Millbrae voters will likely be asked to approve a hotel tax increase this November, with the City Council this week voting to move forward with forming a ballot question that would bump the current rate two percentage points.
Gina Papan
Called the “transient occupancy tax,” or TOT, it currently adds a 12% charge to accommodation costs for those staying in hotels or short-term rentals. The measure, which would require simple majority voter approval, would increase the rate to 14%, growing yearly revenue by $1.5 million, according to the city.
“The city has a $2 million structural deficit, so I think this is important,” said Vice Mayor Gina Papan.
Prior to the pandemic, Millbrae’s TOT brought in close to $8 million annually and accounted for more than a quarter of the city’s general fund revenue. But when travel plummeted, the revenue fell to less than $2.3 million in the 2020-21 fiscal year, and is still struggling to fully rebound.
This fiscal year, which ends July, the tax is on track to collect $4.5 million, and the city projects it to be back up to nearly $7 million in the coming year, rising to $8.5 million in 2023-24 and $9.3 million in 2024-25. The coming year’s total general fund budget deficit is expected to be $1.9 million.
All cities in the county with hotels charge TOTs, with rates ranging from 12%, as is the case in Burlingame and Redwood City, up to 15% in Half Moon Bay. San Bruno, San Mateo, and South San Francisco all charge 14%.
A poll commissioned by the city of 306 “likely voters” found 68.2% of respondents would support the tax increase.
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The poll also asked respondents what were their priorities for city funds. Most indicated repairing city streets was at the top. Funding for police patrols, storm drain maintenance, services to reduce homelessness and maintaining city parks ranked accordingly.
Because the tax would be a general-purpose measure, however, the city could not specifically earmark the funds, though it was noted street repair and police patrols would be among potential uses.
“We need to ensure the public we are making strides to address the conditions of the streets, and I don’t think we do that enough,” said Papan.
Councilmember Reuben Holober asked if the tax increase could be phased in to ease the burden on hotel operators who could still be recovering from the pandemic.
“We say it’s a tax on people who are going to be staying at the hotels, and it is, but I think typically … the merchants end up eating a portion of the cost because they have to lower the rates by a dollar or two to be more competitive,” he said.
City staff will use council input to draft the measure, which will still require further council approvals before being cleared for the upcoming ballot.
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