Critics Say Palmdale's Hotel Bed Tax Is Bad for Business : Government: Some fear the lower rate in neighboring Lancaster is siphoning off potential visitors.

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A 10% tax slapped onto motel rooms here has come under fire from merchants who say it is driving business to nearby Lancaster, where similar rooms cost less.

In Palmdale, the price of a basic $50-a-night motel room jumps to $55 because of the bed tax. Just a few miles north, in Lancaster, a similar room costs $53.50.

Few weary travelers will decide where to sleep over a mere $1.50 a night, but for budget-conscious corporations and others who book a large number of rooms, the difference can add up quickly, officials say.

"It's hurting us because someone next to us is lower," said John Chong, general manager of the Holiday Inn in Palmdale. "I hate to see business . . . go to Lancaster."

Chong and other Palmdale hotel owners have complained that the 3% difference in the bed tax between Palmdale and Lancaster is costing them business.

"The hotels can do much better if we have that 3% cut or Lancaster matches with Palmdale," Chong said, noting that normally only 60% of the Holiday Inn rooms are occupied on a given night.

Partly because of complaints from the business community, the Palmdale City Council is considering lowering the 2-year-old transient occupancy tax.

"Bringing it down is a very real possibility," said Palmdale Mayor Jim Ledford. "I'm going to be on par. I want a level playing field."

When the council last raised the city's bed tax in June, 1992, it did so, in part, because it thought Lancaster was going to follow suit. But that never happened. Palmdale went from a 7% tax to a 10% tax while Lancaster remained at 7%.

Some council members are thinking of lowering the tax to 8%, and then using some of the revenue to promote the region as a tourist destination and film location. That promotion, Ledford said, would help the hotels rent more rooms.

"In my opinion . . . the whole idea is to promote tourism," said Councilman Jim Root.

One concern is what the revenue loss from a lower tax would mean to the city's coffers, Ledford said. City staff estimated that each 1% drop in the bed tax rate would mean a $50,000 drop in revenue for Palmdale.

In the first eight months of the fiscal year, Palmdale received nearly $316,000 in bed tax revenue, a 19% increase over the same period the prior year, according to city records.

A tax decrease to 8% would still leave unresolved the issue of parity with Lancaster, Ledford said. Ideally, Ledford would like to see Palmdale lower its bed tax to 8% and Lancaster increase its tax to that amount. Both cities would then each spend $50,000 on the tourism/film industry marketing campaign.

Lancaster Mayor Arnie Rodio was less than receptive when told of Ledford's idea Friday morning. "Palmdale's not going to tell Lancaster what to do," Rodio said, adding that Lancaster has not thought about raising its bed tax.

The Palmdale City Council is scheduled to further discuss the bed tax issue at its April 13 meeting.

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