Report to Mayor and City Council
Wednesday, July 05, 2023
Consent
SUBJECT:
Title
CONSIDER TAKING A POSITION OF "OPPOSE UNLESS AMENDED" AND SENDING A CORRESPONDING LETTER REGARDING SENATE BILL 584 THAT WOULD ADD A 15% TRANSIT OCCUPANCY TAX ON SHORT TERM RENTALS THAT WOULD BE COLLECTED BY THE STATE OF CALIFORNIA TO FUND LABORFORCE HOUSING (CITY COUNCIL)
Body
I. SUMMARY
This item transmits a request from the League of California Cities for the City Council to formally take a position of "oppose unless amended" on Senate Bill 584 (Lim?n). This Bill would impose a 15% tax on the occupancy of short-term rentals ("STRs"). Proceeds from the tax would go back to local governments as grants for the construction, acquisition, and rehabilitation of affordable laborforce housing. The bill defines laborforce housing as public housing projects built with a skilled and trained workforce or prevailing wage rates.
As stated by the League of California Cities, a transient occupancy or STR tax is often the primary source of revenue for cities that rely on tourism and hospitality as economic drivers. In some cases, the tax on STRs can represent over two-thirds of General Fund revenues, which funds fire, police, and other essential services. Imposing a 15% statewide tax on top of existing local rates averaging 10% would both harm critical local revenues and create a prohibitive fiscal burden for tourism and hospitality providers.
As also stated by the League of California Cities, imposing a 15% statewide tax on top of existing local rates would harm critical local revenues and create a fiscal burden for tourists who would like to visit the community and invest in the local economy. Instead of a statewide tax, owners of short-term rentals could pay a fee to help fund affordable housing. This alternative would provide much-needed funding for affordable housing, protect equally essential services, and ensure the revenue is returned to the community.
II. RECOMMENDATION
Recommenda...
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