin goes to the Marin County Visitors Bureau to promote tourism. 

But Supervisor Rodoni said on Tuesday that perhaps since the proposed tax is just for 14 percent, West Marin could consider a 1 percent B.I.D. tax down the line.  

No matter what voters decide in November, county staff announced that there will be a one-time election cost of between $14,000 and $21,000. 

If the measure passes, this money will come out of the tax praoceeds, and ongoing costs related to administering the funds is limited to 5 percent annually. 

If it does not pass, the general fund will foot the one-time election bill.