Del Mar Council considers bump in hotel occupancy tax

Del Mar could eventually increase its transient occupancy tax, but not before the City Council decides how to allocate the money and determines the fate of the Tourism Business Improvement District.

During the July 20 council meeting, city staff presented a list of projects that could be funded with the additional revenue. From the ongoing city hall replacement and Shores Park master plan projects, to the construction of a permanent lifeguard tower and restrooms at North Beach, the list totaled millions of dollars.

Because TOT funds are unrestricted, the money could also be used to pay for services such as beach cleaning, street sweeping, and park and roadway maintenance.

The last TOT increase took place in 2008, after 62 percent of Del Mar voters approved Proposition H, which permitted the city to raise the tax from 10.5 percent to a maximum of 13 percent. At the time, the council raised the tax only to 11.5 percent.

Hotel visitors are also charged an additional 1 percent from the city’s Tourism Business Improvement District, which the council authorized five years ago. With the transient occupancy tax and district assessment combined, hotel visitors pay 12.5 percent, in addition to their room rate.

Although collected by the city as part of the TOT, the district fee must be used to attract visitors to Del Mar and promote the city’s hotels.

The district is up for renewal. If it is not renewed, it will automatically expire at the end of September.

Residents like Bruce McDermott who rent out their houses or condominiums for less than 30 days do not pay the tax. Rather than increase the TOT, he said, the city’s more than 200 short-term rental units should charge renters a fee.

“My family would be happy to contribute to that,” he said. “I would have no issue because I’ll just add it on to what we charge. It’s newfound money. It shouldn’t affect anything because people want to come and stay here.”

KC Vafiadis, a local business owner and Del Mar Village Association board member, also said she does not support a TOT increase because it would make Del Mar’s rate one of the highest in the region.

Solana Beach’s TOT rate is 13 percent, but most other cities in San Diego County are lower.

“Solana Beach is the same, but I don’t think our hotels compete with Solana Beach hotels,” she said. “They’re a different caliber and a different animal.”

She added that the additional tax could deter group business from Del Mar.

“That could make the difference,” she said. “And that’s what we depend on in the off season.”

Based on projected hotel revenues from the 2014-15 fiscal year, each one-half percent TOT increase yields about $106,000 in revenue for the city. Therefore, a 1 percent increase from 11.5 percent to 12.5 percent would result in a $213,000 increase. Raising the TOT to the full 13 percent would increase revenues by $319,500.

If the TOT were increased, council members agreed that the funds should be earmarked for a specific purpose. They also agreed that the money should be used to fund or improve services affected by tourists because it is a fee paid by hotel visitors.

“We have a lot of visitors coming into the town. Those visitors cost us money,” said Councilman Terry Sinnott. “If we were to raise TOT, I would definitely want it to be pigeonholed or earmarked to help defray the costs to our citizens of that influx of folks.”

Mayor Al Corti said he supported increasing the TOT to the maximum of 13 percent.

“Raising it to a full 13 percent, I think, is not problematic,” he said. “I think it’s beneficial for us.

“I’m not a big supporter of just raising taxes — that’s not necessarily my background,” he added. “But I do think that this is one tax that’s beneficial to Del Mar, and it’s the ability to get a fair share for providing some of these services.”

Deputy Mayor Sherryl Parks agreed.

“I think we’re leaving money on the table that we need,” she said. “It’s legitimate, and it’s a time in the economy where people can afford it.”

Although Corti was ready to raise the tax right away, other members of the council preferred to wait to make a decision.

“I think we should not do it right away,” said Councilman Dwight Worden. “I think we should let the dust settle on the TBID so we actually know where that’s headed.”

Worden said he wanted assurance that Del Mar would remain competitive. He also would like feedback from the finance committee on the matter.

“It’s a great way to raise money to do good things in the city with, for once, not having to ask our own residents to pay the bill,” he said.