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City moves to put hotel tax increase on the ballot

The Merced City Council on Monday night directed city staff to develop a measure for the November ballot that would ask voters to decide if the city can increase the rate of its transient occupancy tax (TOT) — a form of government revenue that comes from local hotels and short-term rentals.

City leaders voted unanimously on the plan that if passed by voters would allow the city to raise the current TOT rate of 10 percent to a maximum of 12 percent. The TOT is designed to ensure that visitors to the community pay the tax when they rent rooms or other space. It’s the lodging operator’s job to collect the tax and pay it to the government.

Why is the city doing this?

Leaders see the move as a mechanism to help promote tourism to the city by using the revenue increase to fund a new Tourism Business Improvement District or TBID. If this sounds familiar, that’s because the city is already developing a Downtown Property Based Improvement District, or PBID, managed by owners around Main Street and the city’s core. A TBID, in turn, will unite the city’s 12 to 14 hotel owners who will dedicate revenue to marketing the city both nationally and internationally as a tourism destination.

The city brings in roughly $2 million a year through the TOT at the current 10 percent rate. So each 1 percent increase would generate an additional $200,000 at current revenues. If, for example, more hotels were built and occupancy rates went up, there would be more revenue.

The idea is for the city to shave off the revenue increase in a new TOT rate — potentially up to 2 percent — and have the hotel owners match that percentage of revenue, with the total going to fund the new Tourism District.

Both leaders and local hotel industry representatives admit the city’s TOT of 10 percent has not been changed for 25 years, and they agree it’s time to do so. They say most cities in the state have a TOT rate from 10 to 12 percent. By comparison, Modesto and Turlock is currently at 9 percent, and Fresno and Visalia are at 10 percent.

Also of note, the city has also already allocated up to $100,000 in its budget to fund the TBID process.

“There’s been ongoing conversations over the course of the past few years, through strategic planning and other meetings as well, about forming a TBID, and it’s potential relationship with the downtown PBID, and then also ways to bolster and encourage tourism in our community,” Mayor Matthew Serratto remarked before the vote on Monday night.

It was Mayor Serratto who took the initiative to put the discussion on the council’s agenda this week.

Edwin Kainth, the president of the Merced Hotel & Lodging Association, said local hotel owners do not object to the proposition of raising TOT rates — as long as they get some benefit from the taxes in the form of funding for a TBID.

“We would hire a consultant and a sales director who will help promote tourism in Merced,” Kainth told council members. “We have to connect with Visit California and Visit Yosemite. So that way Merced will be more prominent so that we will encourage and attract more tourism … Fresno is doing great occupancy because they have had a TBID in place for the last 25 years. Turlock and Modesto is doing the same thing. So we are kind of left behind. They are promoting Gateway to Yosemite. But we are also a Gateway to Yosemite, but nobody knows. … We do not promote Merced as a destination.”

A ballot measure plan is expected to come back for a final decision by the City Council at the next meeting on July 15. City leaders need to act fast to make official deadlines for the November election.

When will Laura Fountain spring to life?

It’s been a couple years since the city and private donors stepped up to restore the cracks and leaks in the historic Laura Fountain in the middle of the Applegate Park rose garden. Some $100,000 was raised in the community for the project, and the city contracted out the work, but today the landmark is still as dry as it was in 2022.

On Monday night, city leaders unanimously approved $13,891 for additional work needed to restore the fountain, in a so-called “change order,” with the company on the project: Solitude Lake Management.

According to Interim City Engineer Michael Wegley, “Along the way we’ve run into design and construction flaw issues that we’ve had to rectify, and personnel changes [within the contractor’s organization], and so it’s been a real challenge.”

Wegley said keeping the contractor on location was part of the struggle, as well as faulty design issues that were built upon, resulting in cracks in the new materials.

“It’s been one thing after another,” Wegley said. “We have the contractor committed now to get in here, and finish up.”

Completion of the project is expected in August.

Facelift for Rahilly Park

The councilman for District 4, Shane Smith, feels Rahilly Park in his district could use a “coat of paint and some love.”

Smith, along with Mayor Serratto, want to have some community outreach and engagement to find out what can be done to improve the popular park in northeast Merced. The city has already allocated more than $50,000 for Rahilly Park improvements as part of the city’s overall investments in all of its existing parks. Leaders agreed to set up a subcommittee to look into the issue, as well as hold a couple public meetings on location to gather community views on the park’s development.

Stay tuned …

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