HomeMy WebLinkAboutAgenda Bill 4E 06/21/2010DATE: June 21, 2010
TO:
FROM:
SUBJECT
Honorable Mayor and Members of the City Council
John C. Brown, City Manager
Discussion and Possible Direction to Prepare for Submission to the Voters of a
Ballot Measure Relating to an Updated City's Transient Occupancy Tax.
RECOMMENDATION
It is recommended that the City Council discuss and provide staff with appropriate direction
regarding preparation for submission to the voters of a ballot measure relating to updating the
City's Transient Occupancy Tax.
BACKGROUND
Background and discussion regarding this subject were provided in the staff report included in
the agenda package for the Council's May 17, 2010 meeting (Attachment 1). The agenda item
was not considered at that meeting but was moved instead to the June 7, and subsequently to the
June 21, 2010 meeting, to allow for additional staff work prior to Council consideration. In the
brief discussion that accompanied delaying consideration of the item on May 17`h, staff was
requested to address in subsequent agenda material: Constitutional and statutory requirements
regarding the placement on the ballot of special and general purpose taxes by local governing
bodies; and how Municipal Code Section 4.24.200 regarding the uses of the proceeds of the
existing Transient Occupancy Tax' (TOT) affects whether an increase is treated as a general or
special purpose tax.
DISCUSSION
At its June 7, 201.0 meeting, the Council authorized me to execute an agreement with the
Petaluma Downtown Association (PDA) to provide Visitor Center services and to operate the
Visitors Program. That agreement will provide a minimum level of funding of $140,000 per
year to the PDA for the contract period, based on current TOT estimates, with provision to
increase funding to $169,000 if revenues from this source improve. As indicated in the May 17,
2010 staff report, increasing the TOT could help to provide additional financial support for the
Petaluma Visitor's Program, and to offset the City's costs to support events that promote
Petaluma. Staff met with the PDA Board in late May, to discuss the proposal to increase the
TOT and to answer questions. After considering that information, and meeting with
representatives of the lodging industry, the PDA Board has decided that it does not support
Agenda Review: /
Dept. Director_ City Attorney Finance Director /!�l/J City Manag "�
increasing the TOT rate. The PDA's position is consistent with that of the local lodging
industry, and the Board of Directors of the Chamber of Commerce. Supporting correspondence
is provided as an attachment to this report.
Regarding the questions posed at the Council's May 17, 2010 meeting:
State Constitutional and statutory requirements related to tax measures and pertinent to this
discussion are found in Article XIIIC, Sections 2 (b) and (d) of the State Constitution, and in
California Government Code Sections 53724 (a) and (b). Government Code section 53724(b)
provides that prior to placing a measure on the ballot to impose or increase a general tax, the
ordinance or resolution proposing the tax must be approved by a two-thirds vote of all of the
members of the legislative body. A two thirds vote of the Council is comprised of five
members. To then become effective, the proposed general tax must then be approved by a
simple majority of the electorate. (Cal. Const., Art. XIIIC, Section 2(b).)
Government Code Section §53724 imposes no special voting requirement on adoption of
resolutions and ordinances for presenting special taxes to the voters. Therefore, the City Charter
rules for approval of resolutions and ordinances apply to City Council resolutions or ordinances
for presenting a special tax to the voters. Article VII, section 42 of the City Charter requires a
simple majority of the Council members present to approve ordinances and resolutions. This
would require the vote of four members if six or all seven are present, and three members if four
or five members are present. To then become effective, the proposed special tax must then be
approved by a two-thirds vote of the electorate (Cal. Const., Art. XIIIC, Section 2(d).
Based on the forgoing, a simple majority vote of the Council members present, (as long as a
quorum of at least 4 are present) is sufficient to place a special tax on the ballot; a two-thirds
vote of the entire Council membership is necessary to place a general tax on the ballot.
The TOT is provided for in Municipal Code Chapter 4.24. Section 4.24.220 addresses
disposition of revenues and provides:
"All fees and revenues collected pursuant to the authority of this article shall be used for
such promotional purposes as the council shall find will contribute to the growth,
enlargement and prosperity of the city and will forward, encourage, advance, help, aid
and assist in the growth, enlargement and prosperity of the city. The moneys collected
hereunder by the city shall be used only for the purposes as set forth in this section, and
the city may place the moneys collected in a separate fund earmarked only for the
purposes as set forth in this section. (Ord. 787 NCS §2: prior code §23.27.)"
It appears that the TOT has been historically treated as a general tax, although section 4.24.220 is
not completely clear regarding certain aspects of the tax that could affect its status as a general or
special tax. Section 4.24.220 clearly permits a broad range of uses that will contribute to the
City's prosperity. As well, it has been the City's past practice to use a portion of the tax proceeds
to fund general activities that support City prosperity, and to allocate tax proceeds to diverse
non-profit entities in the City for various purposes that benefit the City. This appears to be
consistent with the TOT being a general tax. At the same time, the language of section 4.24.220
indicates that the TOT proceeds may only be used as prescribed in the section, notwithstanding
the broad latitude the section appears to afford the Council in allocating the tax proceeds. The
main legal considerations for determining whether a tax is a general or special tax focus on
whether the tax proceeds are placed in the general fund, and whether the proceeds are legally
earmarked for a specific purpose. Petaluma TOT Proceeds have been deposited in a special
revenue fund, and either disbursed directly from the special fund, or transferred to the General
fund. The City Attorney's office has suggested that if a measure is to be submitted to the voters
to provide for an increased tax, the language governing disposition of proceeds should be clear
so that the intended status of the tax under existing law is unambiguous.
Staff is available prior to, or during your June 21, 2010 meeting to answer any further questions
the Council may have.
FINANCIAL IMPACTS
Based on current collections, each percent increase in TOT could be expected to generate
approximately $110,000 in new revenue, or approximately 220,000 if the TOT were increased by
two (2%) percent. Placing this matter on the ballot will generate elections costs ranging from
approximately $8,000 to $15,000. City and legal staff costs are not expected to exceed $7,000.
None of these funds are currently budgeted.
ATTACHMENTS
1. May 17, 2010 staff report
2. Correspondence -
3
R
Z85.8
DATE:
TO:
FROM:
SUBJECT`
May 17, 2010
Honorable Mayor and Members of the City Council
John C. Brown, City Manager
Discussion -and Possible -Direction to Prepare for Subrriission to the Voters of a
Ballot Measure Relating to an Increase in the City's Transient Occupancy Tax
(TOT).
RECOMMENDATION
It is recommended that the City Council discuss and provide staff appropriate direction regarding
preparation for submission to the voters of a ballot measure relating to amending the City's
Transient Occupancy Tax (TOT) to increase the tax.
BACKGROUND
The City assesses a Transient Occupancy Tax (TOT) on persons lodging for periods of thirty
consecutive calendar days or less in hotels, motels, and campgrounds. The tax is assessed to the
paying guest, and is collected by the lodging operator. The current rate is 10 percent of the rent
charged by the operator. The Council .has broad latitude concerning allocation of the tax
proceeds, and may use revenues from this source for such promotional purposes as it finds will
contribute to, forward, encourage, advance, help, aid and assist in the growth, enlargement and
prosperity of the City. City Councils, have supported these purposes by allocating TOT proceeds
to the Petaluma Visitors Program and,to other non-profit organizations whose activities promote
and encourage tourism. Councils have also supported these purposes by allocating TOT to City
departments, whose services directly, or indirectly support tourism and promotion and aid and
assist in the growth, enlargement and prosperity of the City.
