Change in tide on hotel tax

In recent weeks the Costa Mesa City Council has shot down a laundry list of new fees proposed by the fire department to balance the city’s budget, but the rebuke may have been a mixed blessing for those who think the city needs more revenue.

After voting to block several of the fees, Mayor Pro Tem Wendy Leece surprised some on the council and in the audience by announcing that it was time for the voters to consider raising the hotel tax. In the past she has voted against putting the tax up for a vote.

“It is reasonable to ask voters to let us know what they think,� Leece said. “I am not supporting an increase at this time, mind you, but I feel that voters should let the City Council know their thoughts.�

Costa Mesa has the lowest hotel tax in the county. Hotels in the city charge their visitors 6%, which goes to the city’s general fund. Finance officials estimate that the city would make $1 million per year for every percentage point the tax was raised, but it would first have to be approved by voters, who have rejected it in the past.

Councilwoman Katrina Foley and, before her, former Councilwoman Linda Dixon have been trying to get the issue on the ballot again for years, saying that the tax increase would not substantially affect hotels and would create needed revenue.

But it takes a majority vote of the council to get it on the ballot, unless proponents can manage to get thousands of verified signatures from residents.

The unions that represent Costa Mesa’s police, fire fighters and city hall staff members also are in favor of raising the hotel tax.

The fire department’s proposed fees, if implemented, would have hardly generated enough money to account for 5% of the city’s projected $19-million deficit, but city employee unions were hoping that the roughly $1 million they earned would save a few more workers from being laid off.

A 1% increase in the hotel tax could raise more money than all of the fees combined.

The fees largely failed as a majority of the council members echoed the concerns of several residents who spoke out against them.

One fee, for instance, would have earned the city an estimated $540,000 by charging residents extra money when city paramedics responded to certain medical emergencies, but it was killed (the second time around) after people said it would discourage seriously injured people from calling 911 and put an extra burden on residents who already pay taxes for those services.

Many of the residents who spoke out against the fire department fee proposals suggested raising the hotel tax as an alternative, saying that it would be much more lucrative without putting residents’ health and safety in jeopardy.

It was those calls from the public and what she considered onerous consequences of raising revenue in other ways (like the paramedic fees) that helped persuade Leece to advocate putting the tax increase on a future ballot.

Last year, when Dixon was on the council, Leece’s reversal would have had an instant impact — along with Foley, the three women would have had the majority necessary to put the taxes on the ballot — but Dixon’s replacement, Councilman Gary Monahan, says he’s not about to support raising the hotel tax.

“The hotels are getting clobbered as it is, and the last thing we want to do is raise taxes on them,� Monahan said.

Mayor Allan Mansoor and Councilman Eric Bever have given no indication that they have changed their minds either.

Bever said that even though the tax increase may go unnoticed by an average hotel guest, it’s an important factor to big companies and organizations that have conferences at the hotels and book large numbers of rooms.

The Representatives of the Costa Mesa Conference and Visitor Bureau, which represents many of the city’s hotels, is getting together to discuss the tax in the coming weeks, according to Executive Director Diane Pritchett. Not surprisingly, Pritchett has heard a lot of opposition to increasing it from her constituent hotels.

“I don’t think anyone ever wants to see a tax increase, but it’s something that we do need to talk about to determine whether there would be an impact and how we move forward,� she said.

One of the things the bureau plans to discuss is whether a possible tax increase would become more palatable if the money were earmarked for something that might indirectly increase the hotels’ business.

Even if the support of a third council member puts the issue on the ballot, it is unlikely to be voted on before November 2010, which means it won’t fill the massive hole in which the city currently finds itself. Opponents also think voters will reject the increase like they have in the past.

The tax has not been raised in more than 20 years.