Despite an ongoing search for ways to increase city revenue through visitors, Laguna Beach City Council shot down the chance to place a transient occupancy tax (or hotel bed tax) increase or a business license tax restructuring and increase on the city’s upcoming Nov. 5 ballot during its Tuesday, July 23 regular meeting.
The proposed bed tax ballot measure, last raised in 2016 from 10% to 12%, would have allowed residents to vote on whether they’d like to see the city raise its hotel tax by one percent. If voted in by the public, the increase would provide approximately $1,750,000 annually for general city services, including police, fire, marine safety, street maintenance and more.
The hotel bed tax increase was dismissed after council’s concerns it could negatively affect hotels’ business, who already pay significant tax.
However, because the city generates approximately $1 million in revenue from its business license tax, which has remained stagnant since 1996, the focus of discussion turned to Laguna Beach’s 92 bars and restaurants.
“Many Laguna residents are frustrated knowing that the city government and residents are spending more than $20 million every year to cover costs due to visitors – 20 million dollars beyond the revenue that those visitors provide to the city,” said resident Gene Felder, reading a letter from John Thomas and Jim Danzinger. “City leaders have been aware of this subsidy problem for years but have come up with nothing except a small increase in paid parking…About 80% of the spending in bars
and restaurants is by non-residents. And it is a substantial amount of money. So it is about the best place for the city to capture revenue largely from visitors.”
Cary Redfearn, owner of Lumberyard Restaurant and Slice Pizza and Beer, both located downtown on Forest Avenue, was among several business owners who came before council to voice their concern that a business license tax increase for restaurants and bars could potentially put them out of business. Redfearn said that because only 30 percent of his customers were visitors and 70 percent were residents, the tax would negatively affect restaurants, as well as locals who come to dine at his establishments.
“It’s local business that supports us,” Redfearn said. “If we didn’t have the local business, we would be out of business. The proposal is to use restaurants and bars to collect this money that the city needs. There are other ways to do it besides having the restaurants do it…The last thing I want to do is raise prices. COVID has had a tremendous impact on restaurants and has changed our (customers’) habits. Our business is very much affected by this and I just don’t want one more thing to land on our shoulders that we’re responsible for.”
Opinions among councilmembers were mixed on adding the business tax measure to the upcoming November ballot. Echoing Redfearn’s sentiments, Mayor Sue Kempf expressed concern that the tax increase would cost the residents and businesses more money and wanted to look at the bigger picture regarding visitor impacts.
“I like this discussion and want to have a further discussion on a larger scale on how to address our (visitor) impacts and also interested in talking to Visit Laguna,” Kempf said. “I’d like to get money purely from the tourists wherever we can.”
However, Councilmember Bob Whalen said the move to drop the business license tax was a mistake, considering the city’s many projects and needs.
“We’re in the midst of doing this Facilities Master Plan, which is going to come back with an enormous number for facilities’ needs,” Whalen said. We’ve heard from the community, they want us to ramp up enforcement, which is going to cost money to create personnel to enforce this. I think it’s a mistake for the council to say increasing parking revenue is the only way we should be pursuing to get more fees out of visitors.”
Should interest in increasing the TOT or business license tax be presented before the city council again, the measure cannot go to a ballot vote until the next general election in November 2026.
Because the city council took no action on the proposed measure, an ad hoc committee, which was decided at the July 9 meeting to consist of councilmembers Bob Whalen and Mark Orgill, will continue to explore different options for collecting more revenue from day trippers to help address the city’s financial challenges.
The city council’s next meeting is Aug. 13.
The propensity of activists to shout any issue is up for a city wide vote is nothing but mob rule. Democracy IS electing representatives to govern not nit picking every thing that comes to discussion. Let’s not play into the hysterics, but relearn civics 101. Get educated before you rant at the Councils Meetings, and then rave that the Council is not listening to the people.