An.assessment of two (2) percent of the rent charged' by the lodging operator is also collected,
and conveyed to the City. This assessment is charged pursuant to a Tourism Business
Improvement Area formed by the County of Sonoma in'2004, participation within which was
approved by the majority of cities in the.county, including Petaluma. These monies are
forwarded to the,County, and are used to fund activities of the Sonoma County Tourism Bureau.
In Petaluma, these two charges total twelve (12) percent on the rent charged by the lodging
operator. In past years, the City has generated as much as $1.48 million on the 10 percent it
charges and retains, from the seven lodging establishments located in the City. Current TO
estimates are approximately $1.1 million for FY 2009-10, and FY 2010-11. At this.level of
Agenda Review:
Dept. Direct . City Attorney
Finance DirectoCity Manages
collections, each percent of TOT levied generates approximately $110,000. Attachment 1
provides a summary of Petaluma's TOT collections for FY's2000-01 through 2009-10.
Attachment 2 provides a summary of the TOT rates charged by California cities as of August,
2009'.
Earlier this year the Council discussed options for increasing revenues as an alternative to
decreasing expenditures. With respect to creatipg.new revenue options, the most focus was
placed on increasing the TOT, due to. recent decreases in the proceeds from .that revenue source
and its corresponding effect on funding for the Petaluma Visitors Program, and City support for
parades and, special events that similarly promote tourism in the City and the City generally. The
Council made noAecision in that -regard, -but asked,,rather--that the, matter be brought -back for
further consideration within a timeframe that would facilitate, placement of a measure on the
November 2010 ballot. -
DISCUSSION:
This item.is placed on the agenda to provide for further consideration of amending the City's
TOT ordinance to increase the tax.
Although the Council did not. define a specific percentage, a copceptual increase of two percent
on the existing rate was briefly discussed. Staff was requested to identify the amounts that could
be obtained from various percentage increases. Amounts to be generated would be based on
fractions or multiples ofthe $310.,00,0 per -percent amount discussed in the Background section
(i.e.: '/z percent increase equals $55,000, one percent equals $•110,000, two percent equals
$220,000, etc.).
Based on current estimates, a .two percent; increase would generate: approximately $220,000 per
year. With the laddition of at least one new hotel, and economic recovery, it is reasonable to
expect'in the short term that twoapercentcould generate approximately $300*000 per year.
TOT collections have decreased in the, economic downturn, so that the City is collecting
approximately $370,000 less than in 2007-08. Because of that reduction, funding; for a variety of
not -for -profit ,activities, such as Butter and Egg Days and the Veteran's Day parade was
temporarily eliminated. The only entity currently receiving TOT funds, besides the City, is the
Petaluma Visitor';s Program. In the past, this program received as much as $3.72,0,00. In 2007-
08 it received $290,000. It is expected to spend. approximately $100,000 in FY 2009-10.
As indicated, the TOT ordinance provides the Council broad discretion to use proceeds for such
purposes as -it finds will contribute to the growth, enlargement and prosperity of the City. If a
TOT increase were approved, the resulting revenue could. be used to support the City's costs
associated with Butter and -Egg Days and the Veteran's Day parade, and to fund the activities of
the Visitor's. Program.. The two events and the Program bring in thousands of visitors and
potential lodgers to town. Assuming proceeds of approximately $220,000, estimated support
costs for Butter and Egg Days of approximately $26,000 and estimated support costs of
approximately $11,50.0 for the Veteran's Day parade, support for the Visitor's program could be
' Information compiled by Cali forniaCityFinance.com from State Controller's data.
nearly: doubled from the existing level. It would also free- up approximately $120,000
programmed in 20'1.`0-11 for the Visitors Center to'other uses. While funding these activities is
desirable, formally, dedicating an increase to only these uses by ordinance is not recommended.
The Council may at sorne'point want to fund other similar activities that could also increase
visits to and stays in Petaluma.or otherwise contribute to the Citys prosperity. Also,
legislatively restricting TOT proceeds to such specified uses would most likely at least partly
transform the TOT into a special tax subject to 66-2/3%, voter approval requirement, which may
be difficult to obtain.
I have, in the past and recently, discussed a potential TOT increase with representatives of our
lodgm,g�dperators; the Chamber of Commerce, and -the -Petaluma -Downtown --Association,- for the
purpose of understanding. how an. increase might be structured. "I have not found support for
increasing the TOT, as it is viewed as detracting from -Business' ability to attract visitors.
Hoteliers,, in particular, indicated that. increasing the TOT requires'they must either increase their
rates accordingly, reducing their competitiveness with operators in other communities who either
collect a lower TOT orwho have recently cut rates, or they wi11 need to absorb increases at a
time when they are cutting back on expenses. Representatives of these groups have suggested
that City investment in the Visitors program, is, more desirable than increasing the TOT.
However, investment beyond the, amount noted earlier in this report is not possible; without
further reduction of the City's budget and to City services.
Staff checked the rates advertised on the websites of each of our lodging operators for weekdays
and weekend days, and found rates ranging'from $39.50 to $319 per night. That review was by
no means exhaustive. It did not examine seasonal fluctuations; special promotions, or rates
available through other internet booking sites. Staffs review'should, however, sufficiently
identify the potential impact of a percent increase in the TOT. ,It would; based on the forgoing,
result in increases ranging from 79.' cents to $639 per night. On a per -percent basis, each percent
would raise rates from 40 cents. to $3.19 per night, assuming the operator chose to pass the
increases on to the customer.
While they did not support increasing, the TOT, discussions with lodging operators _did identify
options. associated with an increase that would be viewed as less undesirable. These are -
dedicating the proceeds to, tourism., or the Visitors Center', and setting.a sunset for the increased
amount. As previously indicated,; legislatively dedicating ,these funds to specific purposes is not
recommended. Establishing -a..sunset date, ;such as a sunset date tied to term of the Visitor's
Center agreement, or a sunset tied to a revenue generation target, are options the Council should
consider., In.partcular;, the option of setting the sunset in relationship to a revenue target may be
appropriate if this increase is viewed as a means of supplementing existing revenue shortfalls
until such time,as the economy improves and TOT revenues recover to previous collection
levels. A target of at least $1,5`' million a year is suggested if the Council supports this option.
Direction is sought forthe present time as to whether the Council will direct staff to prepare a
measure.relating.to increasing, the TOT for submission to., the voters, and if so, at what.rate of
increase, and with what associated provisions. The Council should consider an increase of at
least two (2) percent; to generate revenues sufficient to increase local promotion activities.
If Council directs, staff to proceed'; the intention would be to return at the. Council's June 7, 2010
meeting with a resolution ordering for submission to the voters a measure amending the City's
transient occupancy tax ordinance and increasing the Transient Occupancy Tax and providing for
submission of.ballotargument and rebuttals, for the Council's further consideration.
FINANCIAL IMPACTS:
As indicated, eachyercent.increase.in the TOT -is estimated to.generate, based on current,
collections, approximately $;l 1 Q Q,00. Election costs associated, with the increase, based' on City
Clerk estimates, range from approximately'$8,0,00415"000 for placing this matter on the.
November.ballot,..based.,on.ibe,amount:of space the Oity2.s- terns take_ up,on.the-sample-ballot.
These costs, are not currently included in the proposed budget for 2:010-11, and would be
provided by shifting funds from other accounts. Staffing and'legal. costs are not expected to
exceed $7,000.
ATTACHMENTS
1. TOT Revenue by Year
2. TOT Rates for California Cities
TOT REVENUE;,BY YEAR
CITY OF PETALUMA
ATTACHMENT 1
Year
;Quarter End
TOT Revenue Total Fiscal Yr;
9/30/2000
$
279,723
12%31/2000
$
192,1098
3/31 /2001
$
171,443
200072001
6/30/20.01
$
225,079
$
86;8,343.
