To: Board of Supervisors
Department or Agency Name(s): County Administrator’s Office, Auditor-Controller-Treasurer-Tax Collector, County Counsel
Staff Name and Phone Number: McCall Miller 707-565-2431, Erick Roeser and Brooke Koop 707-565-2281, and Kristin Horrell 707-565-2421
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
Transient Occupancy Tax Ordinance - First Reading
End
Recommended Action:
Recommended action
A) Conduct a public hearing to consider whether to adopt an ordinance amending Section 12-10 of the Sonoma County Code to include online marketplaces as Operators and require them to collect and remit transient occupancy tax on the full amount of rent charged to transients. If the ordinance is adopted, it will be placed on the ballot at the March 5, 2024, election and will become effective if it is approved by a majority of the voters voting on the measure.
B) Adopt a resolution introducing, reading the title of, and waiving further reading of the proposed ordinance.
end
Executive Summary:
The County’s Transient Occupancy Tax (TOT) Ordinance, codified in Sonoma County Code Chapter 12, requires all Operators within the unincorporated County to collect and remit TOT on the total amount of rent paid for occupancy in any lodging. The current TOT rate is 12%, including the 3% approved in 2016 with Measure L.
This proposed ordinance amendment will update definitions in Section 12-10. Proposed updates include explicitly defining an online marketplace as an “Operator” to obligate them to collect and remit TOT. An online marketplace is defined as, without limitation, any online travel company, online vacation rental site or marketplace or internet-based platform that directly or indirectly facilitates the rental or booking of lodging (collectively, “OTCs”). The amendment will also update the definition of rent to provide a non-exhaustive list of charges and fees charged by an Operator that are subject to TOT, which includes any service or facilitation fee charged by an OTC for use of their platform for booking occupancy. It also adds the term “short-term rental.”
This ordinance amendment will not increase the rate of TOT and is not a new tax on residents of or visitors to Sonoma County. Due to the evolution of OTCs, which were not in existence when the original TOT Ordinance was adopted, these proposed changes will ensure that TOT is applied evenly across all Operators and Lodging within the unincorporated County.
Because this ordinance amendment seeks expansion of definitions under the current Ordinance, voter approval is required. If the ordinance is adopted and submitted to the voters, the ordinance amendment requires a majority vote (50%) to pass.
Discussion:
Transient Occupancy Tax Funding
TOT is authorized under California Revenue and Taxation Code Section 7280 as an additional source of non-property tax revenue to local government. TOT can be either a general tax, where the revenue is available for all general government purposes, or a special tax, where the revenue is required to be spent on specific purposes. Sonoma County’s TOT is a general tax.
TOT is levied at a current rate of 12% in unincorporated Sonoma County, a rate established in 2016 by the voter-approved Measure L. Currently, the first 9% of the TOT rate, which was in place prior to Measure L, is allocated 33% to the General Fund and 67% to the Community Investment special revenue fund; and the last 3% is allocated to the Measure L fund. The Community Investment Fund utilizes TOT to fund various grant programs to encourage economic development, community engagement, and enhance culture through grants to community non-profits for advertising and economic development, events, and advertises the county as a visitor destination with the goal of advancing economic growth through tourism. Additionally, the program provides grants to address impacts on safety due to tourism and to enhance community services throughout the county, in addition to providing funding to the Regional Parks Department, the Economic Development Department, and a number of other county department activities. Measure L funds pay for fire services, road repair and improvement, affordable housing and more.
Proposed Change to Ordinance
As discussed above, this ordinance amendment seeks updates to definitions, specifically to the definition of Operator to explicitly include OTCs and to the definition of rent to include a non-exhaustive list of fees and charges subject to TOT. It also adds the term “short-term rental.” Because OTCs were not in existence when the TOT ordinance was initially adopted, they are not explicitly listed as Operators. This proposed amendment, which will expressly define OTCs as Operators to be subject to TOT, will provide clarity and will also add a non-exhaustive list of fees and charges that triggers TOT. This will ensure that TOT is applied evenly between different types of Operators and Lodging booked within the unincorporated County.
Potential Use of New Revenue
Because the TOT is a general tax, the Board of Supervisors can allocate the funds for any general governmental purpose. The Board of Supervisors has adopted the policies described above for TOT. While it is difficult to approximate the amount of increased revenue this Amendment will generate, a conservative estimate of $1,500,000 has been provided by Granicus, a County vendor who assists with ongoing monitoring of short term rental websites.
Staff Recommendation
Staff recommends amending Section 12-10 of the Sonoma County Code to expressly include OTCs within the definition of Operator and include a non-exhaustive list of fees and charges that are included within the definition of Rent.
This will not increase the TOT rate or impose a new tax on either Sonoma County residents or visitors to Sonoma County. If approved, the amendment will only impose a new requirement on the OTCs to collect and remit TOT and to remit TOT on all fees and charges charged by an Operator, unless explicitly exempt.
If the Board approves the recommended action presented today of adopting a resolution introducing, reading the title of, and waiving further reading of the proposed ordinance adopting this increase, a Board item to adopt the Ordinance and to adopt a resolution calling for election of the TOT ordinance will be brought before the Board for consideration on December 5, 2023.
Strategic Plan:
N/A
Racial Equity:
Was this item identified as an opportunity to apply the Racial Equity Toolkit?
No
Prior Board Actions:
10/4/2022: The Board adopted Ordinance No. 6391 amending the Transient Occupancy Tax Ordinance. This amendment did not change the tax rate.
8/9/2016: The Board adopted Ordinance No. 6173 amending the Transient Occupancy Tax Ordinance. This amendment included a tax rate change from 9% to 12%.
1/6/2009: The Board adopted Ordinance No. 5823 amending the Transient Occupancy Tax Ordinance. This amendment did not change the tax rate.
Fiscal Summary
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Expenditures |
FY23-24 Adopted |
FY24-25 Projected |
FY25-26 Projected |
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Budgeted Expenses |
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Additional Appropriation Requested |
$675,794 - $1,126,324 |
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|
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Total Expenditures |
$675,794 - $1,126,324 |
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|
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Funding Sources |
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General Fund/WA GF |
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|
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State/Federal |
|
|
|
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Fees/Other |
|
|
|
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Use of Fund Balance |
$675,794 - $1,126,324 |
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|
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Contingencies |
|
|
|
|
Total Sources |
$675,794 - $1,126,324 |
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Narrative Explanation of Fiscal Impacts:
The costs of the election are estimated to be between $675,794 and $1,126,324. A number of factors may influence and alter this amount, such as the number of other measures that are on the March ballot. If successful, the proceeds of the tax can cover the costs associated with this measure. Current estimates of Community Investment Fund Balance is anticipated to be sufficient to cover the costs of the measure if unsuccessful.
Narrative Explanation of Staffing Impacts (If Required):
N/A
Attachments:
Attachment A - Proposed Ordinance
Attachment B - Resolution introducing, reading the title of, and waiving further reading of the proposed ordinance.
Attachment C - Current Ordinance Redline
Related Items “On File” with the Clerk of the Board:
None