Measure E: Hotel Tax Could Generate Millions For Santa Clara

With the November election fast approaching, Santa Clarans will have to decide whether to adopt an increase in hotel taxes to help fund City services.

Santa Clara’s hotel tax, also known as the transient occupancy tax (TOT), in place since 1992, is 9.5 percent, on the lower end of cities across California. If passed, Measure E — the only measure on the ballot for Santa Clara this election — would allow the City to raise that tax to 13.5 percent for hotel stays not exceeding 30 days.

Lenka Wright, Director of Communications, rebuffed requests to interview someone at City Hall for this story, saying she didn’t “have pertinent staff available.”

Kenn Lee, the City’s Director of Finance, estimates that the tax hike could generate between $1.75 and $7 million for the City’s general fund annually, based on pre-pandemic economic models. That money would be safeguarded from the state, meaning that it would be spent in Santa Clara.

In an email, Lee told The Weekly that “this revenue stream is a critical element of the City’s overall budget balancing strategy,” saying it would be used to support City services such as emergency medical/disaster preparedness, police and fire protection, bicycle and pedestrian safety, road and storm drains, and parks, recreation and library services.

“Keep in mind that any increase in the TOT rate would not restore revenue prior to the pandemic but would slow the pace of revenue loss because of COVID-19,” Lee wrote. “It would still be entirely used to preserve City services.”

As an example of why such a tax hike is necessary, the City points to fire department service calls, which it says are up 114 percent from a decade ago.

In their argument in favor of the measure, Mayor Lisa Gillmor, Vice Mayor Karen Hardy and Council Member Raj Chahal say the money could be put to good use to continue programs the City has already fostered since the shelter-in-place order such as small-business grants, food programs for youth and seniors and lower electric bills.

“We hope the new tax would generate new revenue once the economy recovers,” Lee wrote. “If this ballot measure doesn’t pass in November, the City will further evaluate how to reduce operating costs and explore other potential revenue generating methods.”

However, the measure is not without opposition.

The Silicon Valley Taxpayers Association opposes the measure, saying the Council wants a “free ride” to “stick out-of-towners with the bill.”

In his opposition of the measure, Mark Hinkle, President of the Silicon Valley Taxpayers Association, calls taking from taxpayers in this way “immoral,” labeling it “a form of theft.”

“If you use city services, shouldn’t you be the one to pay for them? Do you go to a restaurant and always expect someone else to pick up the tab? Those who regularly do that are called gritters. Or petty thieves,” Hinkle writes in his opposition. “Just because the City Council is looking for a free ride and stick (sic) it to out of towners to pay the bill/tax, does not make it right. Stealing is stealing regardless if a majority approves.”

Hinkle calls the City’s claim that such a tax hike will help — not hinder — its ability to attract hotel customers “idiotic,” adding that it “defies the basic laws of economics.” If the Council believes that the tax will not affect hotel business, it should simply increase it to 100 percent, Hinkle wrote.

Voting no on Measure E, Hinkle argues, would help keep Santa Clara hotels competitive and bolster the economy.

Nobody at the Silicon Valley Taxpayers Association could be reached for comment.

Measure E will be on the Tuesday, Nov. 3 ballot. Visit the Santa Clara Registrar of Voters as scc.gov.