9/30/20'.01
$
264,974
12/31/2001
$
157;994
3/3'112002
$
131,139
2001-2002
-6130/2002
$
209;252
$
763,3159'
9/30/2002
$
292,841
12/31 /,2002'
$
1.91, 746
3/3112003 -
$
170,386
2002�20.03
6/30/20.03
$
232,154
$.
887,127
9'/3012003
$
356,461
12/31,/20.03
$
223,835
3/31/2004
$
184,349
2003-2004
6/30/2004
$
302,239
$
1;0.66,884
9/30/2004
$
386;055
12/31/2004
$
254,840
3/31/2005
$
217,084
20.04-2005
6/30/2005
$
338;560
$
1,196,539
9/30/2005
$
441,484
12/31/2005
$
293,231
3/31/2006
$.
263,;544
2005-2006 -
6/30/2006
$
374,805
$
.1,373,064
9/30/2006
$
471,452
1,2/31/2006 ,
$
318,573
3/31/2007
$
254,042
2006-2007
6/30/2007
$
402,609
$
1,4.46,676
9/30/2007
$
508,194
12/3112007
$
340,274
3/31/2008
$
249,762
2007-2008
6/30/2008.
$
383,884.
$:
1,482,114
9/30/20'08
$
469,838
t
12/31/2008
$
282,038
3/31/2009
$
217,974
MAY .13, 2010
TOT REVENUE BY YEAR CITY OF PETALUMA ATTACHMENT 1
2008-2009
2009-2010
6/30/2009
$
386,119 $ 1,305,969
9/30/2009
$
403,133
12/31'/2009
$
237,566
3/31/2010
$
185,020
6/30/2010
$
- $ 825,719 (75% Reported)
MAY 13, 2010
If
ATTACHMENT?
Transient Occupancy Tax Rates - Calif ,Cities
Source: Computations by CaliforriiaCityFinance.com from State Controller data.
Rev
Aug 15, 2009
Count) 427 1
Mean'
9 5%
Standard Deviation)
1.7%
Medianl
10.0%
Minimum)
3.5%
Maximuml
15:0%
City
County Rev
Aug 15, 2009
)Anaheim
)Orange I
15.0%
IBeverly Hills
ILos Angeles I
14.0%
linglewood
Los Angeles I
14.0%
ILos Angeles
Los Angeles I
14.0%
)'San Francisco
ISan Francisco I
14.0%
)Santa Monica
lLos Angeles l
14.0%
IPalm Springs
IRiverside I
13.5%
IDel.Mar
ISan Diego I
13.0%
IGarden Grove
Iorange I
13.0%
IMammoth Lakes
(Mono I
13.0%
(Barstow
ISan Bernardino 1
12.5%
Pasadena
lLosAngeles i
12.1%
.gouraHills
LosAngelesI
12.0%
(Alhambra
Los Angeles I
12.0%
(Avalon
Los Angeles I
12.6% .
IBakersfiield
IKern l
12.0%
IBerkeley
IAlameda I
12.0%
IBuena Park
)orange 1
12.0%
ICalabasas
lLos Angeles I
12.0%
ICalistoga
(Napa l
12.0%
ICitrus Heights
ISacramento I
12.0%
ICommerce
ILos Angeles I
12.0%
ICulver City
ILos Angeles I
12.0%
IDesert Hot Springs
(Riverside I
12.0%
)East Palo Alto
ISan Mateo l
12.0%
IEIk Grove
ISacramento I
12.0%
lEmeryville
IAlameda l
12.0%
(Fresno
(Fresno I
12.0%
(`Half Moon Bay
ISan Mateo l
12.0%
(Hawthorne
ILosAngeles 1
12.0%
IHealdsburg
ISonoma I
12.0%
IKingsburg
IFresno l
12.0%
ILong Beach
ILos Angeles I
12:0%
IMalibu
Los Angeles l
12.0%
I Monterey Park
Los Angeles I
12.0%
(Napa
(Napa I
12.0%
Halo Alto
ISanta Clara l
12.0%
.rancho Cordova
ISacramento l
12;0%
IRohnert Park
ISonoma l
12.0%
ISacramento
ISacramento I
12:0%.
SOURCE: Coleman
Advisory Services
compuations using State Controller reports
53 cities with no TOT
CaliforniaCityFinancexom .
"'ISaint Helena
(Napa - I
12.0%
ISan Juan'Bautista
ISan,Benito I
12.0%
ISan Pablo
IContra Costa I
12.0%
(Santa Barbara
(Santa BarbaraI
12_.0%
ISausaiito
IMarin I
12.0%
ISeaside
(Monterey I
12.0%
ISolana Beach
ISan'Diego I
12.0%
(West Sacramento
IYolo I
12.0%
IWindsor
ISonoma I
12.0%
IYountville
(Napa I
12.0%
(Ontario
ISan Bernardino I
11.8%
I West Hollywood
I Los Angeles I
11.5%
(Cathedral City
IRiverside I
11.0%
(Gardena
ILosAngeles I
11.0%
ILa Quinta
IRiverside I
11.0%
I.Oakland
(Alameda I
11.0%
IRiverside
I Riverside I
11.0%
ISanta Ana
(Orange I
11.0%
(Torrance
ILos Angeles I
11.0%
IVallejo
ISolano I
11.0%
ISan Diego
ISan Diego I
10.5%
IAdelanto
ISan Bernardino I
10.0%
(Alameda
(Alameda I
10.06/.
