City of Sunnyvale Hotel Tax, Measure B (November 2013)

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A City of Sunnyvale Hotel Tax, Measure B ballot question was on the November 5, 2013, election ballot for voters in the city of Sunnyvale in Santa Clara County, which is in California. It was approved.[1]

The last city voted hotel tax increase was approved in 2005, which measure phased in the tax increases over four years, resulting in the rate of 9.5%, which was paid by voters in 2013. The city had 34 hotels active throughout Sunnyvale that paid this hotel tax at the time of the Measure B approval. The tax applied to all guests who occupy hotels, motels and inns for 30 days or less. The 1% increase imposed by Measure B was estimated to grow the city's revenue by about $900,000 per year, amounting to about $23 million over 20 years, when taking into account current inflation-adjusted long-term revenue projections.[2]

Election results

Measure B
ResultVotesPercentage
Approveda Yes 12,657 68.58%
No5,79931.42%
These final, certified results are from the Santa Clara County elections office.

Text of measure

The question on the ballot:

Measure B:

Shall the Sunnyvale Municipal Code be amended to increase the transient occupancy tax rate (commonly called “hotel tax”) charged to persons who occupy hotel or motel rooms in the City for 30 days or less from 9.5% to 10.5% in order to help maintain the City’s ability to fund basic services such as public safety and streets, trees, and sidewalk maintenance, and to keep parity with neighboring cities’ hotel tax rates, effective January, 2014?[1][3]

Support

Supporters

Below is a list of people who signed the official arguments in favor of Measure B:[2]

  • Anthony Spitaleri, Mayor, City of Sunnyvale
  • James R. "Jim" Griffith, Vice Mayor, City of Sunnyvale
  • Tara Martin-Milius, Councilmember, City of Sunnyvale
  • Melinda Hamilton, Former Mayor, City of Sunnyvale

The Santa Clara Democratic Party also endorsed a "yes" vote on Measure B.[4]

Arguments in favor

The arguments in favor of Measure B included:[2]

  • Measure B, as a hotel tax, mostly targets visitors and tourists, so it is a good way to provide important city services free of charge for Sunnyvale residents.
  • Sunnyvale's hotel tax rate is a 9.5% currently, which is less than the county-wide average.
  • Sunnyvale, though using responsible fiscal planning, needs additional revenue sources to maintain the city services residents expect. An increased hotel tax is a solution to this problem.
  • Sunnyvale's Chamber of Commerce estimates that even at the proposed 10.5% hotel tax rate, Sunnyvale hotels can keep a competitive price.
  • Hotel tax revenue is earmarked for the city and cannot be taken by the State.
  • The new Santa Clara stadium will have negative effects on traffic, streets and public safety requirements in Sunnyvale. Visitors who attend the stadium should be paying for this increased necessity for services. The increased hotel tax makes sure they are.

Opposition

Opponents

  • Christopher R. Moylan, Councilmember, City of Sunnvvale, signed the official arguments against Measure B[2]

Arguments against

Official arguments against measure B included:[2]

  • While the city does need new revenue the hotel tax increase is not the way to do it because it will make the city break its hotel tax "competitiveness with surrounding communities" policy.
  • The measure is also in conflict with the criterion of maintaining "equity/fairness in distribution of the revenue burden on various segments of the community."
  • The city should have put a Utility Users tax on the ballot several years ago. This tax would be fair and it would solve the cities revenue problems once and for all, while Measure B is only a temporary fix.
  • The 2013 Budget Letter of the City Manager said,"Over the next year, we should discuss the Utility Users Tax (UUT) which makes up 5% of our total General Fund revenue...Because we have full control over this revenue source, it is vitally important that we analyze our rate compared to our neighboring jurisdictions and ensure we are collecting an appropriate amount..."
  • Many of the hotel rooms booked in Sunnyvale are paid for by local companies putting up employees for business meetings. The increased hotel tax will actually be reason enough for businesses to steer their meetings and activities away from Sunnyvale hotels.

