Item 11 - Discussion of TOT and other Revenue Generated by New DevM E M O RAN D U M City of Poway
DATE: February 18, 2020
TO: Honorable Mayor and Members of the City Council
FROM: John Mullin, Councilmember
SUBJECT: Discussion of Transient Occupancy Tax and other Revenue Generated by New
Development
Summary:
I'm seeking Council concurrence to direct staff to include a Transient Occupancy Tax (TOT) revenue
estimate in staff reports for new hotel developments. TOT is different from sales and property tax
revenues because it is not shared with other taxing authorities and as a result, is a more direct and
much greater source of revenue for the City's General Fund. This is demonstrated in the TOT Sample
Calculations attached.
I am not proposing and do not want to imply that General Fund revenues drive every land use decision
but do believe this revenue analysis should be among the factors considered when making decisions on
selected proposed developments.
Taken further, this could lead to including a broader revenue analysis for all proposed projects. I
recognize, however, that this is not an exact science. Property tax estimates are relatively straight
forward to calculate, but projecting incremental sales tax revenue, the multiplier effect of general
increased economic activity and the cost to provide safety and other services are considerably more
difficult to estimate. Thus, this initiative focuses specifically on TOT but I also propose that staff assess
the value and/or develop a criteria for performing this calculation on other projects.
Environmental Review:
None.
Fiscal Impact:
None.
Public Notification:
None.
1 of 3 February 18, 2020, Item #11
Attachments:
A. Transient Occupancy Tax (TOT) Sample Calculations
Reviewed/Approved By:
Reviewed By: Approved By:
aliAM I
Wendy(aserman Alan Fenstermacher Chris Hazeltine
Assistant City Manager City Attorney City Manager
2 of 3 February 18, 2020, Item #11
TRANSIENT OCCUPANCY TAX (TOT) SAMPLE CALCULATIONS
# NEW HOTEL ROOMS
AVERAGE ROOM RATE1
ESTIMATED OCCUPANCY2
ANNUAL ROOM REVENUE SUBJECT TO TAX
CITY OF POWAY TOT RATES
ANNUAL ADDITIONAL GENERAL FUND REVENUE
COMPARISON WITH OTHER TAX REVENUES:
SALES TAX:
1%
25
50
75
100
$212
$212
$212
$212
68%
68%
68%
68%
$1,315,460
$2,630,920
$3,946,380
$5,261,840
10.0%
10.0%
10.0%
10.0%
$131,546
$263,092
$394,638
$526,184
TO GET THE SAME REVENUE FROM SALES TAX, WE WOULD NEED ADDITIONAL RETAIL
SALES OF:
$13,154,600
$26,309,200
$39,463,800
$52,618,400
PROPERTY TAXI: TO GET THE SAME REVENUE INCREASE FROM PROPERTY TAX, WE'D NEED
21.1% ADDITIONAL PROPERTY VALUATIONS OF ABOUT:
$62,344,076
$124,688,152
$187,032,227
$249,376,303
Notes:
1. Mean rate based on a market sample considering daily and seasonal variations.
2. Based on industry estimates.
3. Poway Municipal Code 3.16.030 and 3.16.031.
4. The City of Poway's direct property tax rate (2019 CAFR).
3 of 3 ATTACHMENT A February 18, 2020, Item #11