IAlbany
(Alameda I
10.0%
IAlturas
Ilviodoc I
10.0%
IAmerican,Canyon
(Napa I
10.0%
(Anderson
IShasta I
10.0%
(Angels
ICalaveras I
10.0%
(Antioch
IContra Costa I
10.o%
(Arcadia
ILos Angeles. I
10.0%
(Arcata
(Humboldt I
10.0%
IArroyo!Grande
(Obispo I
10.0%
(Arvin
IKern I
10.0%
IAtascadero
(Obispo I
10.0%
IBaldwin Park
ILos Angeles I
10.0%
(Beaumont
IRiverside I
10.0%
(Belmont
ISan Mateo I
10.o%
IBlythe
IRiverside I
10.0%
IBrea
(Orange
10.0%
(Brentwood_
IContra Costa I
10.0%
IBrisbane
ISan Mateo I
10.0%
Buellton
ISanta Barbara I
10.0%
Burbank
Los Angeles I
10.0%
IBurlingame
ISan Mateo I
10.0%
ICalexico
Ilmperial I
10.0%
ICalimesa
IRiverside I
10.0%
ICampbell
ISanta ,Clara I
10.0%
ICanyon Lake,
IRiverside I
10.0%
ICapitola
ISanta Cruz I
10.0%
(Carlsbad
ISan Diego I
10.0%
ICarmel
IMonterey I
10.0%
ICarpinte'na
ISanta Barbara I
mo%
I Chico
I Butte I
10 ;0%
IChino Hills
ISan Bernardino I
10.0%
SOURCE: Coleman Advisory Services
compuations using State Controller reports CaliforniaCityFinancexom
I
I
IChowchilla
(Madera
10:0%
„Chula Vista
ISan Diego
10.0%
Claremont
ILos Angeles:
10.0%
ICloverdale
(Sonoma
10.0%
IClovis
(Fresno I
m0%
(Colton
(San Bernardino I
10.0%
(Concord
IContra,Costa I
10.0%
(Corning
ITehama I
10.0%
(Corona,
IRiverside I
10.0%,
(Corte Madera
IMarin I
10.0%
ICotati
ISonoma I
10.0%
(Covina
ILos Angeles I
10.0%
ICrescenfCity
(Del Norte
10.0%
ICupertino
ISanta Clara I
10.0%
ICypress
(Orange I
1,0.0%
IDaly,City
ISan Mateo I
10.0%
(Dana Point
(Orange I
10.0%
(Davis
IYolo I
10.0%
I Del' Rey Oaks
I Moht_erey I
10.0%
IDelano
(Kern I
10.0%
IDiamond Bar
ILos:Angeles I
10.0%
IDinuba
ITulare I
10.0%
IDuarte
ILos Angeles I
10.0%
IDunsmuir
ISiskiyou I
10.0%
IEI Cajon
ISan Diego . I
10.0%
IEI,Centro
Imperial I
10.0%
iEI Cerrito
(contra Costa I _
1o.o%
=I Monte
ILos .Angeles I
10.0%
IEI Paso De Robles
(Obispo, I
10.0%
(Encinitas
ISan Diego- I
10.06%
IEscalon
ISan Joaquin I
1o.0%
(Escondido
ISan ,Diego I
10:0%
I Eureka
I Humboldt I
10.0%
[Fairfax
I Mari-n I
10.0%
IFairfield
ISolano I
10.0%
IFillmore
(.Ventura I
10.0%
(Fort Bragg
IMendocino I
1,0.0%
(Fortuna
(Humboldt I
10.0%
IFremont
(Alameda
(Fullerton
IOraiige • I
10.0%
(Galt
(Sacramento I
10.0%
IGiendale
ILosAngeles I
10.0%
IGoleta
I'Santa'Barbara, I
10.0%
(Grass Valley
(Nevada I
10.0%
IGrover City
IObisoo I
10.0%
IHemet
IRiverside, I
10:0%
(Hercules
ICohtra Costa_ I
10:0%
IHe'rmosa Beach
ILos Angeles- I
10.0%
IHesperia
,ISan,Bernardino I
10.o%
IHuntington Beach
Ibrange I
10.061.
Ilmperial Beach
ISan Diego I
10.00/.
ndio
IRiverside I
10.0%
-llsleton
ISacramento I
10.0%
(Jackson
IAmador I
10.0%
SOURCE: Coleman Advisory Services
compuations using State Controller -reports CaliforniaCityFinance.com
l�
IKing,City
IMonterey I
10.0% I
ILa Mesa
ISan Diego I
10.o%
ILa Puente
ILos Angeles I
10.0%
ILa Verne
ILos Angeles I
10.0%
ILaguna Beach
(Orange I
1o.o%,
ILaguna Hills
jorange. I
1'0f00/o
ILaguna Woods
(Orange I
10.0%
ILake Elsinore
IRiverside I
1o:0%
•ILake Forest
(Orange I
10.0%
Ij
ILakeport
ILake I
10:0%
(Larkspur
IMarin I
10.0%
(Lincoln
(Placer I
10:0%
ILoma Linda
ISan Bernardino I
10'0%
(Lomita
-, ILos Angeles • „I'
10.0%, , .I
ICompoc
ISanta Barbara I
_10.0% I
ILos Altos
ISanta Clara I
10'.0% I.
ILos Banos
IMerced I
10.0%
ILos Gatos
ISanta Clara I
10,0%
(Manhattan Beach
ILos Angeles _ I
10.0%;
IMaricopa
(Kern I
10.0%
IMarina
IMonterey I
10.0%
IMartinez
IContra Costa I
10.0%
IMarysville
(Yuba, I
10:0%
Ij
IMenifee
IRiverside I
10:0%
(Menlo Park
ISan Mateo I
1G.0%
Ij
(Merced
IMerced• I
10:0%
IMill Valley
IMarin I
10.0% I
(Millbrae
;ISan Mateo I
16!0P/°
IMilpitas
ISanta Clara I
10,
Ij
I Monrovia
I Los Angeles I
10.0%
IMontclair
ISan Bernardino I
10.0%
IMontebello
ILos Angeles I
1o.0%
IMonterey
IMonterey I
10.o%.
Moorpark
IVentura I
10.6%,
Morgan Hill
ISanta Clara I
10,0%°
Morro Bay
(Obispo I
10.0%
Mount Shasta
ISiskiyou I
10.0%
IMounta,in View
(:Santa Clara I
1o.06/.
IMurrieta
IRiverside I
10.0%
INational City
ISan Diego, I
10.0% I
INeedles
ISan Bernardino I
10.0%
INevada. City
'I Nevada I
10.0% Ij
(Newark
(Alameda I,
1'0.0%
INewport Beach
(Orange I
10.0%
Norwalk
ILos Angeles I
10.0%
Novato
IMarin I
10.o%
(Oakley
IContra Costa I -
10.0%
(Oceanside
ISan Diego I
10.0%
(Ojai
IVentura I
10.0%
(Orange
(Orange I
10.0%
IOrinda
IContra Costa I
10.0%° I
(Orland
IGlenn I
10.0%
IOxnard
IVentura I
10.01% Ii
IPacificGrove
IMonterey I
10.0% I
+SOURCE. Coleman Advisory Services
compuations using
State Controller reports
CaliforniaCityFinance'.com,
�3
IPacifica
ISan Mateo I
10.0%
(Palmdale
ILos Angeles I
10.0%
`Paradise
IButte I
10.0%
IParamount
ILos Angeles I
10:0%
(Perris
Iiverside I
10.0%
(Petaluma
ISonoma I
10.0%
IPico Rivera
ILos Angeles I
10.0%
IPinole
(Contra Costa I
10.0%
IPismo Beach
(Obispo I
10.0%
(Placentia
(Orange I
10.0%
IPiacerville
IEI Dorado I
10.0%
IPleasant Hill
IContra Costa I
10:0%
IPoint Arena
IMendocino I
10.0%
(Pomona
ILos Angeles I
10-0% '
IPort Hueneme
IVentura I
10.0%
(Poway
ISan Diego I
10.0%
(Rancho Cucamonga
ISan Bernardino I
-10:0%
(Rancho Mirage
(Riverside I
10.0%
(Rancho Palos Verdes
ILos Angeles I
10.0%
IRed Bluff
ITehama I
10.0%
(Redding
IShasta I
10.0%
IRedlands
ISan Bernardino I
1o.o%
I Redondo Beach
ILos Angeles I
10.0%
IRedwood City
ISan Mateo I
10.0%
IRichmond
IContra Costa I
1o.o%
IRidgecrest
(Kern I
10.0%
(Rio Vista
ISolano I
10.0%
Ripon
ISan Joaquin I
1o.0%
I Rolling Hills Estates
ILos Angeles I
10.0%
(Rosemead
ILos Angeles I
lam
ISalinas.
IMonterey I
10.0%
ISan Bernardino
ISan Bernardino I
1o:0%,
ISan Bruno
ISan Mateo I
10.0%
ISan Buenaventura,
IVentura I
10.0%
ISan Carlos
ISan Mateo I
10.0%
ISan Clemente
(Orange I
10.0%
ISan Gabriel
ILos Angeles I
1o.0%
•ISan Jose -
ISanta Clara I
10.0%
ISan Juan_ Capistrano
(Orange I,
10'.0%
ISan Leandro
(Alameda I
10.o%
ISan Luis Obispo
(Obispo I
10.0%
ISan Marcos
ISan Diego I
10.0%
ISan Mateo
ISan''Mateo I
1o.0%
ISan' Rafael
IMarin I
10.0%
I Santa Clarita
ILos Angeles I
1o.0%
ISanta Cruz
ISanta Cruz I
10.0%
ISanta Fe Springs
ILos Angeles I
1o.0%
ISanta Maria
ISanta Barbara 110.0%
ISanta Paula
IVentura I
10.0%
(Saratoga
ISanta Clara I
10.0%
IScotts Valley
ISanta-Cruz I
1o.o%
Sebastopol
ISonoma I
10.0%
{
.,Shasta Lake
ISimi Valley
IShasta I
IVentura I
10.0%
10.0%
SOURCE: Coleman Advisory Services
compuations using State Controller. reports CaIiforniaCityFinance.com
l
ISolvang
(Santa Barbara I.
