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HomeMy WebLinkAbout03/05/1991, 1 - INCREASE IN TRANSIENT OCCUPANCY TAX RATE (2) R E U t'I 1!E D SNEMNN_ _ A pA (��CaD�}V®1� OATE�_ITEM FEB 2 71991 Lodge February 27, T CLERK • i c 1 Jaz►Lynch Dawoes Axion Q FYI 8AN 1U�5 OBISPO,CA D °J�® O ❑lean Monterey Sb a Sao Luis o ,Calilomia 9340 805/SH-8600Pm% 0 Fw DIRFIRE E 1:1 FW DnL Honorable Mayor and Members of the City Council PRIG. ❑ pp(�Q{ City of San Luis Obispo GMT.TFA.M ❑ RECDIP. P.O. Box 8100 ❑ C DF1LE ❑ 1J17LDiR San Luis Obispo, Ca 93403-8100 � — Dear Mayor and Councilmembers: The San Luis Obispo Hotel/Motel Association would like to ..express concern over the proposed bed tax increase from 6% to 9%. This is a 50% - increase at a time when many hoteliers are finding the traveling public, travel agents and tour operators extremely price sensitive due to the recession and the Persian Gulf war. Although we understand the City' s need for additional revenue, we are concerned about a tax increase during a recessionary period. Please consider these facts: # According to the San Luis Obispo City Finance Department, the bed tax collected from August, 1990 to December, 1990 is down 4% from the same period in 1989_ # Tour operators who rely on travelers from Europe and Asia during the off season say business has plunged 30% - 40%. This means many motorcoach tours expected to stop over in San Luis Obispo have been cancelled. # The San Francisco Visitors and Conference Bureau is reporting a drop of 10% to 25% in tourism to the Bay area due to the recession and the Persian Gulf War. Given these statistics, do we really want to do anything at this time that would discourage visitors or possibly place a negative impact on the industry that provides so much to the economic life of San Luis Obispo? If the City ' s need for additional revenue results in a higher bed tax, we feel this increase should be implemented in a way that would be financially palatable to most hoteliers. The Hotel/Motel Association agrees with the San Luis Obispo County Visitors and Conference Bureau and the San Luis Obispo Chamber of Commerce on the following: # Any increase should be phased in over the next three years rather than a 50% jump at once. This would give hoteliers with motorcoach and group business time to negotiate for a higher rate in the 1992 tour season. Page 2 * Delay the increase until October 1, 1991. Contract business, such as motorcoach tours, is negotiated 1 -2 years in advance. Delaying the increase until fall would elev.iate the hotels having to absorb any increase during the peak summer season . �* Combine an increase in the bed tax with a solid commitment to ongoing tourism promotion through guaranteed funding to the San Luis Obispo County Visitors and Conference Bureau and the San Luis Obispo Chamber of Commerce. The Hotel/Motel Association would like to see a five year contract with these entities in order to provide adequate funding levels for the future promotion of tourism. Enclosed are letters from two tour operators who are concerned about the bed tax increase. These letters will provide additional support to our request to phase in any increase over the next three years. We would also like to point out the additional cost paid by the hotels when collecting the bed tax from a guest paying by credit card. In 1990, approximately $34,500 .in credit card transaction fees was paid by the local hoteliers to Visa, Mastercard, and American Express. Should the bed tax increase to 9%, those transaction fees would become approximately $52,900. As you can see, this is not a free tax collected by the hoteliers for the City. San Luis Obispo competes with many cities in California that spend significantly higher dollars on tourism promotion. We must remain aggressive in our advertising campaigns or these much needed revenue dollars will be spent in other communities. By your ongoing commitment to the Chamber of Commerce and the Visitors and Conference Bureau, you will be helping the tourism industry in San Luis Obispo which in turn benefits the entire community. I would be happy to meet with each of you prior to the City Council meeting on Tuesday, March 5, 1991 to further discuss this matter. Thank you for your time. Sincerely , Jan L. Lynch President GLOBUS Golden Holiday Tours GATEWAX150 South Los Robles Avenue, Pasadena, California 91101 cosmos 11,818) 449-0936 • Fax. (818)449-8856. February 7th, 1991 Ms. Jan Lynch Cuesta Canyon Lodge 1800, Monterey St San Luis Obispo CA 93401 Dear Jan, This letter is in response to the news that San Luis .Obispo is considering