Arroyo Grande Coast News Grover Beach

Grover Considers Increasing Hotel Tax

By Theresa-Marie Wilson

After hearing from the Arroyo Grande, Grover Beach Chamber of Commerce, the Grover Beach City Council directed staff to garner more information before decided whether or not to seek voter approval to increase the transient occupancy tax (TOT) from 10% to 13%.

Currently TOT generates approximately $387,000 annually through 20 lodging establishments including voluntary submission by some vacation rental owners. The proposed increase would generate about $108,000 annually in additional general revenue for city services identified by the council including, but not limited to, fire, police, and maintenance service. 

“This estimate does not include roughly 400 new hotel rooms that are currently in the development pipeline with three different hotel projects, nor does it include additional payments from vacation rental owners,” City Manager Matt Bronson told the council. “I will note, that right now, we do receive some voluntary submission from vacation rental owners even though we don’t have a regulation in place for this.” Bronson added that a vacation rental ordinance is expected to be on the books later this year.

Part of the discussion was based around the potential to develop a Tourism Business Improvement District (TBID), which is focused on marketing to attract more visitors.

“We are the only city in this county that does not have a TBID at this time,” Bronson said. “There were some concerns about whether this rate of an increase would preclude the possibility of a TBID coming down the road, which is a grassroots, hotelier based assessment district… It is not something that the city, itself, creates for the hotel community.”

A TBID is a public body that would have to follow the Brown Act and the Public Records Act. A council member would also have a seat at the table.

“Generally they [a TBID] are made up of marketing individuals and hoteliers.” said Jocelyn Brennan, CEO of the Arroyo Grande, Grover Beach Chamber of Commerce. “The goal is to have the body made up of only hoteliers because they are the ones paying into the district. It is like a business district. Those funds have to be spent on marketing Grover Beach. If Grover Beach was to have a TBID, the hoteliers could chose to assess themselves — it’s an assessment not a tax — 1 to 2 %. It really is an economic development tool for the city. It doesn’t have to only go to the hotels. The goal is heads in beds.”

Should a TBID be formed, the council could at later date lower the TOT.

ChamberBoard Chairman Sean Schuur told the council that the TOT increase along with the creation of TBID could add up to a 16% increase.

“The average statewide is 15% and we’re not competing against a Carmel or something of that nature,” he said. “We are actually overpricing out of our own area. We would be the highest tax plus, if you wanted to go for the TOT.” 

Schuur went on to remind the council that TOT revenues are already set to increase with the expected growth in the number of hotel rooms.

“We don’t need to think about, we are going to make it on this hotel room, he said. “We need to also worry about who’s going to be able to afford to eat in our restaurants and do all the other things that make this a true destination… On behalf of the Chamber of Commerce, we would actually be opposed to the increase at this time.”

A few business owners also asked the council to reconsider the TOT increase at this time.

The item was continued to the July 23 city council meeting.

Should the council move forward, the TOT measure, at a cost of $15,000, would require a majority (50% + 1) approval from voters. The measure would have to be to the county clerk’s office by August 10 to make it on the November 2018 ballot. 

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