10:06/.
Isonoma
ISonoma I
10.0%
I;South Lake Tahoe
IEI Dorado I
10'.0% Ij
ISusanville
(Lassen I
1b.0% I
ITaft
(Kern [
10.0%
(Temple City
(Los Angeles I
10.0% I,
(Thousand Oaks
Iventura I
10.0%°.
(Tiburon
IMarin I
1,0.0%
IT:racy
ISan Joaquin I
10.0%
(Truckee
(Nevada I
10.0%
ITulare
ITulare I
10:0% I
IUkiah
(Mendocino I
10.0% I
IUnion•City
(Alameda I
10.0% I
]Upland
_ISan Bernardino_„ I
10.0%
IVisalia'
ITulare I
10.0%
(,Vista
ISan Diego I
1MIA I+
[Watsonville
(Santa Cruz I
10.0%
(Weed
ISiskiyou I
10.0%
IWest Covina
ILos Angeles I
10.0%
(Westlake village
ILos Angeles I
1,0.0%
(Westmorland
Imperial I
1o.0%
(Wheatland
(Yuba I
10.o%°, I
(Whittier
ILos Angeles I
10.0%
IWildomar
(Riverside I
10'.09/.'
[Williams
IColusa I
10.0%
IWillows
IGlenn I
1,0.0% I
IWinters
IYolo I
10.0%
(Woodland
IYolo I
10.0% Ij
IYorba Linda
IOrange I
10.0%
(Yreka
ISiskiyou I
10.0%
IYuba City
(Sutter I
10.00/.
ILafayette
IContra,,Costa I
9.5%
ISanta Clara
(Santa Clara I
9.59/.
(Sunnyvale
ISanta Clara I
9.5% Ij
IIndian Wells
IRiverside I
9;3%
IBellflower
ILos.Angeles I
9.0% I
[Benicia
ISolano
[Bishop
Ilnyo I
9.0% I
(Camarillo
Iventura I
9.0,°/u
ICarson
ILos,Angelesi I
9^.06/.
[Clearlake
ILake I
9.0,%
]Coachella
IRiverside I
9:0% I
Dixon
ISolano I
9.0% I
Downey
I Los Angeles I
9.0%
[Fountain valley
(Orange I
9.0%
(Gilroy
[Santa Clara I
9.0%
IHawaiian Gardens
ILos Angeles I
9.0% I
ILaMirada
ILos Angeles_ I
9.0%
I,Lathrop
ISan, Joaquin I
9.o% [
ILawndale
[Los Angeles I
9.6%
ILivingston
._IMerced I
9.0% I
IMadera
IMadera I
INlanteca
ISan Joaquin I
9.0%
.IModesto
IStanislaus I
9.0% I
SOURCE: Coleman
Advisory Services
compuations using State Controller reports
Cal iforniaCityFinance.com
IOroville
IButte I
9.0%
(Palm Desert
IRiverside I
9.0%
'I,Portola-
IPlumas I
9:0%
'Rialto
ISan Bernardino I
9.0%
ISanta Rosa
Isonoma I
g.o%°
Iseal Beach
(Orange I
9.0%
(Signal Hill
(Los Angeles I
9.0%
I South San Francisco
ISan Mateo I
9.o%
ITurlock
IStanislaus I
9.0%
IT.wentynine Palms
ISan Bernardino I
9.0%
(Willits
(Mendocino I
9.0%°_
[Hayward.
(Alameda I
8.5%
IWalnu,t
ILos Angeles I
8.5%
IWalnut Creek-
IContra-Costa -I
8.5%
(Atwater
(Merced I
8.0%
(Auburn
(Placer I
8.0%
(Bell Gardens
ILosAngeles I
8.o% '
(Big Bear -Lake
ISan Bernardino I
8.0%
IBrawley
Ilmperial I
8.0%
ICalifornia City
IKern I
8.0%
ICalipatria
Ilmperial I
8.0%
(Chino
ISan Bernardino I
8:0%
(Colfax
IPlacer I
8.0%
IColusa
IColusa I
8:0%
(Corcoran
IKings I
8.06/. .
(Coronado
ISan Diego I
__Cudahy
ILos Angeles I
8.0%
f )ublin
(Alameda I
8:0%
1EI Segundo
(Los Angeles I
8:0%
(Ferndale
(Humboldt I
8:0%
(Folsom
ISacrame.nto I
s.o%
(Fontana
ISan .Bernardino I
8.0%
IFoster'City
ISan Mateo I
8.0%
(Gonzales
IMonterey I
8.0%
(Greenfield
IMonterey I
8:0%
IHanford
(Kings I
8.0%
(Hollister
ISan Benito I
8.0%I
Imperial
I Imperial I
8.061.'
IIndustry
(Los Angeles I_
8.0%
Ilnrine
(Orange I
8.0%
ILa Palma
(Orange I
8.0%
(Laguna Niguel
I(D,range I
8.0%
ILakewood
ILos Angeles I
8.0%
ILemoore
IKings I
8.0%
ILindsay
(Tulare I
8.0%
(Livermore
(Alameda I
8.0%
(Loomis
IPlacer I
8.0%
ILos Alamitos
(Orange I
8.0%
IMission Viejo
(Orange I
8.0%°
IMoreno Valley
IRiverside I
8.0%
(Norco
IRiverside I
8.0%
�C'atterson
IStanislaus I
8.0%
t
_)ittsburg
(Contra Costa I
8:0%
'I Pleasanton
(Alameda I
8.0%
SOURCE: Coleman Advisory Services
compuations using State Controller reports CalifOrniaCityFinanCe.COm 1 _,
IPorterville
(Tulare I
8.0% I
IReedley
IFresno I
8.0%
IRio Dell,
(Humboldt I
8.0%
(Rocklin
IPlacer I
8.0%
ISan Dimas
ILos Angeles I
8.0%
ISan'Jacinto
IRiverside I
8.0% I
Isonora
ITuolumne I
8.0%
(South El Monte
ILos Angeles I
8.0%
(South Gate
ILos Angeles, I
8.0%
IStanton
(Orange I
8.0% I
IStockton
ISan Joaquin I
8.0%
ITehachapi
IKern I
8.0%
(Temecula
IRiverside I
8.0%
]Trinidad-
-(Humboldt I
8.0% I
IVacaville
ISolano I
8.0% I
(Waterford
IStanislaus I
8.0%
(Westminster
(Orange I
8.0% I
(Azusa
ILos Angeles I
7.5%
ICompton
ILos Angeles I
7.5%
ISan Ramon
IContra Costa I
7.3%
ISutter Creek
IAmador I
7.3%
IAmador
IAmador I
7.0%
IGustine
IMerced I
7.0%
(Highland
ISan Bernardino I
7.0%
(Huron
IFresno I
7.0%
ILancaster
ILos Angeles I
7.0% I
(Oakdale
IStanislaus I
7.0% I
IVictorville
ISan Bernardino I
7.0% I
Iyucaipa
ISan Bernardino I
7.0%
(Yucca Valley
ISan Bernardino I
7.0%
(Danville
IContra Costa I
6.5%
(Apple Valley
ISan Bernardino I
6.0% I
IArtesia
ILos Angeles I
6.0% I
IAvenal
(Kings I
6.0% I
(Banning
IRiverside I
6.0% I
ICerritos
ILos Angeles I
6 0% 1
ICoalinga
IFresno I
6.0% I
(Costa Mesa
(Orange I
6.0% I
(Etna
ISiskiyou I
6.0%
(Glendora_
ILos.Angeles I
6.0%
(Gridley
(Butte I
6.0%.
