City officials took the first step toward creating a tourism improvement district Monday night that would enhance the promotion of Petaluma and, if successful, could potentially bolster the overall economy.
Council members advised city staff to begin laying the groundwork for a Tourism Improvement District, which would assess a two percent tax on all hotels and lodging. The estimated $660,000 raised would be used to fund marketing campaigns and district development projects to help beautify the city.
The TID would also absorb the Petaluma Visitors Program and alleviate the city’s General Fund of a $248,000 obligation. The PVP is currently operated by the Petaluma Downtown Association.
A number of hoteliers, restaurateurs and retailers pleaded their case to the council Monday, hoping to relay the impact of improving tourism and broadening advertising efforts that have been limited in recent years. Industry officials said more tourism dollars would lead to more sales tax receipts and bigger returns on the transient occupancy tax, or TOT.
“A high percentage of our businesses are tourism related,” said Marie McCusker, executive director of the downtown association. “I think the TID gives us the opportunity to be creative with tourism dollars, and I think it gives us an opportunity to grow those TOT funds.”
City officials have been exploring raising the TOT from its current rate of 10 percent as a means to generate much-needed revenue. The assessment is collected from guests staying at hotels, inns, campgrounds and short-term vacation rentals, and increasing it requires approval from a simple majority of voters.
“The city is bleeding a lot of red ink in a lot of different directions,” Mayor David Glass said. “At some point, if it’s not this year than it better be awful soon, this community has got to talk about what sort of tax measures they’re going to put on because it’s going to be just more than a TOT increase. That’s for sure.”
The deadline for getting a TOT increase on the November ballot is next month.
In 2004, Petaluma agreed to join the Sonoma County Tourism Business Improvement Area, which promotes Sonoma County as an overnight destination. City officials consented to a two percent tax on guests staying at hotels that earned over $350,000 a year. Petaluma’s lodging establishments conveyed $606,000 to the SCTBIA in 2017-18.
If the Petaluma TID is adopted, a majority vote from hotel owners will be needed to finalize its formation, raising the total assessment on overnight guests to 14 percent.
The city uses the proceeds from the TOT at their discretion, and retains a share to fund basic services. Over the past three years, the tax has been used for building projects and financing police and fire vehicle replacements.
The city is expected to reap approximately $3.3 million in 2018-19 from the tax and plans on increasing its TOT spending on basic services by $300,000 in 2018-19.
After advertising dollars have been spent, the TID supporters proposed to allocate $100,000 for periodic dredging of the Petaluma River, but council members scoffed at that idea because of how long it would take to collect the necessary matching funds. Councilwoman Teresa Barrett proposed putting that money aside for the Committee on the Shelterless, and Glass suggested it could be used for maintenance of the storm drains.