Burlingame’s Transient Occupancy Tax, a fee collected from hoteliers and short-term rentals that was previously the city’s primary moneymaker, may never bounce back to pre-pandemic levels after travel ground to a halt two years ago.
That’s according to the city’s Finance Director Helen Yu-Scott, who said potentially permanent changes to business travel combined with the emergence of competing hotel industries in Millbrae and South San Francisco could render the revenue stream permanently stunted.
The city gathered more than $29 million from the tax in 2018-19, nearly 35% of the city’s revenue that year. But last year that figure plummeted to $5.7 million, and the city this year is on track to collect $10 million as some travel returns.
“The TOT used to be the largest revenue source, now it’s down to the third largest,” Yu-Scott said. “We are bouncing back right now but we still have a long way to go.”
While TOT revenue is projected to rebound to between $22.7 million and $26 million by 2026-27, as the city grows, its other revenue streams are expected to similarly increase. Property tax and sales tax are projected to account for 39% and 24% of the city’s revenue this year, respectively, and the TOT less than 15%.
This year, property tax is expected to yield $26.8 million and is on track to be $34.8 million by 2026-27. The city’s total expenditures are projected to be $65.8 million this fiscal year, and grow to $78.2 million by 2026-27.
Despite the ongoing hit to the TOT, councilmembers emphasized the city’s ability to maintain service for most with “not a single blip” thanks to a conservative budget structure and nearly $45 million in the city’s general fund prior to the pandemic.
“It’s worth just taking a pause for a second and reflecting on how well we managed through a really dramatic drop in revenue,” Vice Mayor Michael Brownrigg said. “I’d have to imagine that that fall in revenue was the worst that we’ve suffered probably in 50 years.”
City Manager Lisa Goldman said not a single full-time staff member was laid off during the pandemic. She said the city’s conservative budget structure was designed in part due to the heavy reliance on the potentially volatile TOT, in addition to risk posed by the city being in an earthquake area.
A tentative budget proposal indicated the city could dip into its reserves by $2.5 million this year and again by $4.8 million, $5.3 million and $5.6 million over the following three years until a surplus is again achieved in 2025-26. But as Goldman pointed out, the projections include considerable planned infrastructure spending that could be pulled back if needed.
Projects include the Broadway grade separation, El Camino Real repaving and other road upgrades and park improvements. Councilmember Donna Colson expressed her support for proceeding with the projects as planned and seeking other ways to reduce the deficit.
“I just don’t think you can save your way to success, I really believe that you have to invest in your community … and if you want the high-quality services, and you want the good roads and … everything to be state of the art, we have to figure out a way,” she said. “Whether it’s through the business licensing fees or really just working on economic development, I want to figure out a way to close that gap.”
Councilmember Ann O’Brien Keighran also said it was important for the city to diversify its income. She said, however, that infrastructure spending might need to be reduced.
“We are going through hard times, not everything is always hunky-dory, this is the reality and the community needs to understand that reality,” she said. “But this also proves that we really need to look at diversity on the revenue we receive.”
(2) comments
Burlingame residents - hold onto your wallets! Your city is looking to put their hands in your back pocket or your purse. Most telling is City Manager Goldman saying not a single full-time staff member was laid off during the pandemics. That pretty much says it all. And when Councilmember Keighran says they want to diversify income, it means all tax increases are on the table. You can bet most if not all tax increases will be used to pay for pensions and benefits for all the full-time staff members who were not laid off during the pandemic. Meanwhile, business owners were forced to shut down and are now expected to pony up for the lack of sales tax revenue. Again, Burlingame residents, hold onto your wallets.
Isn't the paving of El Camino Real up to Caltrans?
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