IJone
IAmador' I
6.0%.
(Lemon Grove
ISan Diego I
6.0% I
Lodi
ISan Joaquin I
6.0%p I
Mcfarland
IKern I
6.0% I
Plymouth
IAmador I
6.0% I
(Roseville
IPlacer I
6.0% I
ISantee
ISan Diego I
6.0%
ISelma
IFresno I
6.0% Ij
ISoledad
IMonterey I
6.0% I
(Tustin
(Orange I
6.0% I
,IWasco
IKern I
6.0% I
ICeres
IStanislaus I
5.0% I
(Dorris -
ISiskiyou I
5.0% I
SOURCE: Coleman Advisory Services
compuations using State Controller reports CaliforniaCityFinance.com
l`
(Huntington Park
ILos Angeles I
5.0%
(Maywood.
ILos Angeles I
5.0%
—'`lClayton
IContra Costa I
4,o%
i.
Exeter
ITulare I
4.0%
IFirebaugh
IFresno .I'
4.0%
IHoltville
Ilmperial I
4.0%
IRiverbank
IStanislaus I
4.0%
ISanger
IFresno I
4.0%
I Bell
I Los Angeles I
3.5% I
IAtherton
ISan Mateo I
none
IBelvedere
IMarin I
none
Ij
IBiggs
IButte I
none I
IBradbu y
ILos Angeles I
none I
_IGrand.Terrace
ISan Bernardino I
none I
IHidden Hills
ILos Angeles I
none- I
IHillsborough
ISan Mateo I
none
IHughson
IStanislaus I
none
Ij
Ilrwindale
ILos Angeles I
,none I
(Kerman
IFresno I
none
ILa Canada Flintridge ILos Angeles I
none
ILa Habra
I Orange I
none
.I La Habra Heights
I Los Angeles I
none
(Live Oak
(Sutter i
none
ILos Altos Hills
(Santa Clara I
none
I Lynwood
I Los Angeles I
none
IMonte Sereno
ISanta Clara I
none
IMoraga
IContra Costa I
none
i `Jewman
IStanislaus I
none
Palos Verdes Estates
I Los Angeles I
none
IPiedmont
(Alameda I
none
aanta
(Kancno
Margarita
(Orange
I
none
Rolling Hills
I Los Angeles I
none
IRoss
I Mann I
none
ISan Anselmo
I Marin I
none
ISan Fernando
I Los Angeles I
none
ISan Marino
I Los Angeles I
none
IShafter
IKern I
none
I Sierra Madre
I Los Angeles I
none li
ISouth Pasadena
I Los Angeles I
none- I
ISuisurrCity
ISolano I
none I
IVilla Park
(Orange I
none I
IV,loodside
ISan Mateo I
none I
IAliso Viejo
(Orange I
none I
I Blue Lake
I Humboldt I
none I
IColma
ISan Mateo I
none I
IDos Palos
IMerced I
none I
IFarmersville
ITUlare I
none
IFort Jones
ISiskiyou I
none
IFowler
IFresno I
none
IGuadalupe
ISanta Barbara I
none
ILoyalton
ISierra I
none
t lendota
IFresno I
none
�i0ontague
ISiskiyou I
none
(Orange Cove
IFresno I
none
SOURCE: Coleman
Advisory Services
compuatiotis
using State Controller reports
CafiforniaCityFinance.Com
IParlier
(Fresno I
none
IPortola Valley
ISan Mateo I
none
ISan Joaquin
IFresno I
none
ISand.City
IMonterey I
none
ITehama
ITehama I
none
ITulelake
ISiskiyou I
none
IVernon
(Los Angeles I
none
IWoodlake
(Tulare I
none
SOURCE: Coleman Advisory Services
compuations using State Controller reports CaliforniaCityFinancexom
6
0
Sheraton
MAY 272010
CITY MANAGER
May 27, 2010
City of Petaluma
11 English Street
Petaluma, CA 94952
Re: Potential Ballot Measure to Increase TOT Rate to Equal Beverly Hills' 14% Rate
Dear Mayor and City Council Members:
I am one of the owners of the Sheraton hotel in Petaluma, and oversee its day-to-day
operations. My fellow owners are local, Sonoma County residents, and we operate the
hotel under a franchise agreement with Sheraton. I am also a founding member of the
Petaluma Lodging Coalition, a coalition of hotels, motels and campgrounds in Petaluma.
We strongly advise the City Council to not move forward with putting on the ballot a
measure to increase the Transient Occupancy Tax (TOT) rate in Petaluma. Raising the
TOT rate may seem like an easy way to raise additional funds for the City without harm
to local residents and businesses, but this is simply not true. Instead, .raising the TOT rate
would (1) be paid for in large partby local businesses and residents, (2) decrease the
number of overnight business and leisure visitors to Petaluma by making us less able to
compete with neighboring cities, and (3).harm local businesses that benefit from
spending by overnight visitors.
In addition, proceeding with a ballot measure raises significant legal issues that would
require .the. City to spend even more money on legal fees, and could present obstacles to
passing any such measure.I
' One such. issue is that the TOT tax may be a special tax under Proposition 62 subject to
approval by voters at the super majority level of 66-2/3% rather than the simple 50% level. The
Municipal Code of the City requires that the TOT revenues be used solely for "promotional
purposes." A second issue is the likelihood that Proposition,62 requires a 2/3 majority vote by
the City Council to even put.a TOT rate increase on the ballot in the first place. This would
require approval by five,of the seven members of the City Council, not the normal majority of
four members.
SHERATON SONOMA COUNTY - PETALUMA
745 Baywood Drive
Petaluma, CA 94954
t .— 707 283 2888
f — 707 283 2828
sheraton.com/petaluma
IS
May 27, 2010.
Page 2
1. LOCALS WILL BEAR MUCH OF THE BURDEN OF HIGHER TAXES
The first reason we oppose an increase in the TOT rate is because local businesses and
residents will bear much of the burden of higher taxes.
The myth tells us that only "outsiders" will bear the burden of higher TOT rates. And the
Staff keport issued May 13, 2010 on the potential,TOT'increase did not even mention the
important issue of who pays TOT taxes and therefore who will bear the burden of higher
TOT taxes. The truth, however, is that local businesses in Petaluma will suffer much of
the proposed increase in the TOT rate.
® Many of our best.accounts at -the Sheraton are local businesses who are also
significant employers in Petaluma.2
These local businesses span many industries, including agriculture, food
processing, food products, manufacturing, telecommunications and "green"
technology fields. And they range from long established companies like Mrs.
Grossman's to new and fast growing companies like Enphase Energy. If the
TOT rate is increased all of these businesses will. suffer increased costs to
operate in Petaluma during one of the most difficult economic times in
decades.
Local' businesses often have people stay at our hotel every week. Since the
company pays for their travel, the company bears the burden of the TOT
taxes. Those guests include:
➢ Employees who are visiting the home office in Petaluma.
