Tax Revenues Soft for City of Santa Barbara

Sales tax revenue is down slightly for the City of Santa Barbara, which just posted its first quarter results as well as hotel bed tax information, which is also lower than the previous year.

The city’s fiscal year runs from July to June, and results as of September totaled $7.4 million in sales tax — less than the budgeted amount by 6.6. percent, but only one percent off from the first quarter last year. The same period in fiscal 2023 totaled $7.5 million, part of a comeback from the pandemic years of 2020 and 2021.

Compared to 2019, when $6.8 million in first-quarter sales tax was a 23 percent increase over the prior year, taxes hit lows the following years, recovered in 2022, and now seem to be plateauing. For fiscal 2024, the city projected collecting $30.6 million in sales tax.

The hotel bed tax, or transient occupancy tax (TOT) of 12 percent, is collected on hotels and motels, and also from short-term rentals, a k a vacation rentals. For October 2023, $2.7 million was collected. Comparatively, in October 2022, the city collected $2.8 million, which was 17 percent greater than the year previous.

During the four months since the fiscal year began in July, the city received $13.3 million in bed taxes — $12.4 million from hotels and $890,000 from vacation rentals — an amount that is 5.4 percent short for the anticipated budget of $33 million.

The city’s assistant finance director, Lindsay Maas, whose office produced the numbers, said the difference in the months of information available for sales tax versus bed tax was because they had to wait for the state to allocate the sales tax, whereas the city collects hotel fees directly. As for the decrease in tax revenues, she attributed that to “softening economic activity amid a persistently high-inflation environment.”