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Hermosa Beach Hotel bed tax boost to be on fall ballot

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A rendering of the proposed Strand & Pier hotel and retail project. Hermosa voters will decide whether to increase the city’s hotel bed tax in November. Photo by Ryan McDonald

by Ryan McDonald

Hermosa Beach voters will weigh in on whether the city should raise its transient occupancy tax, added to the bills of those who book rooms in hotels within its boundaries, in order to boost city coffers.

Hermosa’s City Council chose to put the measure, which would increase the tax to 14 percent from its existing rate of 12 percent, on the Nov. 5, 2019 ballot. A $300 per night hotel room would become $6 more expensive. If approved by a majority of voters, the increase would be expected to raise about $550,000 per year, which would go to the city’s general fund.

There are currently eight properties in the city from which the hotel tax would be collected, including the Surf City Hostel; the city’s occupancy rate is just over 80 percent, close to the Los Angeles County average. And although Hermosa is not considered a major destination for convention-goers, one of the prime sources of hotel guests, there are multiple hotel projects in the planning process or under construction in the city, and Tuesday’s vote underscored the growing importance of hotel tax revenue to the city.

Strand & Pier, a proposed 100-room hotel and retail complex at the northwest corner of Pier Plaza, is still in the planning process, while H20 Hermosa, now under construction at the corner of 15th Street and Hermosa Avenue, will add 30 rooms to the city’s stock. The new projects make up an important part of the city’s long term budget forecasts. In a presentation in May, Finance Director Viki Copeland offered two five-year forecasts for revenue-versus-expenditures. While the city remained in the black under both scenarios, the second, which included several pending developments including the new hotels, gave the city a notably greater cushion. (Copeland’s projections were based on a 2021 opening for H20 and a 2024 opening for Strand & Pier.)

“If we incorporate all those developments, if they all come to pass, then the chart looks really good for the next five years,” Copeland said.

The council on Tuesday unanimously agreed to put the tax to voters, but the vote obscured some disagreement over how it ought to be done. Some on the council had sought to structure the ballot measure in such a way that it would have asked voters to give the council the ability to set the rate somewhere between 12 and 14 percent, and to raise or lower it within that range in the future as conditions dictated.

This possibility had initially been presented as a way to blunt potential concerns among business owners about potential negative impacts of the increase. Some wanted a chance to talk with hotels about what the rate should be. 

“From 12 to 14 and that’s emphatic, is just a bridge too far,” said Councilmember Jeff Duclos.

Voters in Manhattan Beach recently instituted a similar scheme, giving its council the power to raise rates in the future. A rate of 14 percent would align Hermosa’s hotel bed tax with that of Beverly Hills, Culver City and the City of Los Angeles, but put it above Redondo Beach, El Segundo and Torrance. 

But the council appeared concerned that the language proposed for the ballot measure could potentially confuse voters about what would actually happen to the bed tax rate, and some argued that a simple increase to 14 percent was more transparent.

The council appeared especially eager to seek agreement on the issue because of recent history with the hotel bed tax.

In 2015, the city council considered increasing putting an increase in the tax to 12 percent before voters; at that time, the tax had been at 10 percent since 1990. But four members of the council, the threshold required for a five-member body in California to put a tax to voters, were unable to agree. In response, a citizen’s signature gathering effort got the increase on the November 2015 ballot, where it passed by a margin of more than four to one.

Council members said that the lopsided 2015 vote was evidence that residents would be willing to embrace a further rate increase — and that the council should put aside internal quibbles in its effort to secure additional funds.

“I just don’t want us to go back to what happened a few years ago,” said Mayor pro tem Mary Campbell.


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