raising the bed tax from 6% to 97. Frankly, I am appalled at the suggestion. As a tour operator it is going to be a difficlut enough year as it is, trying to combat the negative impact of a recession combined with the war. At such a crucial time we expect support from the very people whose businesses we have supported over the last several years. We bring approximately 150 tours a year into the San Luis Obispo area, representing 4,000 room nights and a dollar volume of $175,000.00 — this represents room and tax only, not counting the supplementary business brought to all 1pcal suppliers in terms of food, beverage, souvenirs etc. If this tax is to go ahead, we may have to consider looking for alternative overnight accommodation in order to stay within our budget. Like all tour operators, we plan our budget at least a year in advance in order to meet brochure deadlines. The hotels realise this and work within this time structure. Once a room rate is given, this is guaranteed. We hope that the powers to be governing local taxes also respect our constraints in this area, and realise the hardship caused with a sudden increase with no prior notice. We are unable to pass on such an increase to our clients at this stage — to do so we would lose the goodwill of our repeat clientele which forms the bulk of our business. The alternative is to absorb the expense ourselves — again, I must emphasize, at a point in time when we are ill equipped to do so. I urge you to put our voice forward in the hearing and appeal against any increase. I feel this is the least we can expect in return for our loyal support of San Luis Obispo. Sincerely, Kate Robinson' Manager North America Operations KR/em Saga Holidays February 14, 1991 To Whom it May Concern: Saga International Holidays has been contracted with the Cuesta Canyon Lodge in San Luis Obispo for two seasons. We are contracted for 600 room nights for the 1991 tour season with an approximate room revenue of $27,000.00 to the Lodge. We feel that an increase of room tax from the current 6% to the proposed 9% would be a large enough increase to seriously jeopardize our commitment to the Lodge and the town of San Luis Obispo to bring our passengers and their travel dollars. Not only would the Cuesta Canyon Lodge suffer, but the town would suffer as well. We strongly recommend that such a large jump in the tax rate be reconsidered so that we, and other travel operators, don't have to reconsider coming to San Luis Obispo in the future. Thank you. Sincerely, Com- Susan Gettum Administrative Supervisor Product Development Saga International Holidays,Ltd.,120 Boylston Street,Boston,Massachusetts 02116 Business Office(617)451-6808,Fax(617)451-6474,Telex 6817570 Reservations(800)343-0273, Fax(617)423-4262 MEETING AGEIIIQA DATE - / MI i`_ San Luis Obispo Chamber of Commerce 1039 Chorro Street • San Luis Obispo, California 93401 (805) 543-1323 9 FP.X (805) 543-1255 David E. Garth. Executive Manager RECEIVE ® CMNBTO: February 22, 1991 FEB 2 7 1991 ❑e=OD lT ®Ac n 12�ad . Dt CITY CLPRK QDUL SAN LUIS OBISPO.CA e0 pMW ❑ Honorable Mayor and Members of the City Council �ZWORtc. ❑ RteflvDut CX . City of San Luis Obispo ❑ Mcur.TEAM ❑ Rec DO. ❑ CRFADFlLE ��� P.O. Box 8100 San Luis Obispo, CA 93406-8100 Dear Mayor and Councilmembers: Last year, we wrote to you about our concerns related to raising the City's Transient Occupancy Tax. Although most of the factors that we enumerated in our letter are still present and have intensified, we acknowledge the City's financial condition, and we have been working on finding a mutually acceptable solution to the TOT dilemma. Here are the essential points we feel are necessary to protect both the City and the vitality of the tourism industry: • We reluctantly can accept the TOT being raised to 9%, but only if the increase is phased in at 1% per year for three years. This gradual increase would let the market adjust to the new rates, and make the increase less damaging. • The tax increase must not take effect until after October 1, 1991. Many properties depend on tour and contract business; they have existing contracts with tour operators and others which preclude the property from raising prices until after the 1991 tourist season. • Any tax increase must be accompanied by a strong commitment from the City to ongoing tourism promotion. Because tourism businesses depend on a constant stream of new customers just to stay even, aggressive promotion and advertising is essential not for growth but for survival. As one of our city's most important economic sectors, we should be able to count on a reasonable portion of the TOT revenue being spent as it was originally intended. This commitment should take the following form- 1. A five year contract with the Chamber for promotional services, beginning at our current amount plus 10%, with annual with ACCREDITED CHAMBER OF COMMERCE cllT.III N 01 CoMM1NCl 01 11•I sl+11 ti City of San Luis Obispo--TOT Page 2 CPI+1% inflation adjustments, and annual cancellation provisions. 