Supervisors reduce TOT rate to eight percent

The San Diego County Board of Supervisors reduced the Transient Occupancy Tax (TOT) rate from nine percent to eight percent.

The 5-0 vote July 26 approved the eight-percent rate effective August 1. Although ordinance amendments usually take effect 30 days after a second reading and adoption, the reduction eliminates an increase which was implemented 15 years ago without proper voter approval.

“Historically the Board of Supervisors has been quick to correct any mistakes once it has been brought to our attention,” said Supervisor Dianne Jacob. “Now that we are aware of this, I believe it is appropriate that the board reduce the Transient Occupancy Tax rate back to eight percent.”

In 1990, the Board of Supervisors consisted of Brian Bilbray, George Bailey, Susan Golding, Leon Williams and John MacDonald. On July 24, 1990, the Board of Supervisors amended Section 22.203 of the County Code of Regulatory Ordinances to increase the Transient Occupancy Tax rate from eight percent to nine percent for lodging facilities in the unincorporated area.

Whether such a tax increase was allowed without voter approval was unclear at the time. Proposition 62 had been passed by the state’s voters in the November 1986 election, but Proposition 62 was not resolved in favor of voter approval until 1995. The fact that the TOT rate was increased without necessary voter approval came to the county’s attention during the legal process to determine whether or not the TOT is applicable to lodging facilities on tribal land. “As soon as this issue was brought to our attention, we corrected it,” said Supervisor Bill Horn.

While the TOT rate reduction will have a positive effect for lodging facility customers, it will also result in an 11-percent decrease in the revenue used for Community Enhancement funds derived from TOT revenue. The 2005-06 Community Enhancement funding will not be affected, as it was budgeted from money already received. “We’ll deal with that next year,” Supervisor Greg Cox said of the loss of approximately $330,000 of Community Enhancement revenue.

Whether the reduction is for one year or for a longer period will depend on the result of the public vote to increase the TOT rate to nine percent. The initial staff recommendation included directing county staff to prepare the necessary documents for board consideration to place an increase to nine percent on the June 2006 ballot, but the final motion only included the reduction.

“There’s plenty of time to consider a TOT ballot measure in the coming months,” said Jacob. “This reduction in the TOT should be our only action related to the Transient Occupancy Tax today.”