In an effort to raise revenue to fund public safety and homeless services, City Council voted to place a measure to increase the City’s Transient Occupancy Tax on the November ballot.
The measure would increase the TOT rate on hotel rooms by one percent and on airbnbs/homeshares by three percent. If passed, Santa Monica would have 15 percent hotel TOT and a 17 percent homeshare TOT. These would be among the highest TOT rates in the state, but not out of the range of rates in other major tourist destinations such as San Francisco and the City of LA.
“The City’s revenues including TOT revenues are recovering, but we’re still lagging behind where we would have been without the effects of the pandemic. In fact, we’re not anticipating reaching our pre-pandemic revenue levels until Fiscal Year 23-24,” said Gigi Decavalles-Hughes, director of finance, later adding, “We need to look at new revenue streams.”
City staff estimate that the measure would raise $4.1 million annually. While the ballot measure would not legally hold City Council accountable to spending the additional revenue on specific projects, it comes with a recommendation to invest in public safety and homeless services.
Based on findings from Santa Monica’s annual homeless count staff identified four key recommendations for investment. These include expanding the police department’s Homeless Liaison Program to seven days a week; expanding the police department’s Downtown Services Unit and Public Service Officer program; deploying a homeless multidisciplinary team beyond the Downtown area; and accommodating 24/7 intakes at the SAMOSHEL homeless shelter.
To ensure accountability and connection to the community, staff recommend that a five member citizen advisory board is formed to provide nonbinding guidance on the use of the additional revenue. This board would have one representative from the hospitality industry, one homeless service provider, one representative from the business community and two residents.
Staff anticipate that this ballot measure will be passed by voters based on its 70 percent approval rating in a resident poll. The measure only needs a simple majority to pass.
While the $4.1 million will find good use in the City’s coffers, it cannot cover all of the City’s unfunded priorities including restoring service at all library branches, building more affordable housing and refunding capital improvement projects.
In order to bridge the remaining gap, Councilmembers have proposed additional revenue raising measures.
Mayor Sue Himmelrich is pursuing a ballot measure through a citizen initiative and submitted enough petition signatures to qualify her measure for the ballot, which staff are currently in the process of reviewing.
Himmelrich’s measure seeks to establish a third tier of local property transfer tax, which would charge a 5 percent rate for properties worth 8 million or more in value. Santa Monica already has two tiers of real estate transfer tax charging 0.3 percent on transfers under $5 million in value and 0.6 percent on transfers over $5 million in value. It is estimated to raise $50 million annually with the first $10 million raised going to school and the remainder going towards rental subsidies and affordable housing projects.
Councilmember Phil Brock is also seeking to place a property transfer tax measure on the ballot.
Brock’s proposed measure would establish a more modest 1.5 percent tax on properties sales over $8 million and the funding would be used at Council’s discretion for a variety of priorities including crossing guards, libraries, after school childcare, public safety and homeless response services.
Staff are already in the process of preparing a report on Brock’s proposed measure, after which point Council will vote on whether to place it on the ballot.
If both property transfer tax measures were to qualify, the measure with the highest vote percentage would take effect.
The November ballot will also feature a bond measure from Santa Monica College that seeks to raise $375 million for facility renovations and expansions, the establishment of a police substation on campus and construction of housing for students experiencing or at risk of homelessness. It will be funded through annual property assessment fees in Santa Monica at a rate of 2.5 cents per $100 assessed valuation.