Santa Clara raises hotel tax to tackle deficit

Santa Clara is brainstorming strategies to improve the city’s economic future while grappling with a budget crisis.

The Santa Clara City Council unanimously voted last week to raise the transient occupancy tax from 11.5% to 12.5%, up to a maximum of 13.5% within the next two years, as a way to tackle the city’s deficit. The tax collects revenue from people staying in hotels and temporary rentals such as AirBnBs. The change is effective January 2024.

Councilmember Kevin Park told San José Spotlight the occupancy tax will help the city’s coffers as Levi’s Stadium continues to host more headliner events. He added that even with all the events, the city needs to develop the area around the stadium to keep visitors in Santa Clara.

“People come to Santa Clara for events, but they don’t stay in the city after the event,” Park said. “There’s nothing around the stadium to keep people there. I’m hoping for a future in which the area across from the stadium is active and not shut down during stadium events.”

City spokesperson Michelle Templeton said the city’s finance and community development departments reported a boost in revenue this year, largely stemming from Taylor Swift’s Eras concert tour.

“While we don’t have the exact revenue numbers yet, we do know that our hotels were almost all at or near capacity during this year’s once in a lifetime summer of musical icons including Taylor Swift, Beyonce and Ed Sheeran,” Templeton told San José Spotlight.

Overall resulting sales at Levi’s Stadium have generated a $2 billion economic impact over the last decade, according to a report commissioned by the San Francisco 49ers. Going forward, the occupancy tax increase should boost city revenue from visitors attending events like Super Bowl 60 and FIFA World Cup 2026, Templeton said.

Nearly 1,000 local events and 155 “major events,” like concerts with marquee names including Elton John, Coldplay and The Weeknd, contributed to this total. Levi’s Stadium events brought in nearly $350 million to the Santa Clara Stadium Authority and the city through sales and hotel taxes, ticket surcharges and city parking fees. An additional $120 million went to San Jose and county governments through similar visitor expenses.

However, some councilmembers said the city’s financial stability needs more than an occupancy tax increase.

Councilmember Suds Jain told San José Spotlight the city is “desperate” for aggressive ways to increase revenue. On one hand, the $27 million deficit in 2022 has been reduced to $9 million, due to leaving some staff positions vacant. Voters also approved the city’s plan to start charging different business license tax rates for companies based on size—which Jain estimates added $6 million to the general fund.

“But if we don’t change anything, we’re going to have (a deficit of) $9 million basically forever,” Jain said.

He thinks an increased document transfer tax on property sales could be most palatable to residents. California’s revenue and taxation codes require paying a county transfer tax levied on the value of all real property being transferred between two parties. Santa Clara charges a lower rate than nearby cities, and Jain said the city may explore placing an increased levy on the next ballot.

“We’re sort of trying to whittle away at this,” Jain said. “We can’t do anything if we have a deficit.”

Contact Natalie Hanson at [email protected] or @nhanson_reports on Twitter.