Do We Approve or Reject an Increase in the Hotel Tax?

LA WATCHDOG - The City Council is considering placing a measure on the June 2026 ballot that would increase the Transient Occupancy Tax (hotel tax) to 16% from its current level of 14%.  If approved by a majority of voters, the increase will generate an estimated $50 million a year for the General Fund.  This tax, including tax from short term rentals, is projected to raise $315 million for the fiscal year beginning on July 1st.   

The measure would also require Online Travel Companies (“OTC”) to apply the tax to the price paid by the tourist, not the discounted price paid by the OTC to the hotel company.  This will generate an estimated $5 million a year. 

See Council File 24-1456 for details. 

Although this tax does not dip into our wallets and relies on visitors to the City, we need to consider the impact of this increased tax on the hotel industry, the Convention Center, and tourism, a major driver of the Southern California economy.  Will this added tax hinder the hotel industry’s recovery from the Covid downturn and the impact of the tariffs on international visitors?  How will it impact the development of new hotels and the City’s sales tax revenue?  Will it put the Convention Center at a competitive disadvantage relative to Anaheim, San Diego, Las Vegas, and San Franciso?  

The tourism industry is anticipating boom times.  We have the World Cup (2026), the Super Bowl (2027), and the Olympics (2028) coming to town.  But at the same time, hotels are adjusting their business model to cope with the Olympic Wage Ordinance which will increase the minimum wage for hotel employees by 50% to $30 an hour by 2028 and require healthcare at a cost of $8.35 an hour, resulting in an annual cost of $80,000 for a full-time employee.  

Rather than speculate, we need the City and independent consultants to provide us with objective information on the impact of this tax increase on the hotel industry, the Convention Center, tourism, levels of employment, and the City’s economy and its alternative sources of revenue. 

Unfortunately, the Mayor and the City Council have not earned a YES vote from Angelenos.  They have created a billion-dollar budget shortfall that will require significant budget cuts that jeopardize public safety and the maintenance and repair of our lunar cratered streets, our cracked sidewalks, our neglected parks and their toilets, and the rest of our deteriorating infrastructure.  They have also mismanaged the homeless crisis, spending billions while making little progress.  Just ask Judge Carter. 

To win our vote, the City needs to reform its budget process so that we do not experience another self-inflicted fiscal crisis. Without real reform as recommended by the Neighborhood Council Budget Advocates, we need to send the Mayor and the City Council a message by voting NO on the increase in the hotel tax. 

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The Neighborhood Council Budget Advocates have recommended these seven reforms.  

1. The Four-Year General Fund Budget Outlook needs to be updated to reflect anticipated raises for City employees. 
2. Develop a two-year budget as recommended by the City Controller.
3. Conduct open and transparent labor negotiations that require significant outreach to Angelenos before, during, and after the negotiations.
4. Place a measure on the ballot that would prohibit the City from entering into any labor agreement that would create a current or future deficit. In the short term, pass an ordinance. 
5. Develop a long-term infrastructure plan to address deferred maintenance and future capital expenditures.
6. Create a robust Reserve Fund that can only be used in declared emergencies, not to balance the budget as is the current procedure.
7. Establish an Office of Transparency and Accountability to oversee the City’s budget and finances in real time as recommended by the LA 2020 Commission. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate.  He can be reached at:  [email protected].)