Bed Tax Down Compared to Previous Years

Just one month short of a perfect two-and-a-half-year record of positive comparative gains in the Transient Occupancy Tax, aka “bed tax,” the City of Santa Barbara began to post a loss — when compared to the same month of the previous year — in August 2015. That was also the month the City Attorney’s Office began to subpoena vacation rental websites for user information. The TOT sum in the most recent revenue report was no different, a 2.4 percent loss over the previous April, or $1,471,113 compared to $1,506,982.

The city has limited vacation rentals to commercially zoned lots, and whether the investigation into the rentals has had an effect on TOT revenue is unclear. By the end of summer 2015, the extensive drought, water conservation measures, and the Refugio Oil Spill had made international headlines for months. But the 349 registered vacation rentals in June 2015 had dropped to 316 by February 2016. By 2014’s numbers, the portion of the bed tax from vacation rentals was about 7 percent; the tax is primarily paid by hotels, motels, and bed and breakfasts.

In a March vacation-rental enforcement update to City Council, City Attorney Ariel Calonne wrote that his office’s actions thus far included 19 legislative subpoenas, all but one of which had been complied with, and that the attorneys were to issue 30 more. Of the 159 actions pending, 39 rental owners had received letters saying they might be running an illegal vacation rental, information about the ordinance, and notice that any unpaid TOT was due. Ten of the 39 had settled and closed operations, and two paid about $11,000 in back TOT and penalties. The letters also state that for owners who are licensed and paying TOT but not in a commercial zone, enforcement might take place as late as 2017.

The largest drop in bed tax occurred this January — $1,036,795 compared to $1,167,590 in January 2015, or a loss of 11.2 percent — which the city finance department attributed to the six inches of rain that fell, mostly on weekends, compared to the drier Januaries of the past couple years.

The 2016 fiscal year, which runs July to June, has seen five up months, and five down, adding up to a 0.7 percent gain so far, compared to a positive 10 percent for all of 2015 and 14 percent for 2014. Overall, the city has been averaging around $1.5 million in TOT each month, and is budgeted to reach $19.7 million by June. The year’s total so far is $15,265.052.