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Local Cities Counting on Collecting New Revenue from Bed-Tax Hikes

Voters in Buellton, Carpinteria, Goleta and Solvang all approved rate increases in transient occupancy taxes

The cities of Buellton, Carpinteria, Goleta and Solvang all increased their transient-occupancy tax rates in November, which brings them up to the 12 percent rate of the City of Santa Barbara.

Jurisdictions charge visitors a portion of hotel, motel or vacation rental prices as transient-occupancy taxes (TOT), also known as bed taxes. It’s the responsibility of owners and operators to collect the tax and forward it to the cities.

Santa Barbara County also considered raising its rate from 10 percent, but the Board of Supervisors voted against putting that on the ballot this year, concerned about voter fatigue.

Buellton’s measure allows the City Council to raise the bed tax rates up to 12 percent with an ordinance, and they’ll make those decisions at January public hearings and council meetings.

“At this point, we are waiting to see what the council will adopt at the Jan. 24 meeting,” Buellton finance director Annette Munoz said.

The ordinance will go into effect 30 days after the second reading of the ordinance, so Buellton couldn’t start collecting additional funds before Feb. 23.

According to finance department documents, Buellton has received $505,407 in bed taxes in the first four months of the current fiscal year, and had occupancy rates ranging from 67.94 percent in July to 50.75 in October.

Carpinteria is enacting its increased rates Jan. 1, so half the current fiscal year will bring in those extra revenues, according to John Thornberry, administrative services director.

Thornberry said the city’s budget, adopted in June, expected $1.44 million in bed taxes this year at a 10 percent rate, but that increases to $1.58 million with the 12 percent rate.

Goleta will start collecting taxes at 12 percent Jan. 31, and the city expects an annual increase of about $1 million in revenues, finance director Tina Rivera said.

Under Goleta’s Revenue Neutrality Agreement, the city had to pay the county 40 percent of its TOT revenues until the current fiscal year.

Ten years into incorporation, Goleta keeps all of its TOT revenues, but still has to pay 50 percent of its property tax revenues to the county in perpetuity and 30 percent of its sales tax revenues. In 2011-2012, Goleta paid $1.27 million in “pass-through” TOT revenues to the county.

Solvang’s voters also approved the increase, which goes into effect Feb. 1, City Manager Brad Vidro said.

The city received $2.5 million in bed tax revenues last year, and expects to bring in an additional $500,000 annually from the 2-percent increase to 12 percent, he said.

Overall, the county has had increasing bed tax revenues. For the 2010-2011 year, the unincorporated areas generated $6.92 million, while the incorporated cities brought in $26.32 million among them.

Santa Barbara County’s bed tax revenues increased 10.4 percent in 2010-2011, and another 8.4 percent for 2011-2012, according to the most recent Comprehensive Annual Financial Report.

The county will see a dip in its TOT revenues this year because Goleta’s Revenue Neutrality Agreement hit the 10-year mark.

Noozhawk staff writer Giana Magnoli can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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