Last week the City of Watsonville voted to place an increase in the Transient Occupancy Tax (TOT) from 11 percent to 12 percent on the November ballot. TOT Taxes, otherwise known as hotel taxes, are an additional charge levied on overnight guests staying within a given area based upon how much they are paying for lodging. Not only do they affect hotel guests, but most cities collect on vacation rental visitors as well.
The move is unsurprising given the state of local government budgets, and multiple local jurisdictions are considering similar increases to help offset their declining revenue from other, more traditional sources. Sales tax revenue is down, as is revenue from utility taxes, while pensions and government employee benefit costs continue to rise. While other taxes have been considered, like a tax on the transfer of real property, TOT taxes are more politically palatable for local governments because voters aren’t the ones paying, tourists are.
In Santa Cruz County this will undoubtably hurt the bottom lines of local hotels, however small that may be, but the true loss is felt in our losing a larger share of overnight visitors to other tourism centric areas like Monterey. Again, a percent here or there isn’t going to break the bank, especially given the strong year we are having, but it certainly doesn’t help keep us be competitive, and the cumulative effects–both positive and negative–are hard to measure.