To: MAYOR AND CITY COUNCIL
From: STEPHANIE MEYER, FINANCE DIRECTOR
TITLE
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DISCUSSION AND POSSIBLE ACTION ON THE CITY'S TRANSIENT OCCUPANCY TAX AND THE PROCESS TO CONSIDER INCREASING THE TAX RATE
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EXECUTIVE SUMMARY
The City Council has directed staff to prepare an item to discuss adjusting the City's Transient Occupancy Tax (TOT) rate. This report provides information to assist with Council's consideration, including rates in other comparable cities, exemptions, potential impacts to hotels, and the steps to place a tax increase before voters. The City's current TOT rate is 12%. In order to increase the rate a ballot measure would need to be prepared for consideration by the voters as part of either the June 2026 or November 2026 statewide elections. If an increase were to be approved by voters, the new TOT rate would be effective on the date determined by City Council, following the certification of election results. Staff estimates that each 1% increase in the City's TOT rate would increase annual General Fund revenue by approximately $750K.
Staff recommends the City Council:
1) Receive and file information regarding the City's current TOT rate and those of surrounding and comparable cites, possible TOT increment exemptions and carve-outs, and the potential impact an increase would have on hotels; and
2) Provide direction to staff on next steps and the research of additional information and/or the preparation of ballot measure materials needed for voter consideration of a TOT rate increase.
BACKGROUND
As part of the ongoing strategic planning process, Council requested staff review options to increase the City's revenue, including evaluation of a TOT increase. Staff has since researched TOT rates in comparable cities as well as the process required to increase the TOT rate through Budget Response Reports provided in both in FY 2025-26 and FY 2024-25. As part of the FY 2025-26 budget adoption process, the City Council directed staff ...
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