➢ Employees who are attending meetings such as sales training sessions
or planning meetings in Petaluma.
➢ Customers of the company.
➢ Consultants who are doing projects for the local company, and whose
travel- costs — including TOT — are paid for by the local company.
® As one .local business and. Sheraton client wroteto us recently: ".We have
business travelers — both .employees and guests — almost every week of the
year. This additional tax would have a negative impact on our business
[due to thel. higher costs."
2 The Sheraton is the largest hotel in Petaluma and the largest generator. of TOT revenues to the
City.
�k
May 27, 2010
Page 3
® Local businesses account for a significant portion of our total business. For
five nights of the week —Sunday through Thursday —we are primarily a
business hotel. During the winter season, most of our guests are traveling for
business purposes.
In addition to local businesses, we also host many friends and family of Petaluma
residents. This is a steady part of our business. When relatives come to town, whether it
be,parents, grandparents, children or grandchildren, they often stay with us. And the
same is true for friends. All of these guests pay TOT.
So, if you decide to moveforward with a ballot proposal, voters need to know that a
significant�portion of the higher tax burden will be borne by local businesses, and by- the
relatives,, friends and visitors of local residents. We at the Sheraton, and at the Lodging
Coalition, do not support increasing taxes on local business, and the relatives, friends and
visitors of local residents.
2. RAISING TAXES WILL RESULT IN FEWER VISITORS TO PETALUMA
The second reason we do not support an increase in the TOT rate is that a higher rate will
result in fewer business travelers, groups and visitors to town. The staff report for this
item assumes that increasing the total TOT rate. from 12% to 14% will have zero impact
on demand for -staying overnight in Petaluma. We respectfully disagree with this
assumption. To raise taxes and not assume.any decrease in demand is unsupported by
economic theory and by ,our long experience in the hotel industry. Unlike property taxes
where people cannot move their house from Petaluma to Mann, people can easily stay in
hotels in Marm or Sonoma or elsewhere in response to higher taxes in Petaluma.
So where does Petaluma stand in comparison to our competitors? Currently our total
rate, including the County -wide BIA assessment of 2%, is 12%. This already puts us at a
disadvantage compared, to, the City of Sonoma and virtually all of Marin,- which are at
10%. Going to 14%.will put us 4% above them.
Attached as Exhibit I is a chart which shows the total TOT rates for all cities
in Sonoma, Marin and Napa Counties.
® Highlighted in red font are those cities which are the principal competitive
cities for our lodging properties in Petaluma.
➢ At present, the only competitive city at 14% is Rohnert Park. Having
them 2% above us helps us today in competing with them.
0
May 27, 2010
Page 4
➢ , Santa Rosa is currently at 11 % or 1 % below us, which helps them. If
they go to 14%, that will help us attract business away from them,
particularly the large group business that is very sensitive to total
costs.
➢ Given the location of Petaluma and,parficularly the Sheraton hotel,
two very important competitive areas ,for us are the City of Sonoma
and all of the cities .in northern Marin, which are at 10%. Since we are
at 1-2%-now; we are already 2% higher. At 14% we would be 4%
higher, and this is a substantial -difference, particularly for the high
volume accounts.
Since Petaluma borders Marin and.is relatively close to the City of
Sonoma, creating a larger difference in TOT rates will result in our
losing lodging business to those locations.
While this difference of 4% may appear "small" to those who are not in the hotel or
lodging .business, it is actually a huge difference when we'go after high volume business
accounts, and large groups —these accounts can each produce anywhere from 300 room
nights to more than 3,000 room nights.a,.year.
These large accounts�are a:major,part of our business, -and absolutely critical to
generating high TOT revenues to the City. For these large accounts, having a TOT
rate that was. 40% higher -than the rates in Marin and Sonoma would amount to
thousands of dollars per'year, and we would lose business to those locations. This
would result in lower TOT revenues to Petaluma, and fewer visitors.
Having a total TOT rate of 14% would make us one of the cities with the highest TOT
rates in California — tied with Beverly Hills — and that will not -help us attract visitors. 3
3 We are ranked as the 5`h best Sheraton hotel in North America for guest satisfaction, and last
year our sales team :was selected as one of the top1 sales teams in all of North America for
Sheraton hotels. Our team of five full-time sales people knows how to sell hotel rooms and they
are working very hard to bring as many people as possible to town and thereby increase the
number of people visiting our stores and eating in our restaurants, and at the same time
maximizing. the TOT revenues to the City. The last thing, we need right now is another
obstacle to bringing,more people to Petaluma, and that is exactly what raising the TOT rate
from 12% to 14% would do. Please don't make the job of our sales team even harder.
May 27, 2010
Page 5
3. INCREASING THE TOT RATE WILL REDUCE SPENDING AT L.oCAL )BUSINESSES
The third, reason we do not support increasing the TOT -rate is the.hidden cost to small
businesses that benefit from spending by overnight visitors to Petaluma.
A study commissioned by the. Sonoma County Tourism Bureau showed that, on average,
overnight visitors in Sonoma County spend approximately $292 per day, A portion of
that is spent on lodging, but a large.portion is spent at restaurants and other local
businesses. Therefore, every overnight visitor lost as a result of higher taxes hurts the
beneficiary of such spending ----local businesses. Clearly, our goal as a community should
be to increase TOT revenues by increasing the number of overnight visitors to Petaluma,
not. by raising taxes and causing potential visitors to take their business and -spending to
other cities.
That is why we have been working with John Brown and the Petaluma Downtown
Association (PDA) to bolster the marketing of Petaluma by having the PDA run and
operate the Visitors Program. The Lodging Coalition members are ready and eager to
work with the PDA and'everyone else in town to bring more,people to Petaluma, which is
the quickest and surest way to increase tax revenues to the City while at the same time
helping local businesses.
For the reasons noted, above, we, together with the Petaluma Downtown Association and
the Petaluma Lodging Coalition, recognize that:raising the TOT rate is a bad idea at the
worst possible time. We will vigorously oppose any increase in Petaluma's TOT rate.
Sincerely,
Thomas H. Birdsall
Co -Owner
Sheraton Sonoma County —Petaluma
Attachment
cc: Mr. John Brown
Petaluma Lodging Coalition
Petaluma Downtown Association
2A
Exhibit 'I
Transient Occupancy Tax Rates
and Total Tax Rates by City: 2009
Principal Competitive Cities with Petaluma are highlighted in red
SONOMA COUNTY
'City
�. TOT Rate MY I BIA Rate (%)*
Total Rate MY
J Rohnert' Park
12
2 ' -I
14
Windsor
I 12 I
2
14
Cloverdale
10
2
12
Healdsburg
1.2
--
12
Petaluma'
10.
2
12
Sebastopol
I 10
2
12
Santa Rosa
9
2
11
1 Unincorporated
9
2
11
jSonoma
10
--
10
City
Sausalito
-ICbrte Madera
Fairfax
(Larkspur
Mill Valley
I Novato
San Rafael
City
lCalistoga
Napa
ISt. Helena
IYountville
(American Canyon
TOT Rate (%) BIA Rate (%) Total Rate (%)
12 --
1.2
10 --
10
10 --
10
10 --
10
10 --
10
10
10
10 --
10
TOT Rate Rate Ra BIA (�) (/°) ° - -Total Rate (°�)
12 -- 12
12 -- 12
12 I -- 12
12 I -- 12
10 -- 10
*Sonoma County Tourism Business Improvement Area (BIA) was established in
November 2004 by the Sonoma County Board of Supervisors. Funds from the lodging
facilities in the member cities and unincorporated areas.pay for the Sonoma County
Tourism Bureau to market overnight stays in the BIA.
n,�
QUALITY INN
June 1, 2010
City of Petaluma
11 English Street
Petaluma, CA 94952
Re: Proposed Ballot Measure to increase TOT Tax 20%
Dear Madame Mayor and Members of the Petaluma City Council:
BY CHOICE HOTELS
My family and I have been involved in Petaluma lodging community since 1985. In
those 25 years, we have enjoyed providing our share of hotel accommodations for the
overnight guests of our Petaluma residents, fellow business community, and our share of
the Wine Country traveler. This.also,.means that we.have ridden through at least three
economic down cycles, with this current down cycle being the most severe.
We urge that you rescind Staffs recommendation to place on the ballot a proposal to
increase TOT by 20%.
The most devastating part.of the current recession is the loss of jobs and the empty office
parks that surround us and appear throughout Petaluma.. The; empty spaces mean fewer
jobs for Petalumans, who correspondingly have fewer resources to spend with our local
retailers and service providers. Our hotel occupancy plummeted with the emptying of
the surrounding office parks. -I would attribute most of our lost business in the current
recession to the loss of local jobs and local businesses. A 20% increase in TOT taxes will
negatively impact a business community trying to recover.
Until we see those office parks .fill up with new businesses who hire more local. residents,
you should not expect to see a recovery of TOT revenue that matched the revenue flows
prior to 2008. Correspondingly, since local residents also make up a large portion of the
employers:in Petaluma, restraint in travel budgets will continue to keep occupancy and
hotel rates down for the foreseeable future. Any additional tax, including TOT, will
make surviving this recession even more difficult for the local community.
Because over 50% of our hotel occupancy mix comes from business travelers, travelers
doing business with local businesses, family visiting our local residents, your proposed
20% increase in TOT will most adversely impact local businesses and local residents. If
there are less business and family travelers, then there will correspondingly mean fewer
visitors to our local restaurants and retailers. The negative trickle down effect of less
overnight visitors is compelling. Just read Ben Stone's reports on visitor impacts in
Petaluma. and Sonoma 'County when you have less overnight visitors in a community.
5100 MONTERO WAY
PETALUMA, CALIFORNIA 94954
PHONE 707.664.1155 FAx 707.664.8566 -
www.winecountrygi.com
For reservations worldwide:'800.4CHOICE choicehotels.com �J
QUALITY INN
BY CHOICE HOTELS
On the tourism side of our business, Petaluma continues to:capture its share of transient
leisure travel, which fortunately is the only bright: spot in an otherwise miserable
economy. It remains'a lesser portion of the Petaluma occupancy mix, accounting for
maybe 40% of our annual business. Most of these travelers arrive on weekends and
during the summer., They make up only a small fraction of the occupancy Sunday
through Thursday. Most of that weekday occupancy demand needs to come from local
business, and business travel associated with local businesses.
The internet has made.: shopping for hotel rooms verytransparent. The hotel rates in
Petaluma sit side by side with those of our competitors in surrounding communities. If
rate is an important consideration, particularly for the price conscious consumer of today,
they will likely go where they will get the most value fortheir dollar. Most internet sites
show total cost including room rate, taxes -and service fees combined. Your proposed
20% increase in TOT will adversely affect the ability of Petaluma lodging facilities to
compete with our neighboring communities. We see and hear from those shoppers daily.
This is a highly competitive, market, and people who. stay.in hotels have plenty of choices
and options. Those options do not confine their choices to .any one community. You and
the community of Petaluma will benefit more if. Petaluma left. its .,current TOT rate
unchanged. As recovery begins, and business travel returns; TOT funds will
correspondingly improve; so long as the traveling public feels, they are getting value for
their dollar in a,competitive market. I have always felt that Rohnert.Park's higher TOT
tax was a constant impediment to their historic inability to capture their fair share. Please
do not add Petaluma into the mix of uncompetitive communities for overnight lodging.
Thank you for.your consideration,
Kirkman, Aok,_LjCHA
Managing .Partner
Quality -Inn -Petaluma
5100 MONTERO WAY
PETALUMA, CALIFORNIA 94954
PHONE 707.664.1„155 FAx 707.664.8566
www.winecountrygi.com
For reservations worldwide: 800.4CHOICE choicehotels.com
RECEDED
JUN 0 7 2010
CITY MANAGER
June. 4, 2010
Mayor and City Council
City of Petaluma
11 ,English Street
Petaluma, CA 94952
Dear Mayor Torliatt and City Council Members:
This is to notify you that the Petaluma Area Chamber of Commerce Board has
voted and voted unanimously to oppose, at this ,time, any ballot measure
designed to increase the Transient Occupancy Tax fate on overnight visitors to
Petaluma lodging businesses. The Board's vote folllows the recommendation
of the Chamber's Government Affairs/Economic.Development Committee,
which also opposed this tax increase by a unanimous vote.
The Board believes that this is the absolute -worst time.to increase costs to
local businesses and visitors to our community, and to institute a tax increase
which carries every possibility of doing harm to our local businesses, residents
and lodging institutions.
The original intent of the TOT legislation was to allow communities to raise
funds in order to market those same communities to the growing tourism
market. The Board feels that the City's decision last year to slash funds for
tourism, marketing is at least partly responsible for the substantial decline in
TOT revenues to the City.
It has been dramatically demonstrated to us that the current drop-off in room
rentals has adversely affected many of our other local businesses that provide
badly needed job-s and sales tax revenues. To force higher room rates via this
tax increase would only tend to perpetuate this decline when we.should be
seeking ways to turn it around.
The Chamber supports the Petaluma Downtown Association as well as the
hotels„ motels, and campgrounds in this City in urging the Council to seek
other remedies to resolve their budgeting. dilemmas instead of pushing for 'a
tax -increase that would have no guarantee of providing the funding the City
seeks and will certainly do harm to local businesses and residents.
Sincerely,
Onita Pell`e`grini, CEO
Petaluma Area Chamber of Commerce
�Il
�f.._
�1 t .R-
1,
PETALUMA K r >
DOWNTOWN
''-ASSOCIATION
June 10, 2010
City of Petaluma
11 English Street
Petaluma, Ca 94952
Attn: John Brown, City Manager
Dear Mr. Brown,
Thank you for your offer to more formally state the position of -the Petaluma Downtown
Association regarding the interest of the City in raising the Transient Occupancy Tax (TOT).
On May 11, 2010 the PDA responded to your request that I get a sense of the potential support
of our board for such a taz increase. As a result, an email solicitation.of all board members was
performed and the consensus by unanimous vote was that the contemplated tax increase was
not a good idea at this time for a variety of reasons.
Additionally, and again after agreement by ouricomplete board, a meeting took place where our
members heard: the comments of yourself and briefly, those of our Mayor, Pam Torliatt.
Subsequent discussions were had and this led to an invitation by the board .to hear a
presentation by the Lodging Coalition in the same manner at the next scheduled board meeting.
After hearing,the concerns of the Lodging Coalition, our board entered into further discussions
and has come away with the conviction that our position is unchanged for all the reasons
previously stated.
To;summarize, our concerns with an increase in the tax stems from a) the need to ensure that
our local hotels: remain price competitive and b) a lack of confidence that the increase in
taxation .would be added to the existing TOT funds earmarked for the PVP. We would like you to
know,that o.ur feeling about the tax increase is borne from the same concerns as the overall
economy: With an established economic recovery, we would of course consider an increase in
the TOT tax for°the. purposes of creating.additional furiding for the marketing of Petaluma as a
destination location by the variety of organizations equipped to do so.
Sincerely,
Marie McCusker
�I