2. A five year contract with the Visitor's and Conference Bureau with annual cancellation provisions. 3. A five year spending agreement for advertising, starting at the current level, with annual inflation adjustments based on a nationally accepted index of magazine advertising rates. Agency contracts should be one or two years in length. The tourism industry is hurting. Several businesses are in bankruptcy and two major motels are in receivership. Several more are on the edge. We face stiff competition from other cities who are adding new facilities and attractions and increasing their promotion. If the proposed TOT increase is to yield additional revenue for the City, we must keep our tourism industry from declining by using a small part of the increase in TOT to fund additional promotion. A substantial part of the City's revenue stream (from both TOT and sale tax) depends on residents of other cities making a decision to visit San Luis Obispo. We must keep encouraging them to make the right decision. Thank you for your consideration. Sincerely, David E. Garth Executive Manager Y AEE -? 3- #nw ITS RECEIVE ic!i . FEB 2"91 San Luis Obispo County - l 96 Visitors & Conference Bureau st Adkn Cr FYI DIX FWDW- February 28, 1991 Honorable Mayor and Members of the City Council City of San Luis Obispo P.O. Box 8100 San Luis Obispo, CA 93406-8100 Dear Mayor and Councilmembers, The San Luis Obispo County Visitors & Conference Bureau has devoted its efforts to strengthening tourism, the economic lifeblood of this City. Because of our expertise in this field, we are strongly opposed to the transient occupancy tax rate increase and to the size of the increase that the city is proposing. We understand the City's need to generate additional revenues and increasing taxes is one way to accomplish this goal. The VCB wants to ensure that this occurs without negatively impacting a vital source of these revenues -- the tourism industry. We feel strongly that there is a solution to this dilemma that will be acceptable to all parties concerned. If the TOT rate increases, the VCB recommends the following: * The TOT increase should be phased in at 1% per year. This gradual increase would impact to a lesser degree the segment of the market that will undoubtedly feel the effects of this tax the most -- group and motorcoach business. * The tax increase should not take effect until October 1, 1991. This delay will enable businesses to more easily absorb the cost of existing tour contracts at lower off=peak rates than at the higher summer rates. * Any TOT rate increase must be accompanied by a strong commitment from the City to continuous tourism promotion. Promotion means survival in the tourism industry, especially in these economic times. Because tourism is such an important industry in this City, we should be able to count on a reasonable 1041 Chorro Street, Suite E. San Luis Obispo. California 93401 C805) 541-8000 FAX (805) 543-1255 San Luis Obispo County VCB page 2 portion of the TOT revenue to be spent as it was originally intended. The long term commitment by the City should include the following: I. A five year contract with the San Luis Obispo County Visitors & Conference Bureau in an amount equal to 3 . 5% of the TOT revenues each year, with annual review provisions. II. A five year contract with the San Luis Obispo Chamber of Commerce with annual review provisions. III. A five year spending agreement for advertising, starting at the current level, with annual review provisions. The tourism industry has experienced some difficult times in the recent past and will see even more difficult times in the near future. These hurdles can be overcome with a strong tourism promotion campaign. We must promote aggressively or we will lose our visitors to those destinations North and South of us who already have significant ongoing promotion campaigns. San Luis Obispo' s economy depends on visitors to generate a substantial portion of the revenues required to maintain our quality services. A strengthened tourism industry means increased revenues to the City as well as a healthy economic climate -- a win/win situation for all. S ncerely, Jo i E r ' Ex cutive Dir ct