Media endorsements

Support

San Jose Mercury News: According to a San Jose Mercury News editorial voters should support Measure A. The editorial board wrote,

Sunnyvale has weathered the recession better than many if not most Bay Area cities, but it will need additional revenue to maintain the services people expect while pension reforms and other adjustments are implemented. The hotel tax won't solve all its problems, but it will help, and it's a fair tax.[5][3]

Surrounding tax rates controversy

Opponent's version

Opponents to Measure B argued that the passage of Measure B would put the city into non-compliance with its "competitiveness with surrounding communities" policy because the county average hotel tax rate was 10.4%, and the Measure B increase put the city at 10.5%, which is slightly higher than the average and the neighboring cities Mountain View (10%) and Santa Clara (9.5%).[2]

Proponent's version

Proponents argued that according to city staff and the Chamber of Commerce, the effective hotel tax rates in the area were actually much higher than opponents claim, amounting to between 10.5% and 11.5% in Santa Clara and 12% in Cupertino, Palo Alto and Campbell. While in Santa Jose the rate was allegedly as high as 14%. Supporters claimed that, with the adjusted rates, due to special taxing districts and additional taxes through out the county, the average was between 11.9% and 12.25%, not the 10.4% quoted by opponents.[2]

Analysis

The following statement was submitted by the City Attorney Joan A. Borger as an impartial analysis of Measure B:

This proposed ballot measure would amend Chapter 3.16 of the Sunnyvale Municipal Code to increase the City's transient occupancy tax ("TOT") rate from 9.5% to 10.5%. The TOT, otherwise known as the "hotel tax," is imposed for general governmental purposes and is therefore considered a "general tax." Under state law, any increase in a general tax requires a simple majority vote of the electorate (50% plus one) at a general municipal election of the City.

The City's TOT was first adopted by ordinance in 1965 and became operative in 1968. The last time the City's voters approved a TOT rate increase was in 2005, which gradually phased-in the tax increase over a four-year period to the current rate of 9.5%. Sunnyvale currently has thirty-four (34) hotels operating within the City that pay the tax. As defined in the ordinance, "hotels" includes all types of transient lodging establishments. The tax is assessed by the operator on behalf of the City to guests who occupy hotels for thirty (30) days or less. The tax is collected by the hotels and remitted to the City. It is based on the room rate charged by the hotel. For example, if the base room rate is $100, the total amount charged to the guest under the new rate would be $110.50, with $10.50 remitted to the City as tax.

TOT rates vary around the County of Santa Clara from a low of 9% to a high of 12%. If additional special hotel tax districts are included, such as the San Jose Convention Center Facility District, the range is from 9% to 14%.

Sunnyvale's Department of Finance estimates that a 1% increase in TOT from 9.5% to 10.5% would result in approximately $900,000 in additional annual revenue or approximately $23 million over a twenty (20) year period based on current inflation-adjusted long-term revenue projections. Revenues from the tax are placed in the City's General Fund to support infrastructure and City services including police and fire, public works, street and sidewalk maintenance, parks and recreation, library services, and economic development efforts.

A "YES" vote is a vote to amend the Sunnyvale Municipal Code to increase the City's TOT rate from 9.5% to 10.5%, effective January 1, 2014.

A "NO" vote is a vote to retain the current TOT rate of 9.5%.[2][3]

Text of Amendment

Measure B amended the Sunnyvale Municipal Code Section 3.16.040 to read as follows:

Section 3.16.040 Imposition--Rate--Payment.

(a) For the privilege of occupancy in any hotel, each transient is subject to and shall pay a tax in the amount of eight percent of the rent charged by the operator through June 30, 1995, and eight and one-half percent of the rent charged by the operator on or after July 1, 1995.

(b) Commencing January 1, 2007, and continuing through December 31, 2008, the amount of the tax shall be nine percent of the rent charged by the operator. Effective January 1, 2009, the amount of the tax shall be nine and one-half percent of the rent charged by the operator, provided, however, that the average citywide hotel/motel occupancy rate from January 1 through September 30, 2008, as determined by the director of finance, is at least sixty percent. If the average occupancy rate during this period is less than sixty percent, the increase in the amount of the tax shall be deferred until January 1, 2010. In any event, the amount of the tax on and after January 1, 2010, shall be nine and one-half percent of the rent charged by operator.

(c) Commencing January 1, 2014, and continuing thereafter, the amount of the tax shall be ten and one-half percent of the rent charged by the operator.

(de) Said tax constitutes a debt owed by the transient to the city which is extinguished only by payment to the operator or to the city. The transient, or any person paying rent on the transient's behalf, shall pay the tax to the operator of the hotel at the time the rent is paid. If the rent is paid in installments, a proportionate share of the tax shall be paid with each installment. The unpaid tax shall be due upon the transient' s ceasing to occupy space in the hotel. If for any reason the tax due is not paid to the operator of the hotel, the tax administrator may require that such tax shall be paid directly to the tax administrator.[2][3]

See also

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