Hayward City Council proposes transit occupancy tax increase to 14% by 2025

The Hayward City Council made a significant move during its May 6 meeting, proposing to raise the transient occupancy tax (TOT) from 8.5% to 14%, effective July 1, 2025. This decision aims to bolster the city’s long-term financial stability amid ongoing economic challenges.

Interim Finance Director Sharif Edmond presented the recommendation, highlighting that the increase is expected to generate an additional $500,000 to $1.5 million in revenue annually. The TOT, which is levied on hotel stays, currently stands at 10.5% when including a 2% excise tax, bringing the total to 12.5% for consumers. If approved, the new rate would push the total tax burden for hotel guests to 16%, raising concerns among local hoteliers about its potential impact on occupancy rates.

Council members engaged in a robust discussion about the proposed increase, with some advocating for a phased approach to mitigate the financial burden on visitors and local businesses. Council Member Roach questioned whether a gradual increase to 12% followed by a later adjustment to 14% might be more palatable. However, the finance committee had recommended the full increase to 14% without a phased approach, citing the need for immediate revenue enhancement.

Public comments reflected strong opposition from local hotel operators, who argued that the increase could drive customers to neighboring cities with lower tax rates. Hoteliers expressed concerns about the fragile state of the hospitality industry post-pandemic, noting that many businesses are still struggling to recover. They warned that a significant tax hike could deter visitors and further harm their already declining revenues.

In response to these concerns, the council decided to table the proposal for further discussion, allowing time for additional analysis on the potential impacts and comparisons with neighboring cities. The next budget and finance committee meeting will provide an opportunity to revisit the issue, ensuring that all stakeholders have a chance to weigh in before any final decisions are made.

As the council navigates this complex issue, the outcome will be crucial for Hayward's economic landscape, balancing the need for increased revenue against the realities of a competitive hospitality market.