Los Angeles leaders, mired in budget woes, see a way to boost city tax revenue thanks to an Olympic-sized rush of tourism.
The City Council has approved a June ballot measure that would temporarily raise the hotel tax.
The 2028 Olympic Games create an opportunity, Councilmember Tim McOsker said, “to add some jet fuel to our visitor-serving community.”
The ballot measure advanced on Tuesday suggests a temporary 2% increase to the city’s 14% transient occupancy tax — often called a bed or hotel tax — dropping to a permanent post-Games 1% increase starting in 2029.
“Two [percent] is a pretty significant jump, but it’s a jump that’s justified by the Olympics,” McOsker said.
The temporary 2% increase would yield $44 million per fiscal year in tax revenue, and the 1% increase would bring in half that after 2028, according to City Administrative Officer Matt Szabo. The money would be used for general city services such as emergency services, parks and sidewalk repairs, according to a draft ballot measure.
The proposal comes after a push to increase the hotel worker minimum wage to $30 over time and ahead of a June ballot that could potentially leave voters tax fatigued amid the city’s budget struggles.
Critics argued that the hotel industry was already faced with the minimum wage changes and low demand, and increasing taxes by any amount could send tourists to competing hotels in nearby cities.
“At a time when you’re seeing these declines in demand and losing on tax revenue year over year to the magnitude of $20 million, it just seems like a wrong time to impose more burdens on that shrinking base,” Nella McOsker, president and chief executive of downtown L.A. advocacy group Central City Assn., told The Times.
The temporary 2% option was one of several suggestions; Councilmember McOsker (who is Nella McOsker’s father) initially supported a temporary 4% increase and a permanent 2% increase that would have made L.A.’s the highest hotel tax in the country.
The council also rejected, narrowly, a flat 2% increase suggested by Councilmember Eunisses Hernandez in a 7-8 vote.
Councilmember Monica Rodriguez voted against the measure, arguing the council had not done its job to reduce spending elsewhere before putting taxes on the ballot.
“You can’t ask people to pay more when you haven’t even done the work to claw back on the expenses that you passed,” Rodriguez said.
Also approved in Tuesday’s meeting was a ballot measure that, if successful in June, would close a tax loophole for illegal cannabis businesses and open them up to the threat of civil collections.
“Knowing that we can take you to court is a pretty strong hammer. If you owe us a little bit of money, it’s usually more cost effective just to pay us,” Matt Crawford, an analyst at the city’s Office of Finance, said in a hearing in late January.
Council members were hesitant to believe that a projected tax income increase of $70 million in its first year was realistic, especially when collecting from unlicensed businesses that are hard to track down. But the focus, said Councilmember Bob Blumenfield, was closing illegal businesses, not taxing them.
“They didn’t get [Al Capone] for being a gangster. They got him for for tax evasion,” Blumenfield said in January.
The hotel tax and illegal cannabis tax measures will be on the ballot June 2, when Los Angeles voters will also choose a mayor, city attorney and city controller, and fill eight of the 15 City Council seats and several of the L.A. Unified Board of Education seats.
The June 2 election is a primary. Some races will go on to a November runoff.
