Pacifica voters to decide on hotel tax hikeBy Julia Scott
The Pacifica City Council will ask voters to approve a transient occupancy tax increase in November that will put pressure on Pacifica's hotels - all six of them - to help the city dig itself out of a $3 million budget deficit.
Council members voted unanimously Monday night to create a ballot measure to increase Pacifica's hotel tax from 10 percent to 12 percent. Other cities across San Mateo County recently passed identical measures, including San Mateo, Millbrae, San Bruno and South San Francisco.
Officials portrayed the tax increase as crucial to balancing the city's deficit in the long term, even though it would only generate a modest additional take of $160,000 a year from the city's half-dozen hotels.
Pacifica faces a $15 million structural deficit over the next five years. The hotel tax would add an extra $640,000 to the city's general fund in that time.
Paul Chakkapark, owner of the Pacifica Beach Resort Hotel overlooking the ocean, said he was surprised and disheartened by the council's vote - and he plans to fight against the ballot initiative, which could hurt his business in a very tough economy.
"I think we have a hard time right now, and we need everybody's help. To increase it is not helping," he said. "We are only 15 minutes from San Francisco and customers in San Francisco come and stay with us, because San Francisco has a 14 percent tax and we have only a 10 percent tax."
Pacifica Mayor Sue Digre said passing the hotel tax is one step in a clearly defined plan the city has adopted toward achieving fiscal balance.
"I think we're all sensitive that the hotels don't look upon this with a great deal of favor," Digre said. "It's not a lot of money, but we went carefully through this, and if all the pieces come together, this will save jobs."
The cash-strapped city balanced its budget this year by borrowing heavily from its reserves, which have dwindled to $1.7 million from $7 million two years ago. Officials intend to stop the bleeding over the next five years with $8.5 million in salary freezes and negotiated pension contribution freezes, along with a series of strategies they hope will generate $6.6 million in revenues.
"If we don't get some concessions from employees within the next year, we will have to start looking at furloughs and layoffs, and we don't want to have to do either of those," Digre said.
Pacifica has been running out of places to look for money. Voters decisively rejected a one-cent sales tax increase at the ballot box in May 2009.
A few miles south of Pacifica in Half Moon Bay, officials are looking at a sales tax increase of their own. The City Council conducted a study session on the topic Tuesday night. The city recently declared a fiscal emergency, which allows voters to approve a sales tax increase by simple majority.
Half Moon Bay already laid off or cut back half its staff, and its general fund reserves are even thinner than Pacifica's. The city has not been able to cut its way toward sustainability, however. It already passed a hotel tax rate increase and was counting on those funds this year. Officials were taken by surprise when hotel tax revenues dropped off by 21 percent from what was projected last July and scrambled to make cuts in early 2010 to try to compensate.
Pacifica City Manager Steve Rhodes said he's hoping the economy will pick up enough that by the time the transient occupancy tax would take effect in July 2011, local hotels won't see an impact in lost tourism dollars, and the city won't face the kind of surprise losses suffered by Half Moon Bay.
"We're very conservative in our numbers. We do that with every source of revenue we have," he said.
Copyright ©2010 San Mateo County Times. Published 06/29/2010.