Increasing local tax burden is counterproductive (Opinion)
(Editor’s note: The following opinion was sent to the city of South Lake Tahoe and senior management)
We the undersigned organizations — The South Tahoe Association of Realtors, The South Tahoe Lodging Association, Tahoe Chamber of Commerce, and the South Tahoe Chamber of Commerce — actively support a meaningful increase in accessible, affordable housing and improved transit and transportation mobility in our community.
As you may be aware, collectively, our organizations represent over 1,000 businesses, both large and small, and an estimated 10,000 employees. Please accept the perspectives shared in this letter as consequential.
The above being said, we are writing to express our collective and individual opposition to a possible increase in the City’s transient occupancy tax and to the city’s discussion of a possible imposition of a “vacancy tax.” City leaders have indicated these funding options are being explored to provide the city with a new local source of funding to support affordable housing initiatives and projects.
Context for our concerns
Individually or collectively our organizations have supported a number of city-proposed tax increases over recent years, including:
- Measure G Sales Tax
- Measure S for the Ice Area, Ball Fields, and Bike Trails
- Measure P for the project now known as the Multi-Cultural Recreation & Aquatics Center
- Sales Tax increase to improve Public Safety, Roads, and Fire Protection.
- While not a tax, per se, we supported the TOT increase related to formation of the South Lake Tahoe Tourism Business Improvement District. This is a self-assessment approved by the participating businesses with the revenues dedicated to “improve and promote the economic well-being of the commercial area and businesses within the District boundaries located in El Dorado County, in the City of South Lake Tahoe, with tourism promotion, marketing and other commercial revitalization strategies.”
There comes a point in time where continuing to increase the local tax burden becomes counterproductive. From our perspective, we have reached that threshold. Our concern is heightened by the inflation and higher interest rates that are negatively impacting household budgets, tourism and travel budgets, our investment climate, and the overall economic well-being of our businesses and broader community.
These factors are on top of the tourism, business and community impacts we have experienced from the COVID-19 pandemic, prolonged periods of unhealthy smoke from the Dixie and Tamarack fires, the community-wide evacuation triggered by the Caldor Fire, and this year’s relentless, heavy snowfall which has also had its share of negative impacts on business, infrastructure, and our community.
In the wake of last year’s council election, our concern is heightened by the anti-tourism rhetoric we hear from at least one council member being espoused not only at council meetings but at other meetings and forums throughout the community. Overt or implied threats are not an appropriate nor effective strategy for securing our willingness to engage in dialogue with the city on housing or other strategies.
Specific TOT increase concerns
A variety of independent studies from communities around the nation have documented that simply increasing TOT whenever more public funds are needed, no matter how important the purpose, actually serves to reduce the competitiveness of a travel destination and precipitate a decline in TOT revenues. Currently, TOT revenues comprise some 34% of the city’s budget (21% of this is unrestricted funding that accrues to the city’s General Fund).
This does not include the nearly $3.4 million generated annually by the 2% TOT (Measure P) dedicated to the Recreation and Aquatics Center project. In our view, TOT is not revenue to push beyond its current rates of 12% within non-redevelopment areas of the City and 14% in the “Redevelopment Area.” We are not prepared to support any increase in TOT within the City.
Specific vacancy tax concerns
Measure T was narrowly passed by city voters in 2018. It effectively eliminated 1,400 homes/condos that represented a lodging option preferred by many Tahoe visitors as well as the city TOT revenues associated with those rentals. Although local residents were permitted under specific circumstances to use their homes as “vacation rentals” non-residents were prohibited by Measure T from doing so. A “vacancy tax” would further penalize homeowners already limited by Measure T, forcing them to either rent out their home long-term or be fined/taxed for not becoming a landlord or able to transition to being a full-time resident of their property. The inherent contradictions are evident.
Further, the case law around the legality of vacancy taxes is still being debated. For example, a vacancy tax (Measure M) adopted in San Francisco in 2022 has been legally challenged and is now in court, likely to result in a lengthy and expensive battle. Any vacancy tax proposal in the city of South Lake Tahoe should require very serious scrutiny and analysis to determine if there are any actual benefits. We have seen no evidence that Measure T created housing opportunities for locals, although that was a primary selling point made by Measure T proponents.
What we do support
We support the city’s current work applying for housing grants, programs that give locals affordable rental and ownership options, contributing city land, advocating for the contribution of public lands owned by other jurisdictions, and engaging the use of existing revenues available to the city for housing purposes. We encourage the city and other agencies (e.g., TRPA) to explore opportunities to reduce the regulatory cost of building affordable housing. We also support the city’s actions and initiatives to increase funding to improve local transit services, as improved transit helps support increased affordable housing.
We support proactive and creative organizations such as the St. Joseph Community Land Trust whose work includes initiatives to help locals find and rent affordable, well-managed and well-maintained rental housing as well as purchase opportunities to get locals on the path of affordable homeownership. We support innovative ideas, not simply those that involve a “tax and spend” approach.
We support and encourage all members of the City Council and City management to view our organizations and the business community as partners in the work necessary to improve and sustain our business climate for the benefit of all business owners, residents, and property owners in the community. We stand ready to work collaboratively with you toward these outcomes.
Amanda Adams is president of the South Tahoe Chamber of Commerce
Ryan Smith is president of the South Tahoe Association of Realtors
Mike Glover is CEO for the Tahoe Chamber
Kathleen Mason, is president of the Lake Tahoe Lodging Association
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