Foster City looks to hotel tax hike

The phased approach is meant to coincide with the fiscal year and give businesses time to adjust budgets.

The TOT rate is 12 percent in most San Mateo County cities while Foster City’s 9.5 percent rate is the lowest in the county, with the exception of several cities that don’t collect TOT, according to a staff report. 

While Foster City enjoys a healthy budget, staff is forecasting structural deficits in the general fund over the next four years, starting at $1.3 million and rising to $2.8 million, according to the report, which also projects an additional $1 million annually in TOT revenue if the 12 percent rate is adopted.

But a potential deficit wasn’t Councilman Herb Perez’s motive for supporting the TOT hike.

“The topic should be whether we’re leaving money on the table that we should be responsibly, as a city government, charging people to do business in our city,” he said. “We should be charging an adequate amount of TOT for the wear and tear, traffic and everything else that goes on in our city.”

While all councilmembers supported raising the TOT, Perez called for 12 percent as soon as possible, while Vice Mayor Gary Pollard suggested a slower increase and Councilwoman Catherine Mahanpour expressed support for a more modest increase to 11 percent. 

Solomon Tsai, who owns two of Foster City’s three hotels, said the measure would compromise the competitive edge of his business.

“By the time you blink, you’ve passed Foster City and there aren’t many attractions for the hotel business,” he said, adding that many other Peninsula hotels are bigger, offer more facilities and are located closer to the airport. “People decide to stay with us because the occupancy tax is lower.”

But Perez wasn’t convinced.

“I challenge you to find a room in most of Solomon’s hotels, they’re sold out and surrounding hotels are not sold out and have cheaper pricing,” he said. “These hotels [in Foster City] can easily accommodate this with no detriment to their business.”

Tsai said he’s sparred with the city about multiple TOT increases over the past 15 years.

“If Foster City is financially in distress I can understand they’re looking for new revenue,” Tsai said. “But the city isn’t on the verge of bankruptcy, it’s financially strong and there’s no reason to increase the tax even a half of a percent.”

Pollard said he believes the measure will pass as long as voters understand the tax doesn’t directly apply to them unless, of course, they stay at or own a local hotel.

Staff plans to conduct extensive outreach to the business community in the coming months while the measure is drafted. 

“Hoteliers need to be part of the discussion, and I think there needs to be more conversation so it’s not us versus them,” Pollard said.

zachary@smdailyjournal.com

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