Hotel tax may go to November ballots

In an effort to close the city budget deficit and find ways to increase revenues, Costa Mesa officials are exploring the idea of increasing the hotel and business license taxes with a November ballot initiative.

Although that move might not go over well in the current economic climate, Costa Mesa will have to do something to increase revenue sources, supporters of the tax hikes say.

“We are no different from a private business or individual households or nonprofit organizations or any other municipalities. We have to look at all options because there’s no single action, in my opinion, there’s no single action that we could take that would balance the budget,” said City Manager Allan Roeder.

At this point the city is only discussing whether to put increases before voters, but percentage increases have not yet been proposed.

Placing an initiative on the November ballot is one of seven areas the city is weighing to offset budget deficits this fiscal year and next.

Last month, after a mid-year report revealed a $9.3 million budget gap, the City Council authorized its staff to look into the possibility of placing the initiative on the ballot. The council also authorized cuts in various areas, including freezing 70 vacancies and suspending all projects and programs that require support from this year’s general fund, the city’s day-to-day budget.

Increasing the hotel and business license taxes isn’t going to help this year’s budget, but it’s one way of increasing revenues in the years to come.

“This is just one of many choices,” Roeder said. “So far, certainly for the last three years, virtually all of the balancing of the budget has been accomplished by cutting the budget, easily 95% of that has been cutting the budget. Given the fact that the economy still hasn’t stabilized, we are to that point when you have to look at the range of options before you have to consider suspending programs and services.”

At 6%, Costa Mesa’s hotel tax is among the lowest in the county, Roeder said.

Newport Beach’s hotel tax is 10%, Santa Ana, 11% and Anaheim, 15%.

Last year, Costa Mesa collected about $4.7 million in hotel tax, a decrease from the almost $6 million it earned in 2007 ax, said Judy Vickers, Costa Mesa’s revenue supervisor.

The last time the city’s business license tax was visited was 20 years ago. At the time, the council decreased the business license fee on the lower end from $50 to $25, Roeder said. Business licenses cap off at $200 a year.

Last year, the city made $860,000 from business license taxes, Vickers said.

In the coming months, city officials will research the issue, consult with the business community, then report back to the council to determine whether an initiative will be placed on the ballot.

Among the groups the city plans to meet with on the issues are the Costa Mesa Conference and Visitor Bureau and the Chamber of Commerce, said Tom Hatch, assistant city manager.