by Mark McDermott
The Manhattan Beach City Council last month approved an increase in the City’s transit occupancy tax, better known as the hotel “bed tax,” from 12 to 14 percent.
The increase is expected to generate $1.25 million annually to help pay the $1.4 million allocated last month for ten new Manhattan Beach Police Department positions, including seven new sworn police officers. The increase was made possible by 2019’s Measure A, in which voters approved TOT increases from 10 percent to up to 14 percent, with the funds earmarked in part for public safety.
Finance Director Steve Charelian told the council at its Feb. 21 meeting that the increase puts the City’s TOT in the mid-range of comparable cities.
“Staff periodically monitors the TOT rates amongst various comparable cities in the Greater Los Angeles area. Current rates range from 12 to 16 percent,” he said. Similar to its coastal neighbor of Redondo Beach, the City of Manhattan Beach’s current TOT is 12 percent. Many other cities in the area, including Hermosa Beach, Santa Monica, Beverly Hills and Culver City, are at 14 percent. Malibu’s is 15 percent, and the neighboring LAX corridor is at 16.3 percent.
According to the staff report, the tax increase would impact 12 local hotels and 50 short-term rentals in the city’s coastal area.
Manhattan Beach Chamber of Commerce CEO David Archer said the tax increase would make local hotels less competitive in key sectors of the hospitality market. He asked for a delay in implementation while the issue is further studied.
“As you’re aware, we had an increase in 2019 and the City worked with the hotels on a compromise that allowed us to remain competitive, particularly in the high-producing segments of both corporate and group accounts, who look at the TOT as part of their consideration more than leisure guests do. We feel that the proposed increase of TOT will affect overall hotel production in Manhattan Beach. We will lose shares to the surrounding markets who have lower TOT, which ultimately will negatively impact the tax revenue received by the City.”
Mike Zislis, owner of Shade Hotel, likewise opposed the tax increase. He said 12 percent is more in line with the average rate nationally and suggested the City focus on short-term rentals because when the TOT increase was originally approved they were banned in Manhattan Beach. The courts overturned that ban last year for the coastal zone.
“There is going to be a lot of income coming from short-term rentals,” he said. “I would propose you look at taxing short-term rentals.”
The increase was proposed as part of a mid year budget adjustment. Mayor Pro Tem Richard Montgomery made the motion to approve. He said the City lost a lot of revenue during the pandemic, yet City costs have continued to increase, and federal relief funds are no longer forthcoming.
“We don’t have a well of money to talk about anymore,” Montgomery said
“…This is, I wouldn’t say a less painful way, but it’s necessary. It’s a requirement for us to move forward. Not just to keep up with Beverly Hills and Hermosa, not Malibu at 15 percent or LA at 16 percent. We’re in the right gap here. We don’t have the size of Redondo or the size of Torrance or the size of Santa Monica. But what we do have is people who want to stay here.”
“I also look forward to the bolstering of public safety,” said Councilperson Joe Franklin. “It’s definitely a priority that the residents have expressed, to go back to that peace of mind that we all were looking for when we picked Manhattan Beach as a place to live.”
The motion passed 5-0.
Mayor Steve Napolitano said the City has endless needs and limited resources to provide for those needs.
“And that’s why we do increase along with everyone else — I’m sure that what the hotels are charging today isn’t what they charged four or five years ago, or certainly not during COVID,” Napolitano said. And you know, 14 percent is meant to be competitive, but it’s also meant to provide service for the visitors who come and stay in the hotels. We want to ensure that they’re safe on our streets and that Manhattan Beach remains a destination.” ER
