ARTICLE
Last week, Santa Cruz Local’s reporter, Grace Stetson wrote a very detailed and descriptive article about the City of Santa Cruz’s budget. You can read the full article here: https://santacruzlocal.org/2022/12/02/santa-cruz-city-budget-shows-signs-of-recovery-but-long-term-problems-persist/ The puzzling issue for the City (like most cities in California) is that a large percentage of the municipality’s expenses are related to employees, as noted by Santa Cruz Finance Director, Elizabeth Cabell who stated: “Our largest expenses are people,” Cabell said. “We need to be sure that we’re accounting for and making decisions that will allow us to continue providing services, keep people and maintain those costs as well.” You might recall earlier this fall (in October) more than 400 city employees went on a strike — halting city services. The employees, the city’s executive staff, and the union leaders eventually negotiated a one time $1,800 bonus and a 12% raise over three years. We certainly do understand the high cost of living in Santa Cruz County. It impacts the private, public and nonprofit sectors as we grapple with finding employees and once identified hoping that the employee can find suitable (and affordable) housing. Regardless of what sector an employee works in — we all experience how expensive it is to live on the Central Coast. Earlier this past June, the City placed a 1/2 cent sales tax measure on the June ballot as a revenue enhancement for city services — it failed thus eliminating that new revenue source. The City Council again placed a revenue measure on the November ballot — a Transient Occupancy Tax (TOT) which passed overwhelmingly because the tax comes out of the pockets of visitors to Santa Cruz — not the residents. While the sales tax measure was not adopted by voters in June, there was still a possibility of passing another type of tax: a transient occupancy tax. Measure P was introduced in August, with the intent to raise taxes on hotel rooms, motel rooms and short-term rentals in the city of Santa Cruz. The tax for hotel and motel rooms would increase to 12% from 11%. The tax on short-term rentals would increase to 14% from 11%. The changes were nearly identical to increased transient occupancy taxes approved by Santa Cruz County voters in June for unincorporated areas. The estimated revenue is $1.2 million. City Manager, Matt Huffaker commented: “From wildfire prevention, investing in affordable housing and our infrastructure and continuing our progress on homelessness response, this funding will be put to good use.” The Chamber did not weigh in on this Measure P, however, in an interview with a Good Times reporter last month, I was asked what the business community thought about the TOT. I stated, “I am not surprised the measure passed. It is difficult to predict how a tax hike like this one might affect tourism, but the key to evaluating the tax’s success will be in looking at how the revenue is spent.” When you raise a tax, there is a human behavior response. If the tax reaches a tipping point, visitors won’t travel as much and large corporate groups may look at the added cost to each room on their hotel bill and decide that maybe we should visit another beach community where the tax is not as high. My plea to the City is to show that the revenue provides a return on investment to our city — improvements in our downtown, sidewalk and graffiti clean-up, maintenance of our parks and a host of other necessary services that the residents want and need.
Last week, Santa Cruz Local’s reporter, Grace Stetson wrote a very detailed and descriptive article about the City of Santa Cruz’s budget. You can read the full article here: https://santacruzlocal.org/2022/12/02/santa-cruz-city-budget-shows-signs-of-recovery-but-long-term-problems-persist/
The puzzling issue for the City (like most cities in California) is that a large percentage of the municipality’s expenses are related to employees, as noted by Santa Cruz Finance Director, Elizabeth Cabell who stated: “Our largest expenses are people,” Cabell said. “We need to be sure that we’re accounting for and making decisions that will allow us to continue providing services, keep people and maintain those costs as well.”
You might recall earlier this fall (in October) more than 400 city employees went on a strike — halting city services. The employees, the city’s executive staff, and the union leaders eventually negotiated a one time $1,800 bonus and a 12% raise over three years. We certainly do understand the high cost of living in Santa Cruz County. It impacts the private, public and nonprofit sectors as we grapple with finding employees and once identified hoping that the employee can find suitable (and affordable) housing. Regardless of what sector an employee works in — we all experience how expensive it is to live on the Central Coast.
Earlier this past June, the City placed a 1/2 cent sales tax measure on the June ballot as a revenue enhancement for city services — it failed thus eliminating that new revenue source.
The City Council again placed a revenue measure on the November ballot — a Transient Occupancy Tax (TOT) which passed overwhelmingly because the tax comes out of the pockets of visitors to Santa Cruz — not the residents.
While the sales tax measure was not adopted by voters in June, there was still a possibility of passing another type of tax: a transient occupancy tax. Measure P was introduced in August, with the intent to raise taxes on hotel rooms, motel rooms and short-term rentals in the city of Santa Cruz. The tax for hotel and motel rooms would increase to 12% from 11%. The tax on short-term rentals would increase to 14% from 11%. The changes were nearly identical to increased transient occupancy taxes approved by Santa Cruz County voters in June for unincorporated areas. The estimated revenue is $1.2 million.
City Manager, Matt Huffaker commented: “From wildfire prevention, investing in affordable housing and our infrastructure and continuing our progress on homelessness response, this funding will be put to good use.”
The Chamber did not weigh in on this Measure P, however, in an interview with a Good Times reporter last month, I was asked what the business community thought about the TOT. I stated, “I am not surprised the measure passed. It is difficult to predict how a tax hike like this one might affect tourism, but the key to evaluating the tax’s success will be in looking at how the revenue is spent.”
When you raise a tax, there is a human behavior response. If the tax reaches a tipping point, visitors won’t travel as much and large corporate groups may look at the added cost to each room on their hotel bill and decide that maybe we should visit another beach community where the tax is not as high. My plea to the City is to show that the revenue provides a return on investment to our city — improvements in our downtown, sidewalk and graffiti clean-up, maintenance of our parks and a host of other necessary services that the residents want and need.