Sonoma to raise hotel tax for second time in year

Tourists to Sonoma may want to pack a few more bills into their wallets this fall, as charges for local hotel stays are about to go up another 1 percent.

And operators of illegal vacation rentals in Sonoma may want to go into hiding.

The Sonoma City Council on Monday approved a 1 percent increase in the city transient occupancy tax, or TOT, which is currently at 12 percent, to take effect Sept. 1.

The council intends to use the additional revenue from the tax – charged for overnight stays at local hotels and vacation rentals – to feed a so-called housing trust fund, which the council created last month. Reserves in the trust fund will be used to support various affordable housing initiatives. City staff estimates the new revenue from the hotel-tax increase will be between $350,000 to $400,000 annually.

The September hotel-tax increase will be the second TOT hike this year. The tax went up 2 percent Jan. 1 on the heels of last November’s passage of Measure S, the city initiative that called for the two TOT increases which, said city officials, were necessary to keep Sonoma’s hotel tax on par with similar tourist-driven cities like Healdsburg and Napa.

While TOT revenue typically goes into the city’s general fund, and can be used for any purpose, council members are specifically earmarking the latest 1 percent increase for the housing trust fund in the hopes of building up enough reserves to allow the city to partner with affordable housing developers to incentivize the creation of housing stock.

“This pot of money allows us to partner with developers,” Councilmember Madolyn Agrimonti said in support of the TOT hike. “Not necessarily build developments (ourselves), but partners – and I think that’s a wonderful idea.”

Councilmember Logan Harvey echoed her enthusiasm: “I’m excited to get the housing trust fund up and running and to get some money going in there.”

In decades past, cities relied on dedicated funding from the state for community redevelopment and housing projects, but in a 2011 budgetary move then-Gov. Brown cut redevelopment agencies throughout the state, denying Sonoma about $1 million a year in redevelopment funds, according to Sonoma City Manager Cathy Capriola.

The higher TOT would be in effect for three years; in June of 2021 city officials would begin considering its renewal.

While the council voted 5-0 at the June 10 meeting to raise the transient occupancy tax, the broader discussion turned to the increasing number of illicit vacation rentals operating in the city.

Resident Byron Jones, who runs a company that manages a handful of local vacation rentals, urged the council to exempt vacation rentals from the TOT increase, saying that it’s becoming increasingly difficult to compete with illegal rentals, which can charge lower rates because they don’t pay the hotel tax.

“Vacation rentals are under great pressure because of these illegal vacation rentals,” said Jones. “We’re charging a 15 percent tax (in total), illegal rentals are charging zero.”

Jones called for the council to “take the aggressive steps to eliminate the illegal, non-taxpaying operations in the city of which there are many.”

Currently, there are 41 legal vacation rental businesses operating in Sonoma, offering a total of 56 rental units, according to city staff. Jones alleged he’s found at least 12 illegal rentals listed on various online vacation rental sites.

Council members agreed with Jones that improved vacation-rental enforcement was needed.

As it happens, reported Capriola at the meeting, the city has recently contracted with a company that specializes in identifying potentially illegal vacation rental operations, and will soon begin monitoring Sonoma’s rental stock more closely. Once the firm identifies rental scofflaws, explained Capriola, the city’s code-enforcement officers would take it from there.

“The sleuthing takes a chunk of work; you need to build a record,” said Capriola. “So that gets done by this technology firm.” Capriola also noted that the city had added about $25,000 to its code-enforcement budget this year, allowing between 10 to 15 hours a week of additional code-enforcement.

“One of the primary focuses will be vacation rentals,” said Capriola.

Agrimonti suggested city staff could create quarterly reports on who’s been cited for operating illegal rentals, which elicited the approval of her council colleagues.

There should be “zero tolerance,” for illegal rentals, said Councilmember David Cook. “If you’re operating an illegal vacation rental, it’s better to turn yourself in now.”

Contact Jason at jason.walsh@sonomanews.com.