Petaluma hotel tax increase proposed
The Petaluma Sheraton.
Photo: Santa Rosa Press Democrat File
Photo: Santa Rosa Press Democrat File
With another couple of thin financial years projected, one Petaluma City Council member thinks it might be time to revisit the idea of increasing the city's bed tax to raise revenue.
During a broader discussion about the city's current spending plan, Councilwoman Teresa Barrett said a bump in the hotel occupancy tax could help balance future budgets.
“I just want to make another plea that we look at increasing the tax on hotel stays,” she said. “I think this is an ideal way of raising some revenue with very minimal impact in the city.”
She tried to gather support for putting the issue on the ballot next year, although others appeared noncommittal at this stage.
A similar discussion last year died after lodging representatives and other tourist-focused businesses in Petaluma promised opposition to any proposed ballot measure.
They argued that a tax increase would drive away visitors and actually reduce the amount of taxes raised. That, in turn, would mean less money spent at local businesses and could lead to further spending cuts and layoffs in the city, one hotel owner said.
The city currently imposes a 10 percent tax per night on guests at Petaluma's seven hotels, inns and campgrounds. Another 2 percent is added for a countywide tourism fund.
The city's portion of the bed tax raises about $1.2 million a year, most of which goes into the city's general fund while some is returned to local tourism efforts. The city dipped into the tourism promotion fund last year, taking $75,000 to supplement the general fund.
The council considered raising the tax by 2 percentage points last year, which would have brought in another $220,000. The issue died when four council members said they opposed it.
Barrett suggested the timing may be better now, although she didn't specify the size of the tax increase she would support.
“It doesn't seem to have gone anywhere in the past, but I really do think the time is here,” she said.
She said she recently attended an event in Napa, where the room tax is 14 percent per night, in addition to a $22 “resort fee.”
“If you're going, you're going,” she said.
Recent countywide hotel occupancy rates suggest the industry is rebounding from a two-year slump.
Sonoma County hotel occupancy grew 7 percent in July, with the average room rate up 5 percent from last year, according to a survey by PKF Consulting in San Francisco. Local hotels were 82 percent full in July, compared to 77 percent last year, the survey said.
Leisure and business travel are both growing again following a two-year decline. In turn, hotels are raising rates. The average room rate in Sonoma County was $145.94 in July, compared to $139.40 a year ago, PKF reported.
Barrett's idea didn't generate immediate interest from the council, which last week approved a $31.98 million spending plan that balances the city's budget though next year but is projected to leave deficits two and three years out.
Mayor David Glass said a discussion on raising the tax is worth having, but stopped short of supporting the plan. Councilwoman Tiffany Renee said the council better be prepared for opposition if it presses forward, while Councilman Mike Healy said the objections likely remain the same.
Councilman Mike Harris said an increase would put the city at a competitive disadvantage in attracting overnight guests, an idea echoed by members of the city's downtown association.
“The lodging coalition are concerned about it because it's not just the out-of-town traveler, it's the local businessman, too, that ends up footing that bill,” said downtown association director Marie McCusker.
She said the lodging industry would need assurances that additional funds would be used to encourage tourism if the tax were raised.
“Where does it go? Does it go back into reinvestment, or does it go back to support the general fund and salaries?” she said. “They will have to have the buy-in from the lodging coalition.”
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