Measure H would raise Hermosa Beach’s hotel bed tax
Hermosans will have a chance on Nov. 5 to decide whether to impose the kind of tax increase that people usually like: the kind paid by someone else.
Measure H would boost the city’s transient occupancy tax to 14 percent from its current rate of 12 percent. Commonly known as a “hotel bed tax,” the measure would translate to an extra $5 in taxes for each night of a stay at a hotel with a room rate of $250 per day.
The measure has the unanimous endorsement of the City Council. Unlike the sales tax and property taxes, large portions of which flow to Sacramento and the county, the proceeds of a hotel bed tax go to Hermosa’s general fund.
“The city will use this revenue to fund infrastructure/street repairs, park upgrades, and police, fire and paramedic services. By law, 100 percent of the funds raised by Measure H are required to be spent here in Hermosa Beach to fund our local priorities,” the council wrote in a statement supporting the measure.
Every county and almost every city in the state has some kind of transient occupancy tax, according to the California Hotel and Lodging Association, but rates vary considerably. Hoteliers sometimes argue that higher rates will encourage visitors to seek hotels elsewhere. Hermosa’s eight hotels, including the Surf City Hostel on Pier Plaza, have an occupancy rate of around 80 percent, comparable to Los Angeles County as a whole.
No argument has been filed in opposition to Measure H. However, some studies conducted on behalf of lodging industry trade groups have shown that in certain markets, increases in the transient occupancy tax decreased the amount of tax revenue collected by a city.
This has not been the case in Hermosa. In 2015, the city’s voters raised the transient occupancy tax rate from 10 percent to 12 percent, putting it on the ballot through a signature-gathering campaign after council members expressed misgivings about further burdening businesses. In the most recent fiscal year, Hermosa collected $3.3 million from the tax, the city’s highest figure ever.
Since the boost in 2015, the tax has become “an increasingly important source of revenue,” according to a report from the city’s finance department. Long-term budget projections that include proposed hotels opening forecast significantly greater surpluses than those without. One of those projects, the Strand and Pier Hotel, is now in jeopardy after the developer halted the planning process amid escalating costs unrelated to Measure H earlier this month.