Loading...
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