COSTA MESA — The city could raise $2 million a year if voters approve Measure L, a proposed increase in the transient occupancy tax (TOT) applied to overnight hotel stays.
The citywide initiative aims to raise the 6% fee to 8%, which would still keep the city below the Orange County average.
With a tumbling economy, a $9.5-million budget gap, layoffs and cuts in services, the City Council looked for ways to generate revenue and placed Measure L on the ballot.
"The city has not increased the bed tax in more than 20 years, and we are the lowest in Orange County," said Councilwoman Katrina Foley, a candidate for school board. "We can't provide our residents with the same services as Newport Beach and Huntington Beach because we're not generating revenues like they are. No business is able to continue to provide greater services and keep their customers satisfied as they grow without generating revenues."
Even with the increase, Costa Mesa would remain below neighboring cities. Newport Beach levies a 10% fee; Santa Ana, 11%; and Anaheim, 15%.
"It cost the same to go to Costa Mesa as it does in Anaheim," Foley said. "But Anaheim gets 15% on top of that. They've figured out a way to make some money and fund residential services."
The measure is on the ballot with no formal opposition. Mayor Allan Mansoor was the only council member to vote no when the council authorized placing Measure L on the ballot in June. Council candidate Jim Righeimer, a city planning commissioner, is also opposed to Measure L, arguing that it would unfairly burden businesses.
Ed Fawcett, president of the Costa Mesa Chamber of Commerce, said his group isn't opposing the increase.
"It's a situation where we never like tax increases as a rule, but the circumstances and the need by the city overshadowed that dislike for a new tax," he said. "And this does not put a tax on Costa Mesa residents or the businesses; it's essentially a user tax on visitors staying in the hotels here."
The Costa Mesa Conference and Visitor Bureau is also not opposed.
"At this stage, the proposal to raise it for a couple of percentages still keeps us at a great competitive advantage, so the hotels have not opposed it, based on the fact that we would still be competitive," said Shaun Robinson, bureau chairman and manager of the Hilton Orange County.
Jan Brueckner, professor of economics at UC Irvine, said many people don't check the TOT before booking hotel reservations so a spike in fees may not dissuade tourism.
"It certainly doesn't make sense for Costa Mesa to leave money on the table by charging a low tax when everybody else is charging a higher tax, and when visitors don't pay attention to the tax when deciding where to stay," he said.
Revenues generated from the hotel tax also decreased last year as fewer people booked hotels in the city. The city collected $4.7 million from hotel tax revenues, a decrease from the nearly $6 million it earned in 2007.
"This provides some relief for our budget," said Councilman Gary Monahan, who co-signed a ballot statement in support of the measure. "It provides some additional revenues for the city, while maintaining a very low TOT so we can still attract quality business customers to our hotels."
While the city needs more revenue, Monahan said it's crucial for Costa Mesa to continue to attract guests to its hotels.
"Convention business is very competitive," he said. "We're competing with places like Anaheim with Disneyland and Newport with its beach resorts. And conventions that come in are very cognizant of what they're paying. For our hotels to be competitive, we need every advantage we can get."
Even with conventions in mind, Brueckner said, the city isn't in danger of losing out to other cities since the increase would still keep it at a lower rate.