Hotel Taxes Nixed by Voters in 2 Cities
Future visitors to Costa Mesa and Garden Grove got a break from voters in the recent elections, leaving city officials to search elsewhere for new revenue after measures calling for increases in local hotel taxes went down to defeat.
Both measures sought to increase transient occupancy taxes, known as bed taxes, by 2%. Garden Grove’s Measure P needed only a majority to pass but only garnered 45% of the vote. Costa Mesa’s Measure O fared slightly better at 53% of the vote, but it required a two-thirds margin because the $1 million that was expected to be raised was earmarked for specific uses. Costa Mesa currently has the county’s lowest bed tax at 6%.
In Garden Grove, Measure P would have bumped the bed tax to 12% from 10% and was expected to add about $350,000 to the city’s general fund in its first year.
Neither city is looking to submit new bed tax measures to voters in the near future.
“The increase would have helped the city expand financial resources, but we don’t have a plan B,” said Kathryn Standiford, deputy mayor of Garden Grove. Nor, she said, is the city looking to raise taxes to make up the difference.
“The voters have spoken,” Standiford said.
Costa Mesa City Manager Allan Roeder said it would “probably be some months before we re-address the issue.”
For Garden Grove, it was the second attempt by the City Council to get approval on the rate hike. A similar measure was defeated in March.
Standiford said police and firefighter political action committees, which saw the potential for increased funding for public safety from the expected revenue, bolstered the campaign in favor of the measure.
Garden Grove has begun to benefit in the past year from new hotels on redevelopment land within the city. Another hotel, the Hyatt Alicante, is undergoing expansion that will roughly double its size. And with at least two more hotels slated to open in 2001, the city had hoped to cash in on the revenue visitors to those hotels,just a mile from Disneyland,are likely to bring to the city when the second Disney park opens in February.
Garden Grove’s current bed tax is lower than that of Anaheim at 15%. If the rate had been raised to 12%, opponents feared the city might lose visitors to other neighboring cities with lower rates,such as Costa Mesa or Westminster, which has an 8% rate.
Last year, Garden Grove raised approximately $1.7 million from bed taxes.
Meanwhile, Costa Mesa city officials had hoped to use the additional revenue to purchase or refurbish park land largely used by locals.
Outgoing Councilman Joe Erickson said the city understands the importance of tourism to Costa Mesa. But he said visitors use city resources, too,just as local residents use the resources of cities they visit.
Costa Mesa, too, could benefit from continued hospitality growth. Roeder said entitlements are in place for at least one 300-room hotel, and another expansion is pending.
Roeder said one hindrance to the rate hike in Costa Mesa may have been the low-key campaign launched by City Hall. He said officials were careful to create literature that was informational rather than partisan.
But in Garden Grove, Standiford said community proponents made a more concerted effort than they had in March to promote